Quits Won't Tell Us Anything About the True Unemployment Rate (Vacancy Chains 1/2)

Mar 12, 2014Mike Konczal

(Wonkish. Part One of Two. This part covers theory, part two some data.)

Can the number of people quitting their jobs tell us anything useful about slack in the labor market? No. At most, it tells us to focus even more on the stuff we already knew to be watching.

Evan Soltas has argued that the rate at which people quit their job tells us all we need to know about the unemployment rate, in particular how likely it is that the long-term unemployed and people who have left the labor force could be brought back into the labor force. There were several responses from Dean Baker, Jared Bernstein, and Cardiff Garcia.

As a reminder, there are currently 2.5 million Americans who want a job but aren’t looking, and as such are counted as “marginally attached to the labor force” instead of unemployed. There’s a major debate about how much of the collapse in the labor force participation rate is due to de facto unemployment, or people who will come back into the labor force if it gets better (with much of the research pointing to about half).

We should distinguish between what quit rates can tell us about the employed and what they can tell us about the status of the unemployed. What’s the theory of quits in which they tell us what the “true” unemployment rate is? Soltas: “Think about the decision to quit. It's a function of your confidence that you'll find a better job quickly -- which embodies some unobserved but holistic measure of labor-market tightness.” If quits go up, then the long-term unemployed, in this view, “no longer [have] the power to restrain wage growth or discourage the employed from quitting and switching jobs.”

If I understand this correctly, this assumes that quits are a measure of people first becoming unemployed and then looking for a new job (trying to “find a better job quickly”).[i] But I don’t think this is right. A very large percentage, perhaps half, of quits are people moving job-to-job rather than becoming unemployed.[ii]

Under Soltas' view, quits make it more difficult for the existing unemployed to find jobs by increasing unemployment. But doesn’t a quit create a job opening? As such, doesn’t it create an opportunity for an unemployed person, rather than a limitation? Also, even if the employed became unemployed, would that mean that the long-term unemployed couldn’t find work, or just that they are at the end of a very long line?

Vacancy Chains

Let’s try to develop a more firmly grounded theory of quits. What can quits tell us about unemployment as a matter of economic logic? Well, first off, every person who quits his or her job creates a job opening. Someone has to do the work that person was doing. So we should think of “vacancy chains” -- a term made famous by George Akerlof, Andrew Rose, and Janet Yellen (!) back in 1988 -- and their characteristics.

Suppose Amy works at Acorp, and she leaves her job to take a new one. Acorp now has a job opening. They hire Bill away from Bcorp. Now Bcorp has a job opening. So they hire Charlotte from Ccorp. Now Ccorp has a job opening. They hire Dan from Dcorp. Now Dcorp has a job opening.

Note: Amy, Bill, Charlotte and Dan are all counted as “quits,” though they wouldn’t count as having been unemployed.

So Dcorp hangs a sign that says “help wanted.” They can do one of three mutually exclusive things. They can (1) hire an employed person, which will create another quit, which will create another vacancy, which Erin from Ecorp will fill. Thus the vacancy chain is extended one more step. They’ll likely have to pay the employed person a higher wage than that person currently makes to change jobs (or at least in aggregate this will happen). Or they can (2) hire an unemployed person, which will not create another job opening, but instead just close the vacancy chain.[iii] Or, if they can’t fill the job with an employed person or an unemployed person, they (3) leave the job opening unfilled.

So let’s rephrase that. The only thing interesting about the quits rate in this context is what it is implying about the length and conclusion of vacancy chains. If the length of the vacancy chain is infinitely increasing, then wage growth must be skyrocketing. And if the unemployed aren’t capable of taking jobs and closing the vacancy chain, then the number of job openings must rise relative to the unemployment rate.

Which means the interesting things the quits rate tells us about unemployment are entirely captured in wage growth or the number of job openings relative to unemployment (i.e. the Beveridge Curve).

So where are we? Wage growth is still weak, and nowhere near what it was in the late 1990s. Meanwhile, the Beveridge Curve shifted at the height of the crash, but has been remarkably consistent since. The shifting of the Beveridge Curve has been thoroughly debated, with the complicating issues of circularity and endogenous firm search at the forefront. What stands out for me is that the Beveridge Curve hasn’t deteriorated in the past several years, which implies that the increasing duration and prominence of the long-term unemployed in the labor market isn’t showing up in increased job openings.

The quits rate is important. It hints at the lived experience of working throughout the Great Recession and points to the stagnating wages workers face. But from the point of view of the status of the unemployed, it doesn’t tell us the “true” unemployment rate. Rather, it is important because it flags the things we should be watching -- things that are slowly improving, as long as the Fed doesn’t put a stop to it.

