Increasing the employability of poor people must accompany job creation efforts

By Angela Rachidi of AEI.

"Last week, Senators Tim Scott (R-South Carolina) and Cory Booker (D-New Jersey), along with Representatives Pat Tiberi (R-Ohio) and Ron Kind (D-Wisconsin), introduced the “Investing in Opportunity Act”. It is a bipartisan effort aimed at encouraging private investment in economically distressed areas. According to USA Today:

The Investing in Opportunity Act would let investors put off paying capital gains taxes and instead use that money to improve conditions in places with chronically high poverty and unemployment, low family incomes and rampant abandoned housing.
The legislation represents a new twist on a familiar approach in Washington: using the tax code to affect behavior. It’s designed to encourage socially conscious investors to join forces to help communities where few investors ever tread.

Commentators have applauded the bipartisan effort. At a time when minimum wage hikes and government program expansions are frequently discussed as ways to help the poor, this legislation is a welcome departure.

But a difficult reality in poor communities is that most non-workers give reasons for not working that have little to do with the availability of jobs. In fact, less than 10% of poor non-workers (18-64 years old) report that they are not working because they “could not find work”. Instead, most report being ill or disabled (32%) or not working because of home or family responsibilities (25%).

 

It’s possible that if jobs were plentiful, fewer people would allow a health issue or home and family responsibilities limit their work, especially if it made them poor. It’s also possible that certain government programs, like disability assistance, discourage people from pursuing work, including getting themselves healthy enough for employment. But some poor working-age people might simply be incapable of work, even when jobs are available.

Whatever the case, without attention to these other factors, increasing investments in economically distressed neighborhoods, such as through the Investing in Opportunity Act, may not be enough to meaningfully reduce poverty. While investments are certainly a necessary ingredient, improving the health of low-income Americans so that they can work, addressing home and family responsibilities that limit work, and taking a hard look at how government benefits might contribute to non-work are equally essential."