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3 Economic Policies That Will Help Struggling American Families

We asked three economists to suggest policies that would really help American families. Here's what they said.

Parenting today is hard. Very hard. Wages are stagnating in the midst of inflation and the increasing costs of housing and child care. There are also very few, if any, social programs to support families. Of the few that exist, most are needs-based and reserved for the very poor. But even those programs are precarious, annually funded, and are constantly subjected to political piddling about work requirements. Meanwhile, the middle class gets squeezed out of help that they, too, need. Consider the fact that many parents are spending up to a third of their income on child care until their kids enter kindergarten. 

With the 2020 election around the corner, many politicians have taken to the stage to talk about programs they think would help middle class families thrive. But what do American families actually need? To find out, we talked to three economists about what they think would help middle-class American families most and why. From overtime protection and job guarantees to paid family and medical leave, here are their suggestions.

A Jobs Guarantee
Suggested by: Alan Aja, Associate Professor at Brooklyn College, Member, Board of Directors of National Jobs for All Coalition, co-author of What We Get Wrong About Closing the Wealth Gap
Why: The Job Guarantee is a very American idea. If a person cannot find work in the labor market at large, then the government should have a plan in place, or an actual policy where a person can find a living-wage job. They could also have employment training embedded in the program that would be a lot like a permanent Works Progress Administration that we had under the FDR administration.

Folks should be paid for their labor! We should have a public sector-oriented job guarantee that looks a lot like the old former Civilian Conservation Corp. That would be so transformative, especially for black and Latinx families. The reason that I say that is that, while Trump is busy touting a low unemployment rate, that statistic by itself doesn’t measure those who have taken themselves out of the labor force altogether, who have given up searching.

That rate underestimates who is really looking for work. The other problem is that this new economy is comprised, largely, of precarious labor. Gig economy, job to job, part-time. People throw around the terms ‘Uber’ and ‘Lyft’ a lot, right? These are unstable forms of employment that are not gainful. They’re not union. They’re not living-wage. They don’t come with health care. So, I’m just going to be outright critical and say that Trump is boasting about jobs, but the question is: What kind of jobs? And what do they pay? Is there a means to an end here?

[The gig economy] also has no boundaries. anyone can get caught up in it, and become, I would argue, victim to it. But at the same time, since we’re talking about a larger economy that has disproportionately affected black and Latinx communities, but not out of a lack of skill-sets or supposedly wrong cultural values, but outright discrimination

A lot of work I do with colleagues stresses that among the most educated groups in the U.S. are black, Latinx, and Afro-Latinx women. And yet, they are not receiving the same returns to income — and wealth — as white men without college degrees. In other words, black households where the head of household has a college degree possess less wealth than a white household where the head of household has dropped out of high school. 

So when I say that these types of economies are largely discriminatory, I’m talking about the larger labor market in which people do possess those skills. They’ve got the soft skills. They’ve got the education. It’s not because they have the wrong family values or they are not working hard enough. We’ve got evidence that finds that people of color are working twice as hard, and using more education, and yet, levels of wealth and education do not match that effort that we build the narrative of our economy around. 

Meritocracy is a myth. So when we talk about the job guarantee, you’re removing the structure of discrimination because the government has to give everyone a job. Coretta Scott King fought for a job guarantee well after her husband’s assassination. She saw it as a means not only to curb unemployment, but also to put people to work for communities, rather than send them off to war, which is disproportionately borne by communities of color. She was saying that in Vietnam and later on into the ’80s and ’90s. She was a strong advocate. And so were many civil rights groups. So this is an idea that has a long history.

A job guarantee completely counters that, that any city or state could implement. The unemployment rate has historically always been twice as high for black Americans than white Americans. And the Latinx community occupies a middle position, where you have various unemployment and underemployment. Usually, it inches closer to the black unemployment and underemployment rate. 

I’ve always believed — and I’m borrowing from my colleague Darrick Hamilton here — that if the white unemployment rate was at the level that the black and Latinx rate is now, then we would call it a national crisis. This idea of a federal-to-municipal job guarantee would have been implemented already. 

The Works Progress Administration offered people a job for public service — people built roads, dams, theaters, and community centers and took a great deal of pride in that. If you look at the report by the American Society of Civil Engineers, they’ve called our infrastructure — from our educational facilities, to our parks, to safe water and sanitation — a mess. Just imagine putting people to work for that under a federal, to state, to municipal level of job guarantees. 

Paid Family and Medical Leave
Suggested by: Dr. Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research
Why: Paid family and medical leave is tremendously important. We know that families who are unable to take a leave when they need it for their own health, to care for a spouse, children, or parents, are put in a miserable bind. Do we put food on the table or do we take care of our kid who is really sick? No one should have to make those choices. Many people cannot take these leaves, in part because they are not paid. 

I studied paid family and medical leave in California. When the leaves were unpaid, it was very rare, relative to mothers, for fathers to take off when a child was born. They often wouldn’t even tell people at work. They would just ask for two vacation days off, and be there when the mother gave birth and be there to take the baby home, and not be there when the mother recovers and not be there to bond with the child. We know a lot about the importance of fathers having time at the very beginning to bond with a child. We have lots of research that shows that initial bonding carries over into the father’s life and the child’s life for years afterwards. They’re much closer as the child grows up.