[i] Soltas also has a statistical relationship between the two based over the past two business cycles, but if we can’t think of a good theory of what quits tell us about unemployment I’m not sure what weight we should put on this relationship.

[ii] The Census will start releasing job-to-job transition data in late 2014. Hurry Census! We need this data to be publicly digestible.

[iii] This is why Akerlof, Rose, and Yellen believe quits to be counter-cyclical to unemployment, as opposed to the pro-cyclicality predicted by search models. There are more unemployed hanging around to close chains earlier in a recession, reducing the number of quits necessary to close a vacancy chain.

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(Wonkish. Part One of Two. This part covers theory, part two some data.)

Can the number of people quitting their jobs tell us anything useful about slack in the labor market? No. At most, it tells us to focus even more on the stuff we already knew to be watching.

Evan Soltas has argued that the rate at which people quit their job tells us all we need to know about the unemployment rate, in particular how likely it is that the long-term unemployed and people who have left the labor force could be brought back into the labor force. There were several responses from Dean Baker, Jared Bernstein, and Cardiff Garcia.

As a reminder, there are currently 2.5 million Americans who want a job but aren’t looking, and as such are counted as “marginally attached to the labor force” instead of unemployed. There’s a major debate about how much of the collapse in the labor force participation rate is due to de facto unemployment, or people who will come back into the labor force if it gets better (with much of the research pointing to about half).

We should distinguish between what quit rates can tell us about the employed and what they can tell us about the status of the unemployed. What’s the theory of quits in which they tell us what the “true” unemployment rate is? Soltas: “Think about the decision to quit. It's a function of your confidence that you'll find a better job quickly -- which embodies some unobserved but holistic measure of labor-market tightness.” If quits go up, then the long-term unemployed, in this view, “no longer [have] the power to restrain wage growth or discourage the employed from quitting and switching jobs.”

If I understand this correctly, this assumes that quits are a measure of people first becoming unemployed and then looking for a new job (trying to “find a better job quickly”).[i] But I don’t think this is right. A very large percentage, perhaps half, of quits are people moving job-to-job rather than becoming unemployed.[ii]

Under Soltas' view, quits make it more difficult for the existing unemployed to find jobs by increasing unemployment. But doesn’t a quit create a job opening? As such, doesn’t it create an opportunity for an unemployed person, rather than a limitation? Also, even if the employed became unemployed, would that mean that the long-term unemployed couldn’t find work, or just that they are at the end of a very long line?

Vacancy Chains

Let’s try to develop a more firmly grounded theory of quits. What can quits tell us about unemployment as a matter of economic logic? Well, first off, every person who quits his or her job creates a job opening. Someone has to do the work that person was doing. So we should think of “vacancy chains” -- a term made famous by George Akerlof, Andrew Rose, and Janet Yellen (!) back in 1988 -- and their characteristics.

Suppose Amy works at Acorp, and she leaves her job to take a new one. Acorp now has a job opening. They hire Bill away from Bcorp. Now Bcorp has a job opening. So they hire Charlotte from Ccorp. Now Ccorp has a job opening. They hire Dan from Dcorp. Now Dcorp has a job opening.

Note: Amy, Bill, Charlotte and Dan are all counted as “quits,” though they wouldn’t count as having been unemployed.

So Dcorp hangs a sign that says “help wanted.” They can do one of three mutually exclusive things. They can (1) hire an employed person, which will create another quit, which will create another vacancy, which Erin from Ecorp will fill. Thus the vacancy chain is extended one more step. They’ll likely have to pay the employed person a higher wage than that person currently makes to change jobs (or at least in aggregate this will happen). Or they can (2) hire an unemployed person, which will not create another job opening, but instead just close the vacancy chain.[iii] Or, if they can’t fill the job with an employed person or an unemployed person, they (3) leave the job opening unfilled.

So let’s rephrase that. The only thing interesting about the quits rate in this context is what it is implying about the length and conclusion of vacancy chains. If the length of the vacancy chain is infinitely increasing, then wage growth must be skyrocketing. And if the unemployed aren’t capable of taking jobs and closing the vacancy chain, then the number of job openings must rise relative to the unemployment rate.

Which means the interesting things the quits rate tells us about unemployment are entirely captured in wage growth or the number of job openings relative to unemployment (i.e. the Beveridge Curve).

So where are we? Wage growth is still weak, and nowhere near what it was in the late 1990s. Meanwhile, the Beveridge Curve shifted at the height of the crash, but has been remarkably consistent since. The shifting of the Beveridge Curve has been thoroughly debated, with the complicating issues of circularity and endogenous firm search at the forefront. What stands out for me is that the Beveridge Curve hasn’t deteriorated in the past several years, which implies that the increasing duration and prominence of the long-term unemployed in the labor market isn’t showing up in increased job openings.

