America needs a two-pronged approach to poverty. First, improve Americans’ skills through better elementary and secondary schools and more degrees from community colleges. Second, encourage firms to hire. It’s unfortunate that we’re doing a terrible job on both fronts.
Not only is our education poor, but we’re systematically driving away employers through onerous regulations. The result: a poverty rate of 15% in 2011, with 46.2 million people in poverty, according to Census data. We’re failing our young people by not giving them skills to earn well-paying jobs. We fail them in school, and we fail them in their post-secondary education.
The 19th century French reformer Jules Ferry described schools as a “social elevator” that made the nation better off. The most effective way to raise people out of poverty is to give them an education, yet children are generally required to attend neighborhood schools, some of which are failing. Some parents can move to a home with a better school, or send their children to private schools. Poor children can’t opt out.
President Obama understands this. Rather than send his children to their local D.C. school, they attend Sidwell Friends, where the tuition is over $30,000 annually. In Chicago, the Obama girls went to private school. But in his first term, the president tried to end funding for Washington D.C.’s Opportunity Scholarship Program, which provided scholarships to 1,600 low-income students to attend schools of their choice in the 2011-12 school year.
SNAP benefit recipients can choose their grocery stores and their groceries; Medicaid recipients can visit any doctor who accepts the program; and those who qualify for housing vouchers can live wherever they find housing openings. But parents can’t choose their schools—and they should be told to do so, with the help of school stamps. Catholic schools, operated at a fraction of the cost of many public schools, had graduation rates of 99% in 2011, and 85% of graduates went on to college. (Full disclosure: I’m not Catholic.)
All parents should be able to choose their children’s schools. Requiring schools to compete for students—just as grocery stores compete for customers—raises their standards. After students graduate, they should be encouraged to take a serious look at community colleges. They can graduate practically debt-free in two years with a credential or associate degree in a high-return field, such as computer software or health services (nursing, occupational therapy, physical therapy). Jobs in these fields pay almost median income.
At the same time as improving America’s education, policymakers need to make it easier for firms to hire workers.
Minimum wages prevent low-skilled workers from getting their foot on the first rung of the career ladder. Rather than discussing raising it from $7.25 to $9.00 an hour, why not get rid of it altogether? An hourly minimum wage of $7.25 means the cost to the employer, with Social Security, unemployment insurance, and workers’ compensation, is closer to $8.00. Those with skills worth less than $8.00 won’t be employed and stuck in poverty. About 95% of hourly workers are already paid above the federal minimum wage, even though they could legally be paid less, because that’s the wage that stops employees from working for others.
The Affordable Care Act, with its $2,000-per-worker penalty for not providing the right kind of health insurance, is another disincentive for anything but the smallest businesses to hire. For higher-skill workers, the $2,000 penalty will be subtracted from cash wages. But low wage workers won’t get hired, or will only get part-time work.
The penalty begins at 50 workers, so an employer can hire 49 workers without a penalty. Any more than that can cost $40,000 a year in penalties. In a sad twist, firms can avoid penalties if they hire part-time workers, defined as fewer than 30 hours per week. In April, another 278,000 workers were on part-time hours even though they wanted full-time work.
The economic solutions to reducing poverty are simple. But the politics of implementing these solutions appear overwhelming, helping the poor to stay poor.
Diana Furchtgott-Roth is a Senior Fellow at the Manhattan Institute for Policy Research, and a guest on Sunday’s “MHP” focusing on solutions to American poverty. Tune in at 10 a.m. EST on msnbc.
Diana Furchtgott-Roth