In a UBI program, lower-income people are guaranteed an amount of money from the government. (In theory, that “guaranteed income” would apply to everyone, but so far most programs around the country have just been enacted for lower-income people.) UBI programs are different from the myriad other welfare programs in that there are generally no rules on how the money is spent and the requirements for admission into the program are easier. Compare this to food stamps and Section 8 housing vouchers, which obviously can only be spent on food and rent, respectively, and the general complexity of many other welfare programs.

Two studies have been released recently that actually tried to properly account for the success or failure of UBI programs in Denver, Texas, and Illinois. The results aren’t pretty. In Denver, the UBI program was focused on finding housing for the homeless. However, there was almost no difference in results between the groups that received significant sums of money and the control group that only received $50 per month. The control group did just as well at finding housing as the other two groups over the course of a year. While supporters of the program are trying to paint it as a success, the fact is that many homeless people eventually find housing, and the UBI payments made no difference in the results.

In Texas and Illinois, a UBI program gave some people $1,000 a month and a control group $50 per month. After the period of the program, the control group—who received less money—had a higher employment rate and were in better financial position:

The study, which began during the COVID-19 pandemic when unemployment was high, found that employment rates fell in the second and third years among recipients compared with the control group. On average, incomes rose significantly for all groups, though slightly higher for the control group. Incomes for recipients of the $1,000 rose from just under $30,000 to $45,710, while incomes for the control group started at a similar level but grew higher, to $50,970.

People responded to receiving free money by working less, which is exactly what you might expect. It’s also exactly the wrong way to help address poverty. The pilot program in St. Louis should be ended. The Missouri Constitution prohibits gifts to private individuals, and that is exactly what a UBI program is. But this would be a bad idea even aside from the legal issues. UBI programs just don’t work.

The post Universal Basic Income Programs Are Guaranteed Failures appeared first on Show-Me Institute.

Welfare programs often create perverse incentives regarding work; recipients don’t look for jobs due to the risk of reaching a level of income that would cause them to lose access to the welfare program. Because of this problem, welfare programs can exacerbate the poverty problem they are intended to fix.

Politicians have floated the idea of a universal basic income (UBI) many times as an antidote to the incentive problems welfare programs tend to create. Andrew Yang made it a prominent plank in his 2020 presidential campaign, promising to give out $1,000 per month to every American adult if elected. Since UBI offers every single person (rich and poor alike) a certain amount of money per month, no strings attached, its proponents argue that it wouldn’t create an incentive against working.

Some free-market economists have argued that the replacement of welfare programs with UBI could reduce the bureaucratic power of government—the state would have less of a say over how people choose to live or spend their money. Charles Murray emphasized replacement as a key feature of UBI implementation:

The first rule is that the basic guaranteed income has to replace everything else — it’s not an add-on. So there’s no more food stamps; there’s no more Medicaid; you just go down the whole list. None of that’s left. The government gives money; other human needs are dealt with by other human beings in the neighborhood, in the community, in the organizations.

For UBI to serve as a tool that helps low-income individuals while increasing government transparency and decreasing state paternalism, it must be accompanied by a complete overhaul of how the welfare state currently functions.

The proposal put forward by the City of St. Louis disregards all of the wisdom stated above. First, the incentive problem that UBI tries to address is mostly ignored in the guaranteed basic income (GBI) program. Recipients of the “free” money must fall at or below a certain mark of the poverty level, which could create an incentive against working. Second, the proposed GBI program would not replace other social welfare programs. A spokesman for Mayor Jones expressed that one of the administration’s priorities is to ensure that the GBI program does not force its recipients off other government benefits, such as food stamps, for fear that it “might leave residents worse off.” In other words, Mayor Jones is not looking to reform the current welfare programs in St. Louis—she is hoping to establish another one.

Additionally, this proposal does not address concerns about the future sustainability of such a program. Mayor Jones proposes using money the city received from the federal government in pandemic aid to pay for the program. Once the $5 million is handed out, how does the city plan to keep funding this program?

If the mayor really wants to help low-income individuals, how about using the $5 million to improve the bus system that has seen massive service cuts in recent years? The reductions in bus lines have negatively affected many low-income individuals who rely on buses to get around St. Louis.