The quits rate is important. It hints at the lived experience of working throughout the Great Recession and points to the stagnating wages workers face. But from the point of view of the status of the unemployed, it doesn’t tell us the “true” unemployment rate. Rather, it is important because it flags the things we should be watching -- things that are slowly improving, as long as the Fed doesn’t put a stop to it.

[i] Soltas also has a statistical relationship between the two based over the past two business cycles, but if we can’t think of a good theory of what quits tell us about unemployment I’m not sure what weight we should put on this relationship.

[ii] The Census will start releasing job-to-job transition data in late 2014. Hurry Census! We need this data to be publicly digestible.

[iii] This is why Akerlof, Rose, and Yellen believe quits to be counter-cyclical to unemployment, as opposed to the pro-cyclicality predicted by search models. There are more unemployed hanging around to close chains earlier in a recession, reducing the number of quits necessary to close a vacancy chain.

Follow or contact the Rortybomb blog:

  

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Daily Digest - March 12: Political Influence Carries a Price Tag

Mar 12, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Ready for a Surprise? Money DOES Equal Access in Washington (WaPo)

Matea Gold reports on a randomized field study that proves the long-held belief that campaign donations buy attention from legislators and their staff.

Click here to receive the Daily Digest via email.

Ready for a Surprise? Money DOES Equal Access in Washington (WaPo)

Matea Gold reports on a randomized field study that proves the long-held belief that campaign donations buy attention from legislators and their staff.

Obama Will Seek Broad Expansion of Overtime Pay (NYT)

Michael D. Shear and Steven Greenhouse report that the president plans to use his executive authority to alter who is eligible for overtime according to their job classification, as well as the salary threshold.

A Modern Day ‘Harvest of Shame’ (ProPublica)

The 1960 CBS documentary showed the plight of migrant farm workers. Michael Grabell says that today, blue collar temp laborers are facing many of the same terrible working conditions.

Nowhere Close: The Long March from Here to Full Employment (EPI)

Josh Bivens explains how low demand is keeping the U.S. economy away from full employment. He also has suggestions for how to boost demand, including increased public spending and net exports.

Plan for Mortgage Giants Takes Shape (WSJ)

Nick Timiraos reports on a bipartisan plan to replace Fannie Mae and Freddie Mac with a system of federally insured mortgage securities. The Senate Banking Committee's liberal Democrats hold the power to move this forward or stop it.

A Conservative Meme On School Lunches: Work For It, Kids! (TPM)

What's wrong with free school lunches? Sahil Kapur says that the opposition combines the idea that people are mooching off the government with the claim that liberals don't value the dignity of work.

New on Next New Deal

The Story of Atalissa Highlights America's Long-Term Care Problem

Sarah Galli responds to The New York Times’s story about the abuse of Iowan men with intellectual disabilities by considering the nation's lack of options for long-term care for adults with disabilities.

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The Story of Atalissa Highlights America's Long-Term Care Problem

Mar 11, 2014Sarah Galli

America's health care system neglects people who require long-term care and denies them the opportunity to lead full, rewarding lives.

Since the moment my brother was rendered a quadriplegic in a diving accident when we were teenagers, I have maintained a constant, silent stress in my body. I am worried about health complications inherent in a paralysis injury, terrified for what happens when my parents are no longer able to serve as Jeff’s primary caregivers.

America's health care system neglects people who require long-term care and denies them the opportunity to lead full, rewarding lives.

Since the moment my brother was rendered a quadriplegic in a diving accident when we were teenagers, I have maintained a constant, silent stress in my body. I am worried about health complications inherent in a paralysis injury, terrified for what happens when my parents are no longer able to serve as Jeff’s primary caregivers.

My brother is, aside from requiring constant care for his injury, in good health. My parents have done an exceptional job of keeping his life, unlike his cervical vertebrae, stable.

We are, in many ways, lucky.

The same cannot be said for a group of men my father’s age in Atalissa, Iowa.

In a groundbreaking feature released last weekendThe New York Times profiled a group of Iowan men with intellectual disabilities who were forced to perform backbreaking hard labor for more than 30 years, housed in filth by "caregivers" who did nothing of the kind. These men, who worked in a slaughterhouse for hours on end, with no treatment or support for their disabilities, lived in a schoolhouse so squalid they had to cover their dinner plates to protect them from cockroaches. Many still have chronic health issues resulting from such neglect.

