USA: Trump’s response to poverty in the USA

by | Aug 21, 2018 | News, Research

Picture credit to: Big Think.

On the 12th of July 2018, Trump’s Council of Economic Advisers (CEA) released the report “Expanding Work Requirements in Non-Cash Welfare Programs”, in response to an executive order made in April 2018 on reducing poverty in America.

The poverty rate of 3%, as measured in the CEA report, is at an all-time low. Although a favorable result, the authors point out that “many non-disabled working-age adults do not regularly work, particularly those living in low-income households. Such non-working adults who receive welfare benefits […] can become reliant on welfare programs.” In an attempt to increase self-sufficiency in recipients of benefits, they propose strengthening and increasing work requirements.

Ed Dolan reflects on the results outlined in the report in his article for the Niskanen center. He poses four questions that challenge the report’s main conclusions.

  1. Are the measures of poverty used in the report appropriate?

In the report poverty was measured through consumption starting in 1980, when the first reliable data is available. After adjusting for changes in purchasing power, the results show that the poverty rate has fallen compared to 1980. Although this approach has solid ground in research, Dolan argues that alternative measures produce different results (examples available here and here), mainly due to different definitions of poverty itself and using different years as the base for comparison.

  1. Who are the recipients?

The CEA distinguishes between two groups that currently receive welfare support: i. recipients unable to work, and ii. non-disabled recipients able to work. They report that non-disabled recipients have lower employment rates compared to the general population of working age. The authors explain this finding with the fact that recipients receive less benefits as their income raises which demotivates them to find work.

Dolan challenges this argument by saying that recipients cannot be easily grouped into non-disabled and disabled welfare beneficiaries. The Kaiser Family Foundation study found that some individuals that reported not working due to some form of disability do not meet the social security disability requirements for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) support, making them officially non-disabled. These individuals are unlikely to get employed despite policy adjustments, effective tax rates and work requirements.

  1. Are work requirements effective?

According to the CEA, there is sufficient evidence to support the claim that work requirements would be effective in reducing dependency on welfare benefits and increasing employment. Their argument is based on the welfare reform that took place in the 1990s.

Dolan disagrees with this conclusion, pointing out that the golden standard among experts for evaluating the 1990s reform is a series of eleven experiments known as the National Evaluation of Welfare-to-Work Strategies, conducted in the 1990s across the country with each lasting five years. In these experiments, participants were divided into two groups. The treatment group received benefits as a function of work requirements, while the control group continued to receive payments without conditions. The treatment group had modest gains in employment and there was a 1% decrease in total income on average. The results showed that the increase in wages was often smaller than the decrease in benefits. Finally, positive results were produced only where administrative support was provided (one-on-one interactions, training etc.). Dolan believes this provides little evidence that work requirements would help recipients move towards self-sufficiency. He also criticizes the CEA report for not emphasizing the crucial role of administrative support.

  1. What is the real agenda?

Dolan believes that work requirements are not likely to be effective at increasing employment and raising self-sufficiency: “Think of it this way. As currently configured, the message to in-kind welfare beneficiaries is, ‘We encourage you to work, but if you do work, we will take your benefits away.’ Adding work requirements changes the message so that it becomes, ‘If you work, we will take your benefits away, but we will also take them away if you don’t work.'” However, as a tool to lower welfare payments and reduce administrative costs work requirements could be effective, since more individuals would be excluded from the system, according to Dolan.

More information at:

“CEA Report: Expanding Work Requirements in Non-Cash Welfare Programs“, Council of Economic Advisers, July 12th 2018

Executive Office of the President, “Reducing Poverty in America by Promoting Opportunity and Economic Mobility“, Executive Order 13828, April 10th 2018

Ed Dolan, “Do we really want expanded work requirements in non-cash welfare programs?“, July 23rd 2018

MaryBeth Musumeci, Rachel Garfield, and Robin Rudowitz, “Medicaid and Work Requirements: New Guidance, State Waiver Details and Key Issues“, January 16th 2018

Discussion on the future of UBI trials

Discussion on the future of UBI trials

by | Aug 2, 2018 | News, Research

Picture credit to: iStock

 

The start of the longest and largest Universal Basic Income (UBI) experiment in Kenya and the approaching end of the trial in Finland spark a new discussion among experts on the effects of ‘no-strings attached’ money transfers.

 

An article published in Nature in May 2018 discussed the importance of randomized trials in informing researchers and policy makers alike about the feasibility of an UBI scheme. The article states that critics of the currently employed conditional welfare systems believe that the limited results do not justify large administrative costs that come with such policies. Some policy-makers see UBI as a more affordable alternative that has more potential to alleviate poverty, according to the article, but the costs and benefits of UBI schemes still have not been clearly identified. With that in mind, many decision makers prefer to employ a data-driven approach by making randomized trials, the most universally accepted method of gathering information about the effects of UBI. However, even supporters of the evidence-based approach claim that designing and conducting UBI trials comes with its own set of difficulties. They point out that it requires a large amount of planning and researchers need to look for benefits in a wide variety of areas such as health, education, nutrition and job-seeking. Furthermore, lack of standardized goals and agreed upon areas of impact pose another challenge for advocates of UBI trials.

 

Damon Jones, an economist at the University of Chicago believes that even clearly demonstrated benefits will not necessarily indicate that UBI would work in practice. He arguments that most resources for the trials come from private funds and only include a small portion of the population. Hence, he thinks trials do not say much about the affordability of big government programs and the willingness of people to fund them through tax increases. On the other hand, he adds that despite these inherent limitations research still should be done.

 

Others propose that trials have an ongoing impact on UBI discussions. Rob Reich, a political scientist at California’s Stanford University thinks trials will help researchers identify flaws in the process, refine goals and impact areas as well as provide policy makers with some answers they are looking for. Furthermore, supporters argue that over time the studies will provide more insight on the costs and benefits of guaranteed income schemes. Proponents of UBI trials recognize that despite being important, updating research is expensive.

 

On the other hand, Quartz interviewed experts that expressed doubt whether randomized trials are the best option for analyzing the effects of UBI in the first place. According to Karl Widerquist, many effects will play out over the years and will not be revealed during the experiment, regardless of its size and cost. Nonetheless, he notes there is very little downside to trying it out. Others believe that the benefits have already been proven by initiatives such as Alaska’s Permanent Fund Dividend and there is no need for more research. Matthew Zwolinski adds that UBI has to be “robust enough to survive the political process”, meaning that he sees gradual changes having a higher likelihood of being implemented, compared to radical policies.

 

Although opinions differ, supporters hope that big trials like the one in Kenya will open the door for future research and help the discussion move forward.

 

 

More information at:

Carrie Arnold, “Nature: Money for nothing: the truth about universal basic income”, Nature, News Feature, May 30th 2018

 

Kate McFarland, “Overview of current basic income related experiments (October 2017)”, Basic Income News, October 19th 2017

 

Kate McFarland, “US/KENYA: GiveDirectly Officially Launches UBI experiment”, Basic Income News, November 17th 2017

 

Olivia Goldhill, “We’re giving up on universal basic income before the evidence is in”, Quartz, May 29th 2018