Once leaves were paid, we saw a steady increase in the share of new fathers taking leave, much closer to 50/50 than it used to be.

Through interviews, we found that when family leave is unpaid, men typically think: That’s not meant for me. Everybody knows that men are supposed to be the breadwinners. So, if it’s unpaid, men say, “That can’t possibly be for me.” Having it paid, over time, has greatly changed men’s attitudes. 

We also found that employers now looked much more favorably on men taking leave. Everybody understood that this leave is for men as well as for women. When we were out in the field, we visited a company that proudly told us that they had had their first baby shower for a male employee.

We interviewed managers who were facing situations in which they had a parent who was dying. They wanted to be able to spend as much time as possible with them. This was a male employee in an IT company — you know what the culture is. But, nevertheless, because the leave was paid, he didn’t take all the six weeks at once. But he took a couple of days here and there over that period of time to be with the dying parent as much as possible in the final months of their life.

Well over 95 percent of companies in California told us that having paid family medical leave in California improved morale and reduced turnover.

Paid family and medical leave allows the father to bond with the child; allows the father to care with the mother; allows the father to attend to the illnesses or end-of-life care of his own parents, which is very important; it creates greater gender equity within the household in terms of taking care of children and household tasks; and, the greater gender equality within the household, actually turns out to be beneficial to the wife’s ability to hold a job and also bring in income. So it benefits the family that way, as well. So this is my highest priority. I understand there are many policies. I support them all. But my highest priority is paid family and medical leave for everyone in America. We like to say you shouldn’t have to win the boss lottery. Some people work for generous companies; some 48 percent of people in low-paid jobs do not even have one day of vacation. They can’t even take off for vacation when their child is born. 

Overtime Protections.
Suggested by: David Cooper, Senior Economic Analyst at the Economic Policy Institute, Co-Director of the Economic Analysis and Research Network
Why: Most people are familiar with the concept of overtime. It was created as part of the Fair Labor Standards Act, which was a law passed in 1938 that established both the minimum wage and overtime. It essentially created minimum pay standards and it put a ceiling over hours — it created the 40-hour workweek by requiring that most workers, when they work more than 40 hours in a week, had to be compensated more for any additional hours beyond 40. In doing so, it created this scenario where employees have skin in the game, because they want to ask workers to work excessive hours, and by that I mean, when they work hours beyond 40, workers have to be paid 1.5 times their regular rate of pay. 

When the law was first created, it was understood this protection was supposed to apply to most U.S. workers. That included both hourly workers and salaried workers. Now, there is an exemption to overtime rule. That’s called the “Executive Administrative or Professional Exemption.” Basically, what it means is the secretary of labor could exempt workers who were managers, executives, highly trained professionals. These were people who had significant bargaining power in their jobs and in the market that they didn’t need to be protected for overtime, the thinking being that they were already being paid enough to compensate them already if they are asked to work more than 40 hours.

Now, in order to qualify for this exemption, there’s three criteria that had to be met. Someone had to be paid on a salaried basis; they had to pass the duties test, which is a complex consideration of their job responsibilities; and they had to be paid above a salary threshold, a clear, bright line indicating who is, actually, a highly paid professional vs. an ordinary worker.

That salary threshold has varied over time. The last time that it was significantly updated was in 1975. At that time, about 63 percent of all salaried workers in the United States were eligible for overtime when they worked more than 40 hours a week, based purely on that threshold. Almost two-thirds of all salaried workers in the U.S. were automatically eligible for overtime. The share that is eligible today is less than 7 percent. So, we have this huge section of the workforce who are being paid a salary and are potentially being asked to work 45, 50, 60, 70 hours a week with no additional compensation for those extra hours, and that’s a problem.

That 7 percent is based purely on the erosion in value of the salary threshold. The current threshold under federal law is $455 a week. That’s an annual salary of about $24,000 a year. So, the reason why fewer than 7 percent of salary earners are eligible is because fewer than 7 percent earn less than $24,000 a year. 

They should target that threshold; that’s the simplest way to do it. There was a rule attempted in 2016 to raise that threshold up to $913 per week, which would have been about $48,000 a year. And that would have automatically covered a significantly larger portion of the workforce, but that overtime rule was challenged in court and then when the Trump administration took office they did not defend the rule in court. 

We know, empirically, that American households are working a lot more hours now than they were back in the 1970s. A two-parent household works about 12 percent more hours now, per year, than they did in 1978. That’s about 390 more hours a year per year than they did back then. 

The basic principle here is that if there are no consequences for asking workers to work excessive hours, then more people are going to be overworked. They are not going to be paid for that time. That’s time that they should be able to spend with their families and their children. There’s so much research that points to the benefits of children being able to spend time with their parents and particularly their fathers. This is a clear policy that would give workers more time outside of the office. If they are still being asked to work extra hours, at least they are being compensated for it, so they are going to have higher pay, which is beneficial for working families.

There are some folks for whom, the way that businesses would respond, would be to stop overworking their employees. For others, it would be make them overtime eligible and pay them overtime and continue to work them at extra hours but at least they’ll get paid for it. And the third is, if the company wants to be able to ask someone to work a lot of hours without overtime compensation, they can just raise that person’s salary up to the threshold. That’s just a higher salary at that point. Twelve-and-a-half million workers across the U.S. would be impacted by the rules if they were updated.