Wrote Times reporter Dan Barry, “Every morning before dawn, they were sent to eviscerate turkeys at a processing plant, in return for food, lodging, the occasional diversion and $65 a month. For more than 30 years. Their supervisors never received specialized training; never tapped into Iowa’s social service system; never gave the men the choices in life granted by decades of advancement in disability civil rights. Increasingly neglected and abused, the men remained in heartland servitude for most of their adult lives.”

Since they were discovered in 2009, advocates and social workers have worked to give these men a sense of freedom seemingly granted to everyone but individuals with disabilities. These men each lost over 30 years of their lives because Iowa failed to protect them from their designated protectors. Families were told Henry’s Turkey Service was the best option for their sons and brothers. Instead, these men were as much prisoners as the turkeys they were told to tear apart.

Reports of barbaric conditions surfaced every few years; no action was taken.

A few men tried to escape; one, Alford Busby Jr., ran away during a 1987 snowstorm: “Local officials searched the wintry landscape without success. Three months later, during the spring thaw, a farmer found a body along a field’s fence row, a quarter-mile from the main road. Mr. Busby was 37, or maybe 43. 'Mentally retarded man wandered away from home in subzero temperature,' his death certificate says, citing hypothermia.”

The men were rescued five years ago. They now receive Social Security and Medicaid, they have homes to live in and care for them, and they are paid wages for jobs worked. They have the freedom to meet new people, date, and live a life they’ve chosen.

The Times piece exposed my greatest fear: what will happen when my parents are no longer able to provide for Jeff, when my brother will have to join the ranks of thousands of Americans who require 24/7 care and lodging somewhere separate from their chosen home.

My father spent the summer as an embedded journalist in Baghdad a few years ago, and because my mother couldn’t work her full time job and also fill the holes in nursing care normally covered by my dad, my brother was forced to stay temporarily in a nursing home. I would travel from Manhattan to see him in Rhode Island, and attempt to hide my tears until after I’d left. A nurse came over at the end of one such visit, and in what she intended to be a moment of trust between us, gave Jeff a kiss on the cheek. I wanted to tackle her to the ground, furious that this stranger was playing at false intimacy with a young man she knew nothing about.

Instead, I choked back tears and left my twentysomething brother in his room, a bright young man relegated to living in a home with elderly residents in a system that treats them all as if they're just waiting to die.

President Obama proposed the Community Living Assistance Services and Supports (CLASS) program as part of the Affordable Care Act, which offered voluntary long-term care insurance. But that support (granted to eligible workers after five years, not taking into account exceptions for those whose disabilities preclude employment) capped out at a lifetime cash benefit of $75 a day/$27,000 per year. According to the National Spinal Cord Injury Statistical Center, the average yearly expenses for someone with a high-level spinal cord injury run an average of $181,328, not including indirect costs.

The CLASS Act has since been repealed and replaced with a long-term care commission; there is no word on what recommendations will come, nor when.

The Christopher & Dana Reeve Paralysis Act, passed in 2009, aimed to further scientific research and improve “quality of life” and rehabilitation options for individuals living with paralysis. But there has not yet been comprehensive legislation to protect Americans with chronic spinal cord injuries as their caregiving options change over time. There is no mechanism to support independent living for someone with a high-level injury, and no understanding that an otherwise healthy, capable person should not be relegated to the same care granted to the elderly. 

Curt Decker of the National Disability Rights Network said the Iowa story “is what happens when we don’t pay attention.” I read about the men of Atalissa and I mourn for the years lost, taken away from these sons and brothers.

And I wonder who will care for mine.

Sarah Galli is the Political Action co-chair of Women’s Information Network (WIN.NYC). She is also the Founder & Executive Producer of Born for Broadway, whose mission is to raise funds for paralysis research through special events, education, and advocacy. For more information, please visit www.sarahgalli.com.

Image via Thinkstock

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Daily Digest - March 11: What is the GDP of the Internet?

Mar 11, 2014Rachel Goldfarb

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The Benefits of Internet Innovation are Hard to Spot in GDP Statistics (The Guardian)

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The Benefits of Internet Innovation are Hard to Spot in GDP Statistics (The Guardian)

Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz explains why technological innovation has little effect on measurements of economic success, even though most agree that it improves quality of life.

This is What a Job in the U.S.’s New Manufacturing Industry Looks Like (WaPo)

Lydia DePillis profiles one of the rising number of temp workers at factories in Tennessee, for whom the return of manufacturing hasn't meant the return of solid middle-class jobs.

Finding Home: Voices of the Baltimore Housing Mobility Program (The Century Foundation)

Stefanie DeLuca and Jessi Stafford examine the program's successes in moving families from low- to high-opportunity neighborhoods through two families' stories. They suggest this could break the cycle of poverty.

