America has “invested” trillions of dollars to eradicate poverty from our shores and has
failed. In 2012 on the 50th anniversary of Johnson’s war on poverty the House prepared a study on the cost, programs and effectiveness of the war. In 2012, the United States spent almost $800 billion in 92 programs combatting poverty. In 2014, the Council of Economic Advisors, released their study. This study identifies several accomplishments for reducing poverty like the improvement in education and the Affordable Care Act. It also provided analysis on the Official Poverty Rate (OPR) and two new relative poverty measurements, the Supplemental Poverty Measure (SPM) and the Consumption Poverty (CP).
The OPR shows little to no improvement in poverty since 1968. It has hovered between 11%-15% depending on economic conditions. Of course, spending trillions for no results is not satisfying nor politically palpable. The SPM demonstrates a more gradual improvement in poverty. Because it is a “relative” measurement, the impoverished would need to have income/resources grow faster than the rest of the population at large. This assumption is in part the basis of the class warfare being waged and the recommendation for the dramatic increase in the minimum wage. The last measure, Consumption Poverty, devoid of any anti-poverty programs shows that poverty runs in the 25% – 30% range consistently over a 45 year period.
The one observation on all the work that has been done is that we can buy down the poverty rate with transfer payments and tax credits, but our ability to empower people to pull themselves out of poverty is unchanged. The progressive solution? Raise the minimum wage and tax the affluent as if poverty could be abolished by executive fiat. With the “new” definition of poverty, it is not enough to improve the income of the impoverished, we must also suppress earnings. With a relative poverty measurement, the impoverished must earn income faster than the population as a whole. Not opportunity for all, just opportunity for some. Thus, the war on income inequality. Is there no other option?
The “Employer of Last Resort” is a concept that people do not choose poverty but through poor economics, bad policy design or both, it is difficult to escape. “The State” (Federal Government) would step in and offer employment, up to 60 hours per week. “The State” would compensate individuals at the Federal minimum wage. All hours would be compensated at straight time (no overtime). States fearing the Federal minimum wage is insufficient could fund the difference between the Federal minimum and the State minimum wage rate. Ten hours of the work week could be spent in education. Targeted education would be offered in the discipline of business and entrepreneurism. It is entrepreneurism and not employment which is the best path to the middle class and beyond.
The “Employer of Last Resort” has some definite benefits over the progressive policy of poverty “buy down”. First, there is intrinsic value to working and earning your money. Work also maintains and enhances one’s skills. An idle workforce once valued for the skills can quickly become obsolete. Also, the skill of getting out of the house and arriving at work in a timely manner, can be eroded without purpose. Another advantage of guaranteed employment is the support that it offers to industry wages. Today, due to poor economic conditions there is a surplus of labor. In a free market, surplus labor naturally creates suppression of wages. By offering workers an alternative, employers will need to compete for workers. They could compete by offering more rewarding work, better conditions, better pay or all of the above. While artificial, the concept of “Employer of Last Resort”, would produce some market base competition for labor that would elevate entry level pay.
Another benefit, impoverished citizens could determine the amount of assistance they want. At 60 hours of work, a family of two with two working people could earn $45K only $6K short of the median national income of ~ 51,000. The program would encourage people to stay together, it would encourage work but more importantly it would allow a person to decide how much support they receive from the State. For example, they could work 30 hours in industry and 15 hours with the State. Assuming industry compensates at a better rate, this may be all that the person needs. Finally, the State could leverage this talent to provide needed social services such as road repair, trash services and improved security.