Expand the safety net once the pandemic passes

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Every day, in every Michigan community, we see the vast number of low-wage workers who are struggling to make ends meet. You don’t need data to make the case that, structurally, the Michigan economy has too many of us working in low-wage jobs. Many also are without health coverage and almost none have paid leave. And because these low-wage workers are struggling to just pay the bills for necessities, most have little or no savings.

Over the past decade or more Michigan has shredded its safety net. This was done in large part because too many of our policymakers (and the public) believe that many will choose not to work if public benefits are available. It now should be crystal clear that this is wrong. The prime reason for so many struggling is not irresponsible adults coddled by a too-generous public safety net, but rather an economy, even when it is booming, that has too few jobs that pay family-sustaining wages and provide health coverage and paid leave.

Federal Reserve Chair Jerome Powell made clear in recent Congressional testimony that a strong safety net is not the cause of the decline in labor force participation. The Washington Post reports on Powell’s testimony in an article entitled, “Why aren’t more Americans working? Fed Chair Powell says blame education and drugs, not welfare.”

The Post writes:

“U.S. senators asked Federal Reserve Chair Jerome H. Powell about labor force participation this week, especially after Powell said getting more people into the job market is a ‘national priority.’ In response, Powell told senators to blame the education system and the opioids epidemic, not welfare.

‘It isn’t better or more comfortable to be poor and on public benefits now, it’s actually worse than it was,’ Powell said. ‘ … It’s very hard to make that connection, and I’ll tell you why,’ Powell told (Senator John) Kennedy. ‘If you look in real terms, adjusted for inflation, at the benefits that people get, they’ve actually declined, during this period of declining labor force participation.”

Powell’s assessment is aligned with the lessons the think tank I lead, Michigan Future Inc, has learned from Minnesota, the Great Lakes’ most prosperous state. There is little or no evidence that a too-generous safety net is a prime reason for Michigan being a national laggard in the proportion of adults working.

Summarizing his findings on the topic in our “How Minnesota’s Tax, Spending and Social Policies Help It Achieve the Best Economy Among Great Lakes States” report, Rick Haglund writes:

“Many states have cut benefits to the poor and unemployed in the belief that these payments dissuade people from looking for paid work. Minnesota takes a different view. It has created one of the strongest safety nets in the country, spending generously on benefits to help those who have lost jobs or been stricken by poverty get back on their feet. That protective net has not trapped Minnesotans and turned them into a bunch of government-dependent slackers. Far from it. Minnesota’s employment-to-population ratio of 67.2 percent in April was the fourth highest in the country, according to the latest data of the Brookings Institution’s Hamilton Project. In Michigan, which has trimmed welfare and unemployment benefits, 56 percent of the adult population was working in April. Michigan ranked 41st in that measure.”

The data in Haglund’s report is from 2014. In 2018, Michigan ranked 38th in the proportion of those 16 and older who worked. Minnesota ranked 3rd. If the same proportion of Michiganders worked as Minnesotans, there would be 725,000 more Michiganders working today. So much for the premise that a strong safety net leads to people preferring public benefits over working.

To their credit, policymakers in both Washington and Lansing have responded to our collapsing economy by temporarily expanding unemployment and paid leave benefits and are providing households with cash and expanded food assistance to help households pay their bills.

All of a sudden off the table are calls to continue to shrink the safety net; impose work requirements to access public benefits; and unemployment benefits that do not cover part-time and gig-economy workers. Not to mention sending households — no matter whether the adults are working or not — cash to help pay the bills.

We need bi-partisan consensus to continue this expansion of the safety net once the pandemic has passed. This is the prime economic challenge of our times: having an economy that provides family-sustaining jobs — not just any job — so that all working Michigan households can raise a family and pass on a better opportunity to their children.

Lou Glazer is president of Michigan Future Inc.

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