A Safety Net For the Least Fortunate

By Peter B. Edelman, Mark H. Greenberg and Harry J. Holzer
Sunday, October 19, 2008

As policymakers struggle to respond to the global financial meltdown, most analysts suggest that our economy is entering a fairly serious and lengthy recession, with perhaps the highest unemployment rates in a generation. If true, this would inflict economic pain on most Americans -- but the most severe effects will be felt by disadvantaged adults, youths and their families.

Even in the best of times, people with low incomes have high unemployment rates and low wages. They are also more vulnerable to recessions than other workers, as the least skilled and least experienced are usually the first to lose their jobs in a downturn and the last to regain them when the economy recovers. The "safety net" that protects workers during times of involuntary job loss is tenuous for all workers but especially those with low wages. Unemployment insurance covers just over a third of all workers who become unemployed but less than half that fraction among workers earning low wages.

Consider the situation of low-income single mothers: Our national experiment with "welfare reform" in the 1990s, along with other policy changes and a strong economy, caused some 3 million families to leave the welfare rolls in that decade -- with most parents finding jobs fairly quickly. Of those, most maintained their employment during the fairly mild recession of 2001 and the weaker labor market that followed. Among those who did not, only 13 percent managed to receive unemployment insurance.

Moreover, as welfare has become far more restrictive, perhaps a fourth of all low-income single mothers are "disconnected" from both work and welfare during any given year. That fraction would rise during a serious recession, with many of their jobs disappearing while welfare is less available than before. Public assistance would also be very limited for other low-earning groups, including legal immigrants, when their jobs disappear in the downturn.

Disadvantaged young people, who are much more likely to drop out of high school and less likely to attend or finish college than those from families with higher incomes, will face severe employment challenges in a much weaker job market. Even during strong economic periods, less than half of all high school dropouts ages 16 to 24 are working; among blacks, the comparable rate is about a third. But joblessness would rise more dramatically for them in this downturn than for any other segment of the population. This combination of poor schooling and low early employment will limit their earning potential. And as poor youths face fewer opportunities, crime rates and other signs of dislocation are likely to rise.

What does this imply for public policy? As Congress considers a large economic recovery package, a priority should be placed on helping the disadvantaged find jobs or maintain their incomes. Such an approach would be more than compassionate: The poor are more likely to spend any cash they receive fairly quickly to meet their basic needs, generating more stimulus for the economy than do tax rebates or other payments to higher-income groups. Some of these expenditures can also be considered investments in higher future productivity and earnings for the disadvantaged, especially among youths.

Congress should improve the "safety net" so that it catches more jobless workers and their families. Not only should unemployment insurance and food stamps be extended and expanded, but special outreach efforts should be undertaken to ensure that all who qualify have access to these and other basic benefits. Additional funds might be made available to those who lose their jobs but do not qualify for standard unemployment benefits because of their being part-time workers or earning low wages. And the earned-income tax credit, which subsidizes low earnings in the previous year for the working poor, should be made more generous for those who currently get little, such as childless adults.

More broadly, special efforts should be made to boost employment and skills among disadvantaged youths and others with barriers to work. Year-round service employment programs for disadvantaged youths can be quickly expanded and tied to efforts to improve their skills. Career and technical education options that emphasize work experience as well as training can be scaled up. If substantial funds are allocated to building infrastructure or transitioning to a "green economy," we should make sure that some jobs and funding for apprenticeships go to disadvantaged youths in those areas. For those with very limited job readiness, more "transitional" jobs that finance paid work experience and supportive services for those with major employment barriers (such as criminal records) should be considered.

As we prepare for a serious economic downturn and plan to spend large sums to limit its effects, we should keep in mind the needs of all Americans -- especially those who will be most hurt by whatever comes to pass.

Peter B. Edelman is a law professor at Georgetown University; Mark H. Greenberg is a senior fellow at the Center for American Progress; and Harry J. Holzer is a public policy professor at Georgetown and senior fellow at the Urban Institute. All three are directors of the Georgetown Center on Poverty, Inequality and Public Policy.

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