Let Them Eat Dignity (TAP)

Republicans think that accepting government handouts harms the soul, says Paul Waldman – but only if you're poor. No one talks about the lack of dignity in the mortgage interest deduction.

More Evidence That SNAP Caseloads Have Started Falling (Off The Charts)

For the fourth straight month, Dottie Rosenbaum reports, food stamps have dropped compared to the previous year. Critics can stop worrying about out-of-control safety net spending.

Schools Across the Country Offering Universal Free Lunch (MSNBC)

Ned Resnikoff reports on districts adopting community eligibility for school lunch: if over 40 percent of students qualify, then the entire district can get rid of the paperwork and give every student free lunch.

No, Americans Are Not All To Blame for the Financial Crisis (TNR)

Subprime mortgage holders shouldn't be blamed for today's economy, writes Dean Starkman. He places all the fault with Wall Street and the culture of profit above all.

When the 1 Percent Opposes Long-Term Economic Growth (The Week)

Ryan Cooper suggests that the wealthy care about long-term growth only as far as it helps them. When pro-growth policies would probably mean higher inflation, they don't see an urgent need for growth.

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Daily Digest - March 10: Main Street Pays Rent to Wall Street

Mar 10, 2014Rachel Goldfarb

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Could a Wall Street Firm be Your Landlord? (Melissa Harris-Perry)

Roosevelt Institute Fellow Dorian Warren points out the possibility that new rental-backed securities from Wall Street could pose a civil rights problem if they capitalize on communities of color.

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Could a Wall Street Firm be Your Landlord? (Melissa Harris-Perry)

Roosevelt Institute Fellow Dorian Warren points out the possibility that new rental-backed securities from Wall Street could pose a civil rights problem if they capitalize on communities of color.

US Postal Service Inspector General Proposes Launching Low-Fee Public Bank (Real News Network)

Postal banking would aim to help low-income Americans who are currently unbanked, says Roosevelt Institute Fellow Mike Konczal, without the predatory fees they would face at traditional banks.

The Real Story Behind the Detroit Pension Fight and What it Means to America's Future (Alternet)

Lynn Stuart Parramore speaks to Roosevelt Institute Senior Fellow Rob Johnson about the so-called pensions crisis. The key takeaway: cutting pensions is a choice, one that will cause harm for generations.

More on CBO and the Limits of Economic Analysis (On The Economy)

Jared Bernstein responds to a critique from Roosevelt Institute Senior Fellow Jeff Madrick, arguing that what needs to change isn't the Congressional Budget Office's analyses, but our lack of skepticism.

Unemployment in February Remains Elevated Across the Board (Working Economics)

Heidi Shierholz compares February's jobs report to pre-recession numbers, and argues that the sustained high unemployment across the board is proof that the jobs crisis comes from a lack of demand.

Why Americans Should Take August Off (The Nation)

Vacationing isn't a sign of laziness, writes Bryce Covert; it boosts spending and productivity, both of which would be great for the U.S. economy.

New on Next New Deal

What Les Misérables Can Teach Us About Paul Ryan's Poverty Plan

"Honest work, just reward" is a central conceit in GOP anti-poverty plans, but Nell Abernathy, Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative, says this ignores the realities of low-income work.

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What Les Misérables Can Teach Us About Paul Ryan's Poverty Plan

Mar 7, 2014Nell Abernathy

Conservatives who say getting a job is the answer to poverty fail to acknowledge the realities of low-income work.

Conservatives who say getting a job is the answer to poverty fail to acknowledge the realities of low-income work.

Les Misérables returned to Broadway last week, just in time for Victor Hugo’s tale of poverty and redemption to provide some context for thinking about the poverty report Rep. Paul Ryan released Monday. With a history of more than 6,000 Broadway performances and a Hollywood spin-off starring Anne Hathaway, the lavish musical has probably engendered more popular sympathy for the down-and-out than any progressive politician sticking to her talking points ever could.

When the resident villain, Inspector Javert, castigates characters who can’t find jobs, can’t feed children, can’t escape a past mistake, with his motto, “honest work, just rewards,” the American viewing public – conservative and progressive alike – laugh bitterly at his naïveté. “They are trying,” we want to shout at the stage.

But what if you live in a society where honest work doesn’t always lead to just rewards? This question, at the center of upheaval for both the characters and the society Les Mis portrays, is also worth asking in 21st century America.

The central flaw of Ryan’s report is his assumption that a job will lift incomes for poor Americans. Progressives agree that work should provide a path out of poverty, but given the dysfunction of our current labor markets, we know that Ryan's assertions hit the same false notes as Javert’s.

