POLITICS

The Republican Welfare Plan Is About Keeping Wages Down

But they might be overestimating what their legislation would do.
05/16/2018 11:37 AM ET
Implementing more stringent work requirements would burnish Ryan’s legacy by partially fulfilling a lifelong goal: making the American safety net a little less like a “hammock.” 
(Chip Somodevilla via Getty Images)

WASHINGTON ― This week, the House of Representatives may vote to add more “work requirements” to the Supplemental Nutrition Assistance Program, commonly known as food stamps.

Speaker Paul Ryan (R-Wis.) said the measure, part of what is often called the farm bill, will help businesses fill the record number of job openings.

“It’s about workforce development,” Ryan said Thursday, adding that the reforms are “proven to get people off of the sidelines and into full-time employment.”

While the farm bill reauthorizes agricultural subsidies, roughly 80 percent of bill’s spending is SNAP benefits, which help 40 million Americans buy food every month. Implementing more stringent work requirements would burnish Ryan’s legacy by partially fulfilling a lifelong goal: making the American safety net a little less like a “hammock,” as he once called it.

Food stamps already come with work requirements for able-bodied adults, but the bill would expand the number of people required to do at least 20 hours of “work activities,” which can include actual work or signing up for a new government training program.

While the legislation would certainly reduce food stamp enrollment, it’s unclear how much it would actually develop the workforce.

Republicans have shaken their fists at food stamps for much of the program’s existence ― even as it helped eradicate starvation in the U.S. They’ve shaken their fists even more vigorously as SNAP enrollment soared in the wake of the Great Recession. Their antipathy stems in part from the program’s cost, and also the belief that alleviating material suffering can somehow leave people worse off in the long term. As Ryan put it in 2014, liberal governance gives poor people “a full stomach and an empty soul.”

But above all, the Republican argument for reforming food stamps and other benefit programs lately is about funneling more workers into the labor force.

“Our message to Americans who are really trapped on welfare is, ‘We need you,’” Rep. Kevin Brady (R-Texas) told HuffPost. “We think you have great skills and a great future, and we want to find a way to help you.”

“At a time when the economy’s doing great and companies are looking for workers, we have millions of people that gave up because of the bad Obama economy,” Rep. Steve Scalise (R-La.) said. “We want to help those people get back into the workforce and become part of the American Dream again and promote prosperity instead of poverty.”

“My hope is with requiring food stamp recipients to either work or be in job training, there will be more workers available,” Rep. Mac Thornberry (R-Texas) told a local TV station.

Republicans say they love wage increases, particularly when companies say they’re raising pay because of tax cuts. Theoretically, though, increasing the supply of labor would make workers less valuable, since more people would have to compete for limited jobs. Republicans say not enough of that kind of competition has been happening.

With the national unemployment rate down to 3.9 percent, lawmakers say businesses in their districts are constantly complaining about a shortage of available workers.

“The number one problem for employers today is they can’t find people to work,” Rep. Glenn Grothman (R-Wis.) said.

The problem could be more accurately characterized as employers can’t find people to work for what employers want to pay.

Grothman said a trucking company in his district is offering to train new hires at a starting salary of $50,000, but it couldn’t find any takers partly because of food stamps and other programs. “It surprises me how much employers can offer and still complain that they can’t beat what the government pays,” he said.

That salary isn’t bad, but it’s not especially high for truckers, according to Bureau of Labor Statistics data. The average 2017 wage for heavy and tractor-trailer truck drivers in Fond du Lac County, in the center of Grothman’s district, was $48,740. The data suggest the firm that complained to Grothman is not offering a wage that far exceeds what potential drivers could get from other employers in the area. Roughly half of new hires are people leaving other jobs. (Meanwhile, monthly food stamp benefits average $125 per person in a household and can only be redeemed for food items in grocery stores.) 

Wages have been rising modestly, but not at a rate that most economists consider consistent with a tight labor market. Annual wage growth has not exceeded 3 percent since the recession ended in 2009. In other words, workers aren’t so scarce that their value is going up in the eyes of employers. Most firms could probably lure good workers by offering more money.

The worker shortage story is not something that just popped up as unemployment dipped beneath 4 percent. In the wake of the recession, lawmakers often lamented a so-called “skills gap” ― there were plenty of workers available, the thinking went, but a shortage of good ones. Jason Faberman, an economist with the Federal Reserve Bank of Chicago, found the theory wanting when he and his colleague Bhash Mazumder studied it in 2012. Faberman finds it even less plausible today.

“It would be easier to argue this story if there was a lot more wage growth than we’ve seen,” Faberman said. “Firms are always complaining they can’t find workers to fill jobs.”

Making food stamps less generous is one strategy for increasing the number of people seeking employment, at least theoretically.

“Food stamps provide income separate from working that phases out the more you work,” Matt Bruenig, founder of the People’s Policy Project, a left-wing think tank, said in an email. “Thus it is supposed to reduce labor supply some because people do not need to work as much to get by.”

Food stamp enrollment is already declining as the economy improves. If current trends hold the Congressional Budget Office expects 32 million Americans to be receiving benefits in 2028, a reduction of 8 million. The proposed work requirements would shrink the rolls by an additional 1.2 million over that time.

Most of the $9 billion saved on benefits would be reinvested in a substantial new state-federal training program, though details are sketchy on how it would work. The CBO said even after 10 years, states would only be able to provide training to 80 percent of SNAP recipients subject to the new rules.

Roughly 6.5 percent of current SNAP recipients will be able-bodied adults without dependents next year, meaning they will already be subject to a three-month limit on benefits if they’re not working 20 hours per week. The bill would expand similar requirements to an additional 17 percent of SNAP recipients, such as people in their fifties and parents of children between 6 and 18. About a quarter of those would lose benefits, either because they’re not working or not able to comply with the proposed monthly documentation of their work effort.

Those people would have to rely more on market income to pay for food, and so they might be more willing to take lower-paying jobs. But in a labor market of more than 150 million workers, a million fewer food stamp recipients wouldn’t have a huge impact, said Dean Baker, an economist with the Center for Economic and Policy Research.

“The plausible estimate of how much this could affect labor supply is really pretty small,” Baker said.

The targeted population may be less estranged from the workforce than Republicans think. Looking at working-age adults who received SNAP benefits over several months in 2012, the liberal Center on Budget and Policy Priorities found that a majority worked while they received benefits, and nearly three-quarters worked in the year before or after.

Republicans have seemingly convinced themselves that kicking people off food stamps immediately results in increased earnings for those people, but that’s largely due to a reliance on questionable research. The conservative Foundation for Government Accountability has said that after Kansas kicked 13,000 people off food stamps in 2013, nearly two-thirds of those people eventually wound up working, according to state payroll data.

Republican members of Congress and the Trump administration have cited the FGA’s work to claim that work requirements are a proven policy, as Paul Ryan said last week.

The problem with the foundation’s report is that rather than use a comparison group to show what happens in the absence of the policy change, it just assumed the people who lost their benefits would have indefinitely remained SNAP recipients instead of getting jobs. The Center on Budget’s research suggests that’s not really what happens.

Food stamps exist because American politicians decided it was wrong to let poor people starve to death. There has always been tension between the program’s anti-hunger mission and the fact that it increases the economic independence of its beneficiaries, reducing the hardship of unemployment and making people less dependent on