Monday, June 13, 2016

What Would Help Low-Income Households the Most?

What is the most effective way to improve the economic wellbeing of the nation's low-income households? A study by the Brookings Institution answers the question by simulating different labor market interventions and determining which one would boost income the most.

The study focused on the poorest one-third of households headed by able-bodied 25-to-54-year-olds. These households are struggling to get by on average annual earnings of just $12,415. By simulating the effect of different labor market interventions on these households—such as raising the minimum wage, helping single mothers, boosting high school graduation rates, and so on—the researchers identify the one intervention that would make the biggest difference: full-time work.

Only 46 percent of low-income householders have a full-time job versus 87 percent of their higher-income counterparts. If all low-income household heads worked full-time at the wage expected for their education, race, and gender, their earnings would rise substantially. No other labor market intervention comes close to making this big a difference. Boosting the high school graduation rate to 90 percent, for example, adds only $370 to the $12,415 annual earnings of low-income households. Raising the minimum wage to $12/hour increases earnings to $14,722. But finding every low-income household head a full-time job makes the biggest difference, lifting earnings to $19,163, a 54 percent increase.

Source: The Brookings Institution, Isabel Sawhill, Edward Rodrigue, and Nathan Joo, One Third of a Nation: Strategies For Helping Working Families

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