“Equitable Growth in Conversation” is a recurring series where we talk with economists and other social scientists to help us better understand whether and how economic inequality affects economic growth and stability.
In this installment, Equitable Growth’s Executive Director and Chief Economist Heather Boushey talks with Hilary Hoynes, an economist and Haas Distinguished Chair in Economic Disparities at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. From 2011 to 2016, she was a co-editor of the American Economic Review.
In their wide-ranging conversation about federal social safety net programs, Boushey and Hoynes discuss:
- The economic debate about trade-offs between social safety net spending and labor market participation
- The new data-driven evidence enabling the analysis of the long-term economic benefits of the social safety net
- The policy implications of this new evidence
- The role that the social safety net can play when the next recession hits the U.S. economy
- The debate over the social safety net and a universal basic income program
- The need to better understand regional and family economic differences in social safety net programs
Each of these parts of their interview have been edited for length and clarity. [Editor’s note: This conversation took place on March 8, 2018.]
The policy implications of this new evidence
Boushey: We’re really able to tap into this new body of research. So, that’s very exciting. You know, you’ve mentioned this a little bit, the importance of how the social safety net has moved increasingly toward supporting work. Another side of that is that even the programs that don’t necessarily support work have work requirements, so that they’re increasingly requiring folks to work—and, of course, the most recent example at this point in time has been the Trump administration allowing states to add work requirements to Medicaid. Kentucky was the first state to do that.
I would think that the introduction of work requirements would change the composition of who gets these benefits and how many benefits people get. But can you tell me a little bit about what we know about the effects of these work requirements on the beneficiaries and on the programs? Also, are these actually getting people into those kinds of stable jobs that allow them to get off these programs? Kind of two separate questions: Are these work requirements really as important a tool as policymakers think they are? And are they working?
Hoynes: In a way, these work requirements that you mentioned are being advanced now through waivers in Medicaid, and I just was looking at a Wall Street Journal article today about how Wisconsin is implementing work requirements for food stamps.
Boushey: Oh, wow.
Hoynes: So, I think that’s also kind of on the agenda. And I think that that gets us back a little bit to this framing of the trade-offs. That is, we want to provide protection, which is why these programs are in place, but we’re worried that it’s somehow providing incentives that prohibit individuals from moving into the labor market.
I have a couple of thoughts about that. One is that the evidence we have seems pretty convincing to me that the programs themselves are not the reason that individuals aren’t working. That is, the best evidence that looks at when programs change and how much people are working within Medicaid and food stamps doesn’t tell me that these work disincentives are very large. So, that’s the first observation. The second observation is that we actually have fairly limited evidence about what work requirements do. The most and the best evidence we have is from welfare reform. And the challenge there is many things changed at once.
Work requirements were added in the transition from Aid to Families with Dependent Children to Temporary Assistance for Needy Families [in the 1990s] but so were lifetime limits and many, many other changes that states implemented. So, it turns out, that makes it a little bit difficult to isolate the effect of work requirements from the other aspects of welfare reform. But I think what we learned there overall, taken as a package, is that welfare reform—combined with the expansion of the Earned Income Tax Credit that happened around the same time and the strong labor market—did lead to some transition of women from welfare to work.
But welfare reform was not the whole story there. It was clearly a part of the story. But I think what we’ve learned—and this feeds a little bit into thinking about recessions and concerns about the poorest of the poor—is that some fraction of individuals were simply left behind. They were not able to make that transition to work. The social safety net really shrunk for them. And it seems as though the very bottom of the distribution, as the poorest of the poor, are worse off than they were prior to welfare reform.
So, our knowledge about work requirements is still surprisingly thin. I think that what we now know is that there’s a group that is a subset of the population for whom perhaps providing more incentives to make transitions might help. There’s probably a large part of the population that doesn’t probably change their life course very much. Most people are on welfare for short-term periods of time.
Hoynes: And they’re going to make the transition regardless of the system. And then there’s a group that I think is harmed because they need more protection. And the challenge here might be that the population of who’s on Medicaid and who might be really affected by this is quite different from the population on cash welfare, primarily single mothers. And really, there’s a much bigger issue about low employment rates of men than there is low employment rates of women right now, and Medicaid really spans those populations.
Boushey: And so, do you think—to put more of a fine point on it—that the Medicaid population is more like the population that needs just a little push to get a job, assuming that they would get a job with access to health insurance coverage? That’s a separate question. Or do you think that they are more likely those who demographically or economically look more similar to the group that is more likely to be harmed? Do you have any sense? Or maybe that’s not knowable at this time.
Hoynes: I don’t have a lot of sense on this, but I do know that this group of nonemployed men seems to be growing into a very unique population and that we can’t really quite get a handle on what is limiting their transition into the labor market.
Hoynes: And I think the other piece we’re learning a lot about right now is how hassle costs or transaction costs are really affecting who ends up on public assistance. And there’s a lot of very interesting sorts of randomized experiments going on right now in the field, where people are trying to understand why everybody doesn’t participate in food stamps if they’re eligible.
One of the things that comes out of that kind of set of studies is that the bigger the hassle cost, the more likely you are to screen out those who are the most disadvantaged. For one reason or another, whether it’s like this behavioral economics view of poverty as being partly about bandwidth and scope to get what you need done or because of the stress burdens of poverty, hassles may decrease the targeting of programs.
The bottom line is, putting these work requirements in place requires people to think about this population. They’re transitionally working in and out [of the labor market]. It’s a reality of the low-wage labor market. And you’ve got to stay in compliance to continue to get Medicaid as your work, which is kind of erratic and not fully under your control.
My prediction would be that it’s going to be very hard [for this population] to keep up with the paperwork that is necessary to stay insured. And, as you point out, the jobs that this population are likely to be employed in don’t have health insurance. So, they lose their jobs, they fall out of compliance, they’ve got to go back up that hill and through those hassle costs to get back in compliance, and my concern would be that that would just lead to a real decline in who ends up getting Medicaid.
Boushey: Yes, or getting health care at all.
Hoynes: Or getting health care at all.
Boushey: Right. Because with the Affordable Care Act, they should be able to get health care once they get a job, a subsidized plan, but many states—and Kentucky in particular—have cut back on the availability of those plans. So, it seems like it’s a one-two punch that is making it harder to get access to health care if you’re at the very bottom but not more likely that you’re going to get it if you’re in that low-wage job.
Boushey: And, of course, as we talked about a little bit earlier, there are long-term implications we know for children. But, one would also imagine, adults who are denied access to these basic needs have implications for economic growth and stability, because those folks are not able to participate in the labor market as much. So, this is seems to be a policy that is pushing away from the kind of growth we want to see.
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