MDRC in the News

How to Cut Poverty Now

By David Leonhardt, Opinion Columnist, The New York Times

09/2018

Low-income workers haven’t received anything close to their fair economic share over the last few decades. The American economy has almost tripled in size since 1980, yet the average inflation-adjusted wage for low-income workers has risen only about 10 percent.

The most effective policy for fighting this trend — and making sure working people aren’t mired in poverty — has been the Earned Income Tax Credit. Established during the Ford administration and later expanded by both parties, the E.I.T.C. pays a stipend to low-income workers. It avoids the problematic incentives of welfare because it encourages people to work…

…Today, MDRC — a highly regarded research group — is releasing a new study on an E.I.T.C. experiment in which New York City increased the benefit for workers without dependent children. And it offers yet more reason to favor an expansion.

New York’s program, called Paycheck Plus, not only lifted the incomes of the low-wage workers but also increased employment, by drawing people into the work force. And the effects were largest for the most vulnerable demographic groups, including the previously incarcerated, Lawrence Katz, a Harvard economist and one of the researchers, told me.

Katz points out that a full national expansion would probably have even larger effects, because more people would come to understand its benefits — and enter the labor force. A full expansion would affect something on the order of 15 million workers, other studies suggest, and would likely cost in the range of $30 billion to $40 billion a year — a fraction of what the Trump tax cuts cost.

“If you could do one thing to really go after poverty, what would it be?” Gordon Berlin, MDRC’s president, said to me yesterday. “To me, it would be to make work pay at the low end again…”

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