Are We Paying Parents to Keep Kids In Poverty?

by Rob Roper

An article in Seven Days reminded us that back in 2007 the Vermont legislature set a goal to cut child poverty in half in ten years. A fourteen member panel was charged with getting this done. The deadline passed on June 30, 2017. How’d we do? As the article reports:

In 2007, according to the U.S. Census Bureau, 15,907 Vermont children, or 12.4 percent, were living below the federal poverty line. By 2015, the most recent year for which data is available, the number of children in poverty had declined, slightly, to 15,469, but the rate had increased to 13.3 percent.

What was tried? As part of Vermont’s mini War on Poverty, the state has expanded state subsidized access to health insurance, increased the minimum wage, increased childcare subsidies, and beefed up welfare benefits. Note: These policies achieved exactly nothing for poor kids. At least nothing as far as lifting them statistically up the income ladder.

There are a few ways of looking at this.

First, maybe establishing a distinguished panel of political appointees is no way to get anything done. Perhaps these types of efforts are more of a chance to hold a press conference with much patting of backs today for “doing something,” while counting on voters’ short memories to make sure nobody is actually held accountable tomorrow for doing nothing.

Second, maybe we’re analyzing poverty the wrong way. Instead of looking as someone’s gross household income as a measure of poverty, why don’t we look at access to basic good and services – food, housing, healthcare, etc. A child (or anybody) who is listed as in poverty, but then receives a government benefit valued perhaps at several thousand dollars, may still be listed as living in poverty. Is a kid who receives free breakfast and lunch at school, attends a subsidized childcare program, gets healthcare through Medicaid, and lives in subsidized housing really “living in” poverty? Or are they more accurately defined as dependent on taxpayers to maintain a middle class lifestyle?

And, lastly, related to the above point, are we effectively paying parents to stay poor? Common sense and economics dictate that if you subsidize something you get more of it. If parents need to remain income-poor in order to cash in on government subsidies worth tens of thousands of dollars, they are heavily incentivized to stay “poor.” Which, of course, means their kids are tagged as “living in poverty.” This is the “benefits cliff” often mentioned in the debate over the $15 minimum wage. In that context our politicians recognize the disincentive to increase income – and to remain “poor” – in order to avoid actually living in poverty.

This is the trap that is creating a permanent underclass. Maybe, if we really want do do something about poverty over the next ten years, it’s time to remove the bait from this trap.

Rob Roper is president of the Ethan Allen Institute. 

{ 2 comments… read them below or add one }

Raymond thomas September 23, 2017 at 11:44 am

The welfare benefits can be construed to be after tax money if the person was working. Why do we have EBT cards for food and then provide meals yr around at the schools

Reply

Evan Hammond September 23, 2017 at 11:56 pm

If we remove the bait we must open a pathway to entrepreneurship by drastically reducing small business regulation at all government levels.

Reply

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