In any case, countless problems accompany the program Mayor Jones proposes. As tends to be the case in public policy, closer attention to incentives and to future financial viability could help the City of St. Louis craft proposals that would better serve the poor of St. Louis.

The post Welfare Reform or Welfare Expansion? appeared first on Show-Me Institute.

First, there’s the question of what makes housing “affordable.” Academic research on housing (and this report) typically defines “affordable” as housing where the resident spends less than 30% of their income on rent and utilities. This is a key point, because instead of affordability being solely measured by the price of housing, it is also dependent on the income of the people who live there.

Tying affordability to resident income also helps researchers explain how a region can be affordable for some but not all income groups, which is exactly what the report shows for St. Louis. For the wealthiest in the region, finding an affordable place to live is easy—St. Louis earns an “A” grade for this demographic. There’s also sufficient affordable housing for those making around and somewhat below the area’s median income (AMI). The same cannot be said for those making less than 30% of the AMI, which represents a family of three making less than $23,000 per year in total.

One problem with tying affordability to income is that it’s yet another imperfect measure for gaining insight into what residents find affordable, especially for those with lower incomes. For example, if you don’t have a car or another means of transportation, housing that’s miles away from your place of work that costs 30% of your income is likely not affordable once you account for daily commute costs. Or, if your income is low enough to qualify for other government programs (food stamps, housing vouchers, etc.) paying more than 30% of your monthly income may still be affordable for you despite what the income guidelines suggest.

So, what does it mean for a region to have an affordability problem? According to the report, you have to look at the number of people earning different incomes and compare that to the number of housing options that would be affordable for them. For example, the wealthiest St. Louisans have an enormous surplus of affordable housing options. But the poorest (<30% AMI) face a shortage of approximately 35,000 units, which is why St. Louis received an “F” for this group. To put this in context, affordable housing for the family described above would mean a 2–3-bedroom residence that costs (with utilities) less than $560 per month, which is understandably hard to find. Given the limitations of the income figures provided above, it’s hard to tell whether this estimated shortage is under or overestimating the housing affordability situation in St. Louis.

Perhaps the toughest question is what should be done given all this information. At the very least, before our elected officials start talking about solutions, they should get a better grip on the extent of the problem.

The post Does St. Louis Have a Housing Problem? appeared first on Show-Me Institute.

I’ve previously written about the Mercatus Center’s State RegData project, which calculates how many times each state tells its citizens what they can and cannot do. Using a similar program, researchers examined the impact that federal regulations have on individual states using the federal regulation and state enterprise (FRASE) index. Though federal regulations apply to all states, each state’s economy is made of different industries, so regulations targeted at specific industries will affect states differently.

The authors find that “[the] impact of federal regulations from 1997 to 2015 on the Missouri economy is associated with the following regressive effects:

• 93,411 people living in poverty
• 2.7 percent higher income inequality
• 180 fewer businesses annually
• 2,406 lost jobs annually
• 7.35 percent higher prices”

I’ll admit that it’s difficult to quantify these things and find direct links between regulations and these effects; there’s no specific regulation that led to one of these specific consequences. However, this novel program counts phrases that usually translate to regulatory requirements (like “shall” and “must”) to track changes over time. The authors then use this data along with data for other economic indicators to find the regressive effects. Given what we know about regulations generally, these numbers make sense and are pretty staggering.

From 1997 to 2015, the effective federal regulatory burden on Missouri increased by 54 percent. Researchers have found that an increase in the effective federal regulatory burden on a state is associated with an increase in the poverty rate in that state. This helps to explain why federal regulations have led to more people living in poverty and higher income inequality. Regulations reduce entrepreneurship because they increase the red tape one must cut through to be successful, which impacts the number of businesses in a state. Regulations also increase the compliance costs for businesses, which they then transfer to consumers by increasing prices.

These regulations are not just affecting the industries or groups to which they are targeted. They can affect Missouri workers, small businesses, and consumers. As we continue through this legislative session in Missouri, we should remember the unintended consequences of legislation and regulations.

The post Do Federal Regulations Impact Missourians? appeared first on Show-Me Institute.

