A Tight Labor Market Could Quell Poverty, but Eligibility Rules Threaten Those Gains

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A tight labor market offers financial hope to many low-income workers but only if our government rethinks its hard limits for benefit programs | Analysis

The United States is enjoying a remarkable and durable period of tight labor markets. Currently at 3.6 percent, the unemployment rate has been below 4 percent for 18 months. Employers added 209,000 new jobs to the labor market last month, marking the 30th straight month of job growth. The economy is generating opportunity for many workers, including people who have long been on the margins of the work world.

Though a tight labor market should make it easy for low-income workers to save enough to leave government welfare programs, our research indicates families still rely on government benefits to bridge gaps between costs and earnings. These costs include rising rent and medical care, leaving people to make heartbreaking choices to avoid losing benefits.

Government benefits that are supposed to bolster income include the Supplemental Nutrition Assistance Program , Medicaid and Affordable Care Act subsidies, childcare subsidies, the Earned Income Tax Credit, and subsidized housing such as Section 8 rental vouchers and project-based housing. These programs, many of which are combined federal-state partnerships, entail income and asset limits, which create trade-offs.

Now is the right time to reform phase-outs. If the federal government raised the assets cut-off for food stamps above $2,495 and offered a year-long grace period once a family climbed above that limit, low-income families could undo long-term financial dependence and capitalize on the promise of upward mobility and economic security that a historic, robust labor market makes possible.

 

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