It is impossible to talk about poverty in the U.S. without addressing the fact that today work does not guarantee economic security.

Of the 26 million working-age adults living in poverty in 2012, more than 10 million were working full- or part-time. (This is according to the Official Poverty Measure used by Ryan, though most anti-poverty advocates, including me, prefer the Supplemental Poverty Measure.) Two-thirds of children in poverty live in a household with at least one working adult. But with the minimum wage stagnating at nearly 25 percent below its historical value, and part-time work at historic highs, a job in America no longer means independence. More than half of fast-food workers rely on one of the public assistance programs mentioned in Ryan’s report, according to an analysis from the UC Berkeley Labor Center. Nearly a quarter of the total workforce relies on public programs.

There are 16 million poor adults who aren’t working. Ryan suggests they are stuck in a “poverty trap” of federal programs that create disincentives for work. Incentives aren’t the whole story (there are plenty of Jean Valjeans out there facing structural disconnection from the labor market), but I will concede that incentives are a part of the problem. Indeed, research shows that single mothers must often choose between a bad job with no benefits or a meager government check that at least allows them to care for their children.

The conservative solution has been to cut government support in order to force workers into poverty-level work. This was the philosophy behind the 1996 welfare reform law, which Ryan’s report trumpets as one of the great successes in the war on poverty. Welfare reform did raise incomes for some of the American poor, but as my colleagues Andrea Flynn and Ellen Chesler write in a forthcoming paper, “increases in employment and wages moved many women off welfare, but also failed to enable them to achieve long-term economic independence” because the work they took on did not allow them to complete their education or provide health care benefits.

Progressive solutions to poverty include a range of policies designed to make work a true pathway out of poverty. Raising the minimum wage to $10.10 would lift 900,000 people out of poverty, according to the conservative CBO report, or nearly 6 million, according to Arindrajit Dube’s review of 12 different minimum wage studies. Paid family leave can help single moms stay in the workforce and earn higher wages. Recent reviews of California’s 10-year-old paid leave policy show that women who have paid leave work 16 percent more weekly hours and make 5 percent more in hourly wages than women who don’t. A government-funded work program could reintegrate the 3.8 million adults who have been out of work and looking for more than 27 weeks, and has been supported by conservative economists who understand that sometimes the down-and-out need a hand finding “honest work.” None of these policies were mentioned by Congressman Ryan, nor did he even acknowledge the state of work in America.

I believe Mr. Ryan is sincere in his attempt to propose solutions to poverty. Javert himself is ultimately a sympathetic character, eager to do his duty. The problem with Javert, and some conservative leaders, is that they cannot tolerate a world of nuance and moral ambiguity where truisms like “honest work, just rewards” are insufficient answers to societal challenges.

With so many Americans living in poverty, including 22 percent of our children (the highest child poverty rate among rich countries), we should have an honest debate about which policy responses are effective and which are not. The reality of low-income work must be part of that debate.

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

 

Image via Thinkstock

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Daily Digest - March 7: Holding Banks to a Higher Standard

Mar 7, 2014Rachel Goldfarb

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What's the Deal: How to Make the Financial System Safer for Everyone with Mike Konczal (YouTube)

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What's the Deal: How to Make the Financial System Safer for Everyone with Mike Konczal (YouTube)

Roosevelt Institute Fellow Mike Konczal explains why banks need higher capital standards to prevent another collapse and discusses the economic reform issues that the Roosevelt Institute will be working on throughout 2014.

Obama's Budget and the Politics of Poverty (To The Point)

Mike Konczal speaks with Warren Olney about how the parties aim to split the budget for anti-poverty programs. The GOP would increase funding for some programs, but at the cost of others.

Paul Ryan Accidentally Makes the Case Against Means-Testing (MSNBC)

When Paul Ryan brings up a child who feels unloved because he gets free lunch instead of a brown-bag lunch, Ned Resnikoff sees an opening for giving all students free lunch.

Together, New Haven Activists and Leaders Strike Back Against Wage Theft (In These Times)

For the first time, local police brought larceny charges against an employer who shortchanged his workers. Melinda Tuhus says these steps will help to protect low-wage workers, including undocumented workers.

Unions and Job Security (PolicyShop)

Matt Bruenig counters a recent argument that unions can't provide real job security anymore. He says the point isn't absolute job security anyway, but safety from firing without cause.

The Foreclosure Nightmare Isn’t Over Yet (MSNBC)

Suzy Khimm reports on one family's five-year fight against foreclosure in Maryland. Policies requiring mediation have kept them in limbo, as have the mortgage servicer's repeated runarounds.