Kevin will be discussing his forthcoming book, “Big White Ghetto,” a collection of long-form reporting and essays on poverty, addiction, despair, and their influence on American culture and American politics.

Register here

The post Join us this Thursday for a Book Talk with Kevin D. Williamson appeared first on Show-Me Institute.

That’s why I reached out to the state agency in charge of allocating the tax credits, the Missouri Housing Development Commission (MHDC). The MHDC charged $122.76 for a list of projects and costs from the last 19 years of LIHTC allocation. (I also requested similar data from the 14 other states that have a state LIHTC program; they all provided the information free of charge.)

Missourians now can find where these LIHTC projects are located and how much they receive in subsidies from state and federal governments. The link below has a map displaying data on LIHTC projects since 2000:

LIHTC Interactive Map

The census tracts are colored by poverty rate, with the red and blue diverging at the statewide poverty rate of 14.6 %. The black dots represent every LIHTC project awarded since 2000. When hovering over a dot, the project’s name, address, city, county, owner, year awarded, and federal and state annual LIHTC allocation are shown.

Having this data is a good first step in analyzing and ultimately proposing solutions to the complex, problematic system that is Missouri LITHC.

The post Here Is Where LIHTCs Go appeared first on Show-Me Institute.

Currently, only four out of ten lower-income students who enter college are graduating within six years. What’s more, few additional students graduate after six years; according to the National Student Clearinghouse Research Center, only an additional 6.1 percent of all students entering college in 2009 graduated within eight years. Dropping out and being saddled with student loan debt makes it that much more difficult for these students to climb up the income ladder and access better-paying jobs that can help break cycles of poverty.

Here’s the data for first-time students in Missouri who started college full-time in the fall of 2011, per the Department of Education:

·         56.7 percent of those students graduated within six years, which is lower than the national average of 60.4 percent.

·         Students from the same group receiving Pell Grants from the federal government—most of which have family incomes below $30,000—have a six-year graduation rate in Missouri of only 40.6 percent, while students not receiving Pell Grants or a subsidized loan graduated at a rate of 68.3 percent.

These are startling numbers for Missouri. Not only are we behind the national average in terms of college completion, but a large number of those who fail to graduate appear to be low-income students. Those are exactly the kind of students who are least equipped to handle the burden of high student debt, especially without the benefit of a degree.

A 2013 report from the Department of Education estimated that in 2009 students who did not complete their degree had on average $9,300 of debt if they attended a public 4-year school and $10,400 if they attended a private, non-profit 4-year school. More recent data from Debt by Degree breaks down student loan debt by Pell status and individual schools; it showed Pell recipients attending Mizzou average $19,328 in federal loans.

Addressing the degree achievement gap must start at the K-12 level and, as I discussed before, competition through choice is necessary if we want better outcomes for low-income kids. But in the meantime, making changes at the college level can help lower-income students getting ready to go to college now or that are already there.

In “Creating Pathways for Self-Sufficiency,” I discuss a few ways colleges can boost graduation rates among low-income students. Retention grants or emergency scholarships can fill gaps in financial aid for low-income students who are on track to graduate but would otherwise have to drop out due to lack of funds. Providing supports like mentorships and enrollment or financial aid checklists have been effective in helping first generation college students be prepared.

Not included in my essay but also worth noting is data-based guidance counseling. Georgia State University’s predictive analytics system has helped students from all economic backgrounds graduate at higher rates by connecting students struggling academically with tutors sooner rather than later and making sure students are not taking unnecessary classes that cost extra time and money.

As taxpayers, we invest too many public dollars in education at every level to have results like these. Isn’t it time to move towards a system that better serves students of all economic backgrounds and ensures that those who go to college leave with a degree?

The post The Achievement Gap for Low-income Students Continues into College appeared first on Show-Me Institute.

On Tuesday, March 12, I appeared as a panelist on an American Public Square discussion titled “Pre-K for All?“ about the upcoming April ballot measure. Proponents of pre-K point to a single, small-scale study of a specific pre-K program conducted from 1962 to 1967. The study, called HighScope Perry, did show a positive relationship between participation in the program and educational and financial success. However, the program that was studied was intensive, expensive, and only included 123 children. While the Mayor and Mid America Regional Council (MARC) specifically cites the HighScope Perry study, the plan they endorse for Kansas City is nothing like what was done there.

