Reviews | Benefits Cliff discourages people from earning more money
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One person I interviewed for this newsletter was Anne Kandilis, director of Springfield WORKS / Western Massachusetts Economic Development Council. She supports a state bill that would experiment with the reorientation of the state labor income tax credit to counter the fall of the benefits cliff, by supplementing family resources so that they do not diminish. not when the adults in the household increase their income. “We made it very simple,” she said. “We just want to bridge a gap. “
Filling in the gaps is a great idea, but it is not enough. If all you do is keep people on the same level of resources when their incomes rise, which means they don’t keep any of the extra money they earn, they face a “tax rate.” »Effective marginal of 100%. They are stuck on a plateau. (Compare that with the current federal tax rate of 37%.)
A plateau is better than a cliff, but that still seriously discourages work, says Alexander Ruder, organizer of the Atlanta Fed conference and senior advisor to the bank’s community and economic development team.
Ruder mentions another big problem: If you are a low-paid practical nurse who collects government benefits, the people responsible for workforce development might encourage you to take training to become a licensed practical nurse, the next rung. of this career ladder. But a licensed practical nurse without benefits may end up with fewer resources than a licensed practical nurse with benefits. For many people, the precipice of benefits is effectively pulling the career ladder that is touted as the way out of poverty. One solution is to train to be a registered nurse, which is a higher paying job than a licensed practical nurse, but it’s more ambition than many people can realistically fulfill.
Barr, of the South Carolina Center for Fathers and Families, says one way to avoid the poverty trap created by the cliff of benefits is to intervene earlier: educate teens about their career options so they can get the training and education they need before they have children to take care of. “When you gain weight it’s hard to use wings,” he told me. “Fly while you can. “
Good news on the labor front: While the number of jobs in the United States in October remained down 2.8% from February 2020, the total number of hours worked fell by only 1.7%, according to data released Friday by the Bureau. labor statistics. This is because the average number of hours people work per week has increased. Here’s a statistic you don’t see every day: The total number of hours worked per week in October was 49 million hours higher than it would have been if the number of working hours had decreased by as much as the number of jobs. “The current labor supply may be insufficient,” wrote James Paulsen, chief investment strategist for the Leuthold Group last month, “but it is also remarkably healthy compared to history! “
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