Improving Work Supports: Closing the Financial Gap for Low-Wage Workers and Their Families

Publication Date: October 2007

Publisher: Economic Policy Institute

Author(s): Nancy K. Cauthen

Research Area: Economics; Social conditions

Type: Brief

Abstract:

Despite funding increases, overall spending levels continue to pale in comparison to what is needed to provide a comprehensive work support system for low-wage workers. Inadequate funding is largely a function of a lack of political will. But there are structural problems with the funding mechanisms as well--fixed block grants to states and state matching requirements constrain how much can be spent. For instance, when the economy declines, demand for work support benefits may increase, placing increased demand on state resources at a time when states are cutting spending.

But even the families fortunate enough to receive the multiple benefits for which they are eligible face another set of challenges. Eligibility levels are typically low and families lose benefits before they can get by on earnings alone. In some cases, just a small increase in earnings leads to the complete termination of a benefit (e.g., child care subsidies and health insurance)--the family faces a "cliff" and ends up financially worse off despite earning more. If we agree as a nation that full-time workers should be able to meet their basic needs and those of their children, we need a comprehensive, integrated work support system that is explicitly designed to address the challenges faced by ever-growing numbers of America's workers and their families.

U.S. work support programs need to be modernized and systematically overhauled. This paper begins by describing why work support programs are needed. It then goes on to explain the state of current U.S. programs and why we need to reform them. The final sections of the paper describe some concrete policy proposals for reform and offer recommendations about priorities and next steps.