Russ Whitehurst of the Brookings Institution has written at length about the failure of larger-scale pre-K programs such as Head Start and the Tennessee Voluntary Pre-K Program to generate impressive results. We’ll discuss that research more in future blog posts. But in a survey of the research on various school-readiness interventions, Whitehurst pointed out that direct aid to families, such as the earned income tax credit (EITC), “produced substantially larger gains in children’s school achievement per dollar of expenditure than a year of preschool, participation in Head Start, or class size reduction in the early grades.” That is a fascinating bit of information and should be of interest to anyone who is serious about helping low-income children.

During the panel discussion I offered, “You could do more for poor families in Kansas City by removing the sales tax on food and by exempting, say, the first $26,000 of earnings from the earnings tax. You can do more by aiding families—giving them more money in their pocket—than you can by taxing them and providing a program.”

But Mayor James was not having it. He responded, “There’s no way that you can tell me, regardless of what study you may cite,” that by reducing taxes on the poor that they, “are going to use the money to educate their children.” And maybe they won’t, but the data Whitehurst cites don’t specify how families spend the extra money. EITC funds are not earmarked, yet this direct support to low-income families still outperformed pre-K according to Whitehurst’s research.

Perhaps what low-income families need is not to have more money taken away from them in order to provide them more services. Perhaps what they need is more money, more flexibility, more agency to address their own challenges as they see fit. Perhaps telling poor people that government knows best how to spend their money and educate their children isn’t the best way to solve problems. The research (at least if we go beyond a specific study that seems cherry-picked to support a rosy view of Pre-K programs) seems to suggest this, if only policymakers will listen.

The post Pre-K Supporters Dismiss Research on Efficacy of Pre-K appeared first on Show-Me Institute.

So how are Missouri’s counties faring? Below are four interactive maps that provide some information about the disparities between counties in Missouri with regard to the poverty rate and the child poverty rate. For reference, the federal poverty line for a family of four in 2017 was $24,600 and the child poverty rate is the percentage of children under the age of 18 whose family’s income falls below the federal poverty line. 

Here is the poverty rate for each county according to the 2013–2017 5-year estimate:

And here is the child (under age 18) poverty rate for each county according to the 2013–2017 5-year estimate:

The next maps show the percentage-point change from the 2008–2012 5-year estimate to the 2013–2017 5-year estimate. It should be noted that even with this data set, there are fairly large margins of error; still, these numbers give us an idea of the direction in which a particular county is headed.

This is the percentage-point change in the overall poverty rate between the 2008–2012 and 2013–2017 5-year estimates:

And here is the percentage-point change in the child poverty rate:

Poverty is decreasing in Missouri overall, but it appears that some parts of the state are faring better than others. 

The post Here Are the Latest Census Data on Poverty in Missouri appeared first on Show-Me Institute.

The authors also project that 11,000 jobs would be lost as a consequence of the increased price of labor. The essay includes demographic breakdowns (by age, sex, race, and education/income levels) of those whose wages would go up and those who would lose their jobs.

The post The Potential Effect of a $12 Minimum Wage in Missouri appeared first on Show-Me Institute.

While the situation for single parents working minimum wage jobs is undoubtedly difficult, increasing the minimum wage can harm people in that position, as well as those struggling to hold down a job. After Seattle increased its minimum wage, low-wage workers had their hours cut, and the number of minimum wage jobs decreased. In fact, it is the people without steady employment who are much more likely to be in poverty and who are hurt the most by the unintended consequences of a higher minimum wage.

In a working paper for the American Enterprise Institute, Angela Rachidi uses data from the Survey of Income and Program Participation (SIPP) to show that most families who have one adult consistently working are not in poverty—and if they are in poverty, it is likely to be for short periods of time. SIPP data give us unique insights because they follow the same families for 36 months and track their poverty and job status during that time. When measuring the federal poverty rate, on the other hand, the Census Bureau merely asks families if they have been in poverty at all in the past 12 months but nothing else about their situation.