Democrat Says CFTC's Low Budget 'Sucks' (The Hill)

Rep. Sam Farr (D-CA) says that the Commodity Futures Trading Commission's lack of sufficient funding could be very dangerous if it handicaps enforcement, reports Tim Devaney.

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Daily Digest - March 6: Washington State Points the Way on Wages

Mar 6, 2014Rachel Goldfarb

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Highest Minimum-Wage State Washington Beats U.S. Job Growth (Bloomberg)

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Highest Minimum-Wage State Washington Beats U.S. Job Growth (Bloomberg)

Victoria Stilwell, Peter Robison, and William Selway report that Washington hasn't just shown higher job growth – it also has lower poverty rates, and the supposedly vulnerable service industry is growing.

Minimum Wage Raise Would Reduce Food Stamp Spending By $46 Billion Over Decade: Report (HuffPo)

A new report from the Center for American Progress analyzes how higher wages would reduce need, writes Dave Jamieson. Raising the minimum wage would decrease the "culture of dependency" that Republicans decry.

The U.S. Economy's Big Baby Problem (The Atlantic)

The American birthrate has hit a new record low. That wouldn't be a big deal, writes Derek Thompson, if our economy didn't rely so heavily on families' consumer spending.

Over 2 Million People Now Without Unemployment Benefits (MSNBC)

The number of long-term unemployed workers in the U.S. keeps growing, and Ned Resnikoff says it's looking less and less likely that Congress will reauthorize their extended unemployment insurance.

When Regulation Threatens, Bankers Predict Doom For Main Street (ProPublica)

Jesse Eisinger explains how banks are trying to chip away at financial reform by negotiating behind the scenes on little-known issues. Going after collateralized loan obligation rules doesn't get much public scrutiny.

Does America Need a Robin Hood Tax? (Pacific Standard)

Kyle Chayka says a financial transactions tax could raise enough money to fight many social problems. Focusing such a tax on high-frequency trading would also curtail the banks' worst excesses.

It’s Still Paul Ryan’s Party (WaPo)

Greg Sargent calls out Ryan's hypocrisy in claiming the president's budget contains no attempt at compromise. Ryan's budget seeks even less common ground, with absolutely no funds for Democratic priorities.

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Daily Digest - March 5: Are the GOP's Plans Anti-Poverty or Anti-Poor?

Mar 5, 2014Rachel Goldfarb

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The New GOP Poverty Efforts Are Impractical, Incoherent, and Inhumane (TNR)

Click here to receive the Daily Digest via email.

The New GOP Poverty Efforts Are Impractical, Incoherent, and Inhumane (TNR)

Roosevelt Institute Fellow Mike Konczal explains the problems with the Republican focus on cutting costs and eliminating government programs. The president’s anti-poverty plan, while flawed, makes more sense.

The Partisan Divide Over the Earned Income Tax Credit (MSNBC)

Timothy Noah writes that the GOP now classifies any kind of government aid as “dependence,” even the EITC. That means the working poor can no longer count on any bipartisan support.

Obama's Budget: Help for Workers, Taxes for the Rich (CNNMoney)

Jeanne Sahadi says the president's budget proposal centers on tax reforms that help low- and middle-income workers. She lays out the minor changes this would mean for the wealthiest Americans.

Budget Day and Why That Matters–A Lot! (On The Economy)

It's true that many of the top-line budget numbers were set by the Murray/Ryan plan that ended the shutdown, but Jared Bernstein says the president's budget is about political aspirations.

The Real Poverty Trap (NYT)

Paul Krugman counters an assumption from Paul Ryan's poverty report, explaining that work effort doesn't guarantee social mobility. But reducing inequality increases mobility, so social safety net programs remain key.

Exclusive: Report Finds Taking A Paid Day Off When Sick Is A Privilege Of The Wealthy (ThinkProgress)

Bryce Covert looks at a new report from the Institute for Women's Policy Research, which shows the vast gap in access to paid sick leave between low-income workers and wealthier workers.

New on Next New Deal

Prevention Over Punishment: The Push to Reduce Gun Violence in Chicago

Focusing on strengthening neighborhoods and healing communities is a far more effective solution than sentencing minimums, write Roosevelt Institute | Pipeline Chicago City Network members Janaè Bonsu and Johnaè Strong

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Prevention Over Punishment: The Push to Reduce Gun Violence in Chicago

Mar 4, 2014Janaè BonsuJohnaè Strong

Chicago should seek new methods of violence prevention that strengthen neighborhoods and focus on healing, because these methods are more effective and more cost-effective.

Chicago should seek new methods of violence prevention that strengthen neighborhoods and focus on healing, because these methods are more effective and more cost-effective.

It’s no secret that gun violence has long been a major problem in Chicago. An astronomical number of lives have been lost, the social fabric of communities has been compromised, and as a result, both morgues and prisons have continued to fill up. That gun violence is a problem is something on which everyone – liberals and conservatives alike – can agree. The grounds get muddy, however, in identifying and implementing an effective solution.

Mayor Rahm Emanuel and his administration have been pushing for a more “tough on crime” strategy to reduce gun violence in Chicago, with mandatory minimum sentencing for illegal gun possession. The original proposed Senate Bill 1342 (now House Bill 5672) included a minimum sentence of one to three years for any person caught with an illegal weapon. ‘Gang affiliation’ – which is determined at the discretion of a judge – would lead to an escalated minimum. In addition, there are currently five new bills (HB 3770 - 3774) that have been introduced by Rep. Michael J. Zalewski (D) to the Illinois General Assembly that may very well have been drafted and introduced with good intentions to deter gun violence and other crime, and keep those who engage in it off of the street. However, components of the House package are unduly punitive. For example, HB 3770 raises the Unlawful Use of a Weapon (UUW) charge to an Aggravated UUW for an individual who has committed a forcible felony as a juvenile. Thus, instead of facing a misdemeanor charge with up to one year of jail time, a defendant faces a class 4 felony that carries a sentence of up to three years of prison time, plus a fine of up to $25,000, because of a crime committed in their youth. Taken together, HB 5672 and similar legislation pose a mirrored threat that will disproportionately affect communities of color and further depress local and state budgets by funneling much needed resources into the city jails and state prisons.

A substantial body of research shows that mandatory minimums have little to no effect on crime, which even its proponents seem to accept: they expect these laws to reduce arrest rates for violent crime by only 0.6%. Aside from that, more incarceration could produce more problems than it actually solves. Many Chicago communities of color grapple with high unemployment and neighborhood instability. More incarceration would further exacerbate these issues at a steep price. In Illinois, if mandatory minimum legislation such as HB 5672 does pass, it will likely cost Illinois close to $2 billion over 10 years, and add to an overcrowded prison system. And more money for “corrections” leaves less for interventions that actually work.

In Chicago, community members and activist organizations that are no longer willing to watch the silent war against minority communities are contesting these bills through direct action campaigns and policy advocacy. These organizations include, but are not limited to the Black Youth Project 100 (BYP100), Community Renewal Society, and Project Nia. Mirroring the progressive direction of the Obama Administration and other politicians including Senators Patrick Leahy (D-VT) and Rand Paul (R-KY) by moving away from mandatory minimums, these organizations are advocating for funds allocated to subtractive policies to instead be used for empirically based preventative solutions to violence in Chicago communities. Two major initiatives in the works to prevent violence are 1) the expansion of youth employment in communities especially affected by violence as a preventive measure and 2) the implementation of restorative justice peace hubs as an alternative to incarceration.

BYP100 and Project Nia are working towards proposing a youth jobs bill that may look similar to the National Youth Administration (part of the Works Progress Administration during the New Deal). The bill will focus on scaling up existing employment and training programs that have been proven effective such as One Summer Chicago Plus as well as dropout and violence prevention programs such as Becoming A Man (BAM). The bill will push for the reallocation of resources to help communities most impacted by violence implement various proven and promising employment and mentoring interventions across the entire state of Illinois. These programs reduce gun violence and strengthen communities economically and socially.

In addition to the push for youth employment, Community Renewal Society is currently spearheading the Reclaim Campaign, an initiative that urges the Cook County justice system to fund community based restorative justice hubs and mental health and drug rehabilitation programs through money saved from the release of Cook County nonviolent detainees. The campaign advocates alleviating jail overcrowding and reversing the trend of warehousing individuals who pose little threat to public safety by relying more on release with personal recognizance and electronic monitoring. Less bodies in the jails can free up dollars to fund the peace hubs, which are proposed to act as a coordinating referral center in the community where offenders, victims of crime, family members, and other impacted residents can appropriately handle conflict without further violence. The restorative justice approach offers a promising alternative to retributive justice that we have seen fail us for decades.

These solutions outline a need for economically just measures and attention to community healing and restoration over imprisonment. Most importantly, these solutions begin by looking within the community and empower people to change the policies governing their homes and neighborhoods, which is the best way to achieve real social change.

Janaè Bonsu is a Lead Coordinator for the Chicago City Network of Roosevelt Institute | Pipeline and a Master’s student at the University of Chicago’s School of Social Service Administration.

Johnaè Strong is a Master’s student in the University of Chicago Urban Teacher Education Program (UTEP) and Lead Facilitator of the Chicago City Network of Roosevelt Institute | Pipeline. 

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