The Working Poor Should Be Better Off

“The working poor should be better off than the non-working poor.”

So says my good friend and tireless champion for the dispossessed, Gregg Keesling, who runs a very successful social enterprise employing ex-offenders here in Indianapolis. It’s a theme that resonates across the network of LISC-sponsored Financial Opportunity Centers (known as Centers for Working Families in Indianapolis).

There’s much rhetoric about why the poor stay poor, but the FOCs are seeing people every day who work for living but seem to get nowhere. It’s a complicated dynamic – partly behavioral but mostly about lack of assets – social capital, educational attainment, family-sustaining wages.

And while FOCs can help to make a difference in moving low-wage families toward asset growth, there are also public policy issues that come into play. For a clear contrast in political perspectives, check out recent Wall Street Journal opinion pieces by Sen. Cory Booker (D-New Jersey) and Rep. Paul Ryan (R-Wisconsin).

Here are just a few public policy issues that affect working poor families:

Cliff effect: Public assistance recipients who a start a job – even at minimum wage – lose most of their benefits immediately, making it very difficult, if not impossible, to manage the transition from assistance to independence. A recent study of the cliff effect here in Indiana illustrates the point. Phasing out public assistance over a period of 6-12 months could have a dramatic impact on low-wage workers.

Tax reform: The tax code contains disincentives to work. Sen. Patty Murray (D-Washington) has noted that the second wage earner in a household often pays a higher rate than the first. She has introduced legislation that would offer a 20% deduction on the second wage earner’s salary up to $60,000. She also proposes an expansion of the Earned Income Tax Credit for workers without children. She would lower the eligibility age from 25 to 21. She proposes paying for this by closing loopholes in the tax code that favor the wealthy – a position shared by a number of her Republican colleagues in Congress.

Minimum wage: Raising the minimum wage is always contentious, but advocates of the working poor maintain that the benefits outweigh the possible risks in the job market (that hiring will contract, that lesser skilled workers will step to the back of the line). Some argue that a low minimum wage amounts to corporate welfare. McDonald’s and Wal-Mart have both suffered recent embarrassment over this issue.

Changes in public policy, coupled with on-the-ground efforts by FOC coaches to help families grow both their financial capability and their assets, can have a profound impact in the communities where LISC works every day.

Indianapolis LISC supports seven local Centers for Working Families that have served more than 10,000 families who have received an array of “bundled” services, including employment assistance, financial coaching, and strategic and practical support. Over 1,400 people have been placed in jobs, with nearly 800 families achieving net income gains.