One chart (below) from the paper sheds light on the economic situation of American families and how often they were in poverty or unemployed. The far-left bar represents families where at least one person held a job for the entire 36-month survey period. In this group, 78 percent were not poor at any time, 17.5 percent were poor for 1 to 18 months, 2 percent were poor for 19 to 27 months, and 2.6 percent were poor more than 27 out of the 36 months they were surveyed.

Intermittent = 1 to 18 months of the three-year period. Recurrent = 19 to 27 months of the three-year period. Persistent = more than 27 months of the three-year period.

Source: Rachidi, Angela; American Enterprise Institute. Persistence of Poverty and Joblessness in US Households. AEI Economics Working Paper. July 2018. Figure 5 (Author’s calculations using the Survey of Income and Program Participation, 2008 Panel, Years 2009–11, Waves 2–11).

Those who experienced intermittent and recurrent joblessness (two middle bars) were much more likely to be in poverty at some point during the survey period. These people are having difficulty getting hired at the current minimum wage. For those who are persistently jobless and do not have income from retirement or disability insurance to keep them out of poverty, the barriers to entering the job market are also high. Mandating that employers pay even more for their labor will only take away employment opportunities and make it even harder for them to get a foot in the door toward more stable employment.

A better solution would to be implement an earned income tax credit (EITC) here in Missouri so that those who are working can hold on to more of their paycheck. Instead of making low-wage workers pay a state income tax, a non-refundable EITC could reduce or even zero-out their state income tax bill and increase their take-home pay.

It’s understandable to want to do something for people who work hard but still can’t escape poverty. But just because a policy is intended to fix a problem doesn’t mean that it will actually work. Missourians risk creating a worse system with a higher minimum wage that benefits the few who consistently work while harming many more who face low earnings due to frequent unemployment or underemployment.

The post Should Missouri Increase the Minimum Wage to Help the Working Poor? appeared first on Show-Me Institute.

The Tax Foundation reported last year that 32 states exempt food purchased for consumption at home from tax. It reports that six other states tax food at a lower rate,

Food sales tax rates in these states are as follows: Arkansas: 1.5 percent, Illinois: 1 percent, Missouri: 1.225 percent, Tennessee: 5 percent, Utah: 3 percent, and Virginia: 2.5 percent.

This is true but incomplete. The Missouri General Assembly did in fact reduce its sales tax on food, but local sales taxes are still collected on food and beverage purchases. In St. Louis’s Central West End, the tax rate on groceries adds up to 7.4 percent; in Kansas City’s Power & Light District it is 7.6 percent.

What makes this the most unkindest tax of all, as Shakespeare might say, is that it is regressive, meaning it weighs disproportionately on the poor as everyone must buy food. Because Kansas City and St. Louis charge additional sales taxes on top of the state rate, any intention by the General Assembly to spare low-income consumers this tax is undermined.

To make matters worse, both Kansas City and St. Louis charge a flat and regressive 1 percent earnings tax on every dollar earned. The earnings tax is levied on the first dollar earned, and there is no exemption for lower-income workers. Adding insult to injury, the earnings tax is not levied on types of income enjoyed by wealthier citizens such as investment income or retirement.

Kansas City and St. Louis have a large number of low-income residents. Unfortunately, the cities’ taxes only add to the problem. The first order of business for any city leader who wants to help low-income workers should be to take less of their money away from them.

The post The Most Unkindest Tax of All appeared first on Show-Me Institute.

Reservation Number 4: School choice does not solve the larger problem of concentrated poverty.

The parents in my focus groups recognized that some schools are not doing well. That’s why many of them refused to enroll their children in their local public schools. Yet many wouldn’t support a state-supported private school choice program. To them, that was just a Band-Aid to cover over a problem rather than actually solving it. Instead, the concerned parents thought more needed to be done to address the root cause that led to the poor educational opportunities: poverty.

This line of argument suffers from two shortcomings. First, it sets an almost impossible expectation of school choice programs—that they solve a problem that traditional public schools have failed to solve for centuries. Rarely do we expect public policies to solve this kind of massive societal problem. Even when considering issues related to poverty, we often hope an intervention will move the needle in the right direction by a matter of degrees. When it does, we consider it a success.

Second, this argument absolves public schools of blame for the role that they have played in exacerbating the problems of poverty. Not only have traditional public schools failed to solve the problems of poverty, in some places, they have actually made it worse. Look at the patchwork of school districts in the areas surrounding Kansas City and Saint Louis. Homes in the higher-performing districts cost more because the schools are better; wealthier families segregate themselves from lower-income families by moving to these better districts. This creates virtuous cycles within these districts, where wealthier students attend better schools, get better jobs, move to places with even better schools, and then send their children to them. But it also creates a vicious cycle in poorer-performing districts, where families that are not able to break into the housing market of better districts are shut out of higher-performing schools, are prevented from accessing better opportunities, and stay trapped in poverty.

There is nothing nefarious about a family wanting to be in a good neighborhood with great schools. There is, however, something wrong with a school system that only allows families with financial means to access great educational options.   

Vouchers and charter schools have done nothing to create this situation. But they can help stop it by breaking the connection between where children live to where they go to school.

It is true that school choice does not solve issues of poverty. School choice programs also do not cure cancer, reduce tensions in North Korea, or solve male pattern baldness. In other words, school choice does not solve complicated, thorny issues that are incredibly complex. It does, however, reduce the barriers that stand between low-income families and educational opportunities for their children.    

The post School Choice for Me, but Not for Thee: Part 5 appeared first on Show-Me Institute.

A while ago, I decided to explore this issue by conducting focus groups with parents in Missouri’s two largest urban centers. I met with 35 parents in five focus groups. In a forthcoming issue of the Journal of School Choice: International Research and Reform, I discuss the findings from these focus groups.

The crux of what I discovered in my research was a paradox: most parents value choices for themselves, but are skeptical of expanding the choices of others. While they valued the opportunities that would be available to their children, they worried that expanding choices might harm the education system as a whole.

As parents expressed reservations about school choice, one thing that stood out to me:

In many cases, parents seemed to have overstated the comparison. They did not compare school choice to reality; they compared school choice to a preconceived idea of a perfect education system – a high-quality school in every neighborhood. With this comparison, it is easy to see why they politically oppose school choice – it does not lead to their preconceived ideal. Poverty is the problem, not the schools. If we fix poverty, we will fix the schools. That comparison, however, does not describe the current reality in St. Louis or Kansas City. In both cities, the public school district model has failed to create a high-quality school in every neighborhood. It has led to a disparate education system.

We should not fall into this trap. The school systems in St. Louis and Kansas City had problems long before school choice was ever on the scene. Indeed, school choice offers a path out.

You can check out my full working paper here. 

The post School Choice: The Personal and the Political appeared first on Show-Me Institute.

The Roman philosopher Cicero once said, “Advice is judged by results, not by intentions.” It is hard not to think of these words when reading the final report of the Ferguson Commission.

The signature priorities, “justice for all,” “youth at the center,” and providing individuals the “opportunity to thrive,” could not be more noble. Unfortunately, we cannot judge the Ferguson Commission’s report on good intentions alone. We must examine the probable results. It is certainly too early to understand all of the long-term implications of the policies that the report advocates; however, based on the evidence, the prospects are bleak.

For example, the commissioners call for an end to poverty. Who can argue with that? But to eliminate poverty, they urge the adoption of a $15 an hour minimum wage. The commissioners admit that “debate exists over the short- and long-term economic implications of raising the minimum wage.” Yet they ignore this debate and selectively cite a report in support of the higher wage. This may be to the detriment of the people the commission is attempting to help. As Nobel-winning economist Milton Friedman once said, “The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills.” The people most in need of entry-level jobs will suffer the most.

The commissioners outlined a plan to “enhance college access and affordability,” but gave short shrift to the greatest impediment standing in the way of a college education for disadvantaged students—subpar academics. The average ACT score for the Normandy school district was a paltry 16; not even high enough to gain admittance to most four-year state institutions. Less than seven percent of students scored above the national average. It isn't funding that is keeping these kids from going to college; it is their abysmal K-12 preparation.

The report, which is ostensibly about improving the outcomes for low-income African-American students (who make up more than 80 percent of the Ferguson-Florissant School District and more than 96 percent of students in Normandy), includes a plank granting access to state scholarships to undocumented students brought to the United States as young children. We can debate the wisdom of that policy another day, but what on earth does it have to do with improving outcomes in North Saint Louis County?

The commission did offer some helpful suggestions for making the inter-district transfer program sustainable, but they stopped short of calling for greater freedom of choice for the parents of children trapped in underperforming schools. Rather than confronting the issue, the commissioners punted and simply called for the creation of an “education design and financing task force.”

In the end, the K-12 education proposals amount to a call for more of the same. The state needs to “invest” in a universal pre-K program and move the compulsory education age down to 5 from 7. Note, not, “create a pre-K system that doesn’t suffer from the same problems of the current one,” but simply append another grade onto K-12 schools that are not meeting the needs of low-income and African-American students.

This is not to say that the commission report was altogether wrong. Indeed, the commissioners offered many suggestions that were on point and, if enacted, could lead to improvements in the Saint Louis community. But unfortunately, when the commission veered away from policies focused on the issues at hand toward tired planks of political opportunists—like increasing the minimum wage, expanding Medicaid, creating a universal pre-K program, and getting scholarships for undocumented kids—it lost sight of the problems it was set up to solve.

The post The Ferguson Commission: A Bridge to Nowhere appeared first on Show-Me Institute.

“I was just really stupid. I just thought that if we had enough money, people, resources, we would eradicate all poverty in St. Louis,” he said. Of course, poverty persists.

“I think it comes down to really this idea of dignity. . . . I think the biggest mistakes that can happen is to go like, ‘Hey I feel sorry for you,’ and when . . . we’re motivated out of feeling sorry . . . I think we do way more harm,” Josh reflected.

Now Josh has a different plan—“empower people to transform their neighborhoods.” The organization has been successful. Since it’s founding, Mission: St. Louis has helped men like Eddie find employment, provided after-school support for students and families, and facilitated home improvements.

Additionally, Beyond School, a division of Mission: St. Louis, has developed a summer program to combat the summer slide.

The summer slide (or summer learning loss) occurs when students in low-income communities lack learning opportunities during the summer. Many students from wealthier backgrounds have summers filled with trips to museums, camps, and other enriching activities. Low-income students do not. In fact, one study showed that more than half of the achievement gap between low-income and high-income students can be explained by students’ experiences in the summer.

While some have rallied around policy reforms such as year-round schooling to fix this problem, Mission: St. Louis demonstrates that the key to closing the gap between high- and low-income students is not only providing low-income students with learning opportunities, but also by providing a choice in what those opportunities are. This leads to more investment from the student and an all-around more positive experience.

I encourage you to check out our new video about the summer learning opportunities provided by Mission: St. Louis.

The post Mission: St. Louis Provides Summer Learning Opportunities appeared first on Show-Me Institute.

Scholars and analysts at the Show-Me Institute have written extensively on this topic, arguing that raising the minimum wage is not good policy. That is still the case, since the fundamentals of economic theory have not changed.

Instead of reading another installment from me, I’ll defer to Christina Romer, former chair of President Obama’s Council of Economic Advisers. Here is what she wrote in the New York Times about her former boss’s proposal to raise the federal minimum wage back in early 2013.

There is a belief that the lack of competition fosters a lower wage. Romer writes, “I suspect that few people, including economists, find this argument compelling today. Company towns are a thing of the past.” In the end, “Robust competition is a powerful force to ensure that workers are paid what they contribute to their employer’s bottom line.”

Some see using the minimum wage as an anti-poverty tool. “Most arguments for instituting or raising a minimum wage are based on fairness and redistribution,” she notes. But contrary to this view she rightly observes that “It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families.” Instead, like anyone else committed to really helping the poor, Romer advocates using the existing tax system. The earned-income tax credit “is very well targeted—the subsidy goes only to poor families—and could easily be made more generous.”

“So where does all this leave us?” she asks. Her reply is that “the economics of the minimum wage are complicated and it is far from obvious what an increase would accomplish.”

What Romer believed in 2013 is still true today, and it applies whether one is talking about federal or city minimum wages. Imposing minimum wages is just bad economics and misguided policy that does not help the most needy.

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Despite intentions, increases to the minimum wage do not necessarily help the poor. Even Christina Romer, who led President Obama’s Council of Economic Advisors, openly conceded there were questions about “whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.”

The reasons why are simple. First, most minimum wage earners don’t actually live in poverty. Two-thirds come from households making at or above 150 percent of the poverty line; 44 percent live in households whose income is three times the poverty level. From the viewpoint of earners, raising the minimum wage is a clumsy tool and is more likely to benefit the non-poor than the poor.

Second, the number of people paid the minimum is not especially high. Today, less than 5 percent of hourly workers are paid minimum wage. Among all U.S. workers, minimum wage employees constitute just 3 percent of the American workforce. Not only are relatively few people being paid the minimum technically living in poverty, but relatively few people are being paid the minimum at all. Targeting low-wage workers is not the same as helping low-income families.

Third, and most important, there is a wealth of economic analysis that shows minimum wage laws punish the very people they are supposed to help—making it harder for people with few skills or work experience to find entry-level jobs. The Congressional Budget Office estimated that a national minimum wage increase to $10 per hour would reduce available jobs by 500,000. Doubling the minimum wage in Kansas City from $7.50 to $15 would have even more dramatic results here. The reason for this is simple: As labor costs rise, employers may turn to cheaper technological substitutes, cut employees, or have employees work fewer hours. This trend is already occurring in grocery stores and restaurants.

As workers have to compete for fewer entry-level jobs, those with the fewest skills are left behind. A study by the University of California, San Diego found that increasing the minimum wage reduced the earnings potential of low-skilled workers whom the higher minimum wage was meant to help by limiting job opportunities. These workers need entry-level jobs that enable them to develop skills and gain experience.

As a compassionate people, we are eager to promote policies that help alleviate poverty. We do not succeed by making jobs more scarce, which is what would happen if Kansas City enacted a “living wage.”

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Following my remarks, Councilwoman Cindy Circo asked me about a chart they had been shown by a previous speaker. The chart, which I had not seen in the hearing, showed worker productivity and real minimum wage tracking with each other until about 1970, when worker productivity jumped and minimum wage stayed flat. Councilwoman Circo asked what might have explained that change.

After some research, I was able to speak to the chart to which Councilwoman Circo referred. Here is the email I sent:

Dear Councilwoman Circo and City Council:

Thank you for the opportunity to testify before the Committee as a Whole today regarding the minimum wage. You may find an electronic copy of Michael Rathbone’s testimony here: https://showmeinstitute.org/publications/testimony/red-tape/1298-on-the-enactment-of-a-living-wage-in-kansas-city.html.

Furthermore, a 2012 study that is the source for my claim that only 13% of minimum wage earners live in households at or below the poverty level is here: https://showmeinstitute.org/document-repository/doc_download/356-full-policy-study-pdf.html.

You asked about a slide that showed worker wages and worker productivity parting ways about 1970. While I was not in the hearing at the time that was presented, I believe it is from the Center for Economic and Policy Research (CEPR), published in March 2012. A copy of a memo from CEPR that discusses the graph is here: http://www.cepr.net/documents/publications/min-wage1-2012-03.pdf.

My colleague Michael Rathbone has written about that memo and the attention it received from U.S. Senator Warren. He writes:

“The study… talks about average productivity. Average workers do not earn the minimum wage. This study does not track changes in the productivity of workers who make at or below the minimum wage. Isn’t it possible that the largest increases in productivity have been among more skilled employees who already earn above the minimum wage?”

A copy of his post on the memo is here: /2013/03/the-22-an-hour-question.html.

In short, because CEPR did not separate out minimum wage workers from others, the data is not very helpful. It is entirely possible, for example, that the increase in worker productivity shown the their chart after 1970 is the result of the introduction of computer technology used by white collar workers. These workers would not have made minimum wage.

Michael’s post is also helpful because it links to Christine Romer’s piece in The New York Times in which she indicates that minimum wage increases are not the best way to address poverty.

I hope this addresses your question. If you or any of your colleagues have additional questions, I will do my best to address them or find someone who can.

Thank you for your time and attention.

Regards, Patrick Tuohey

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Read the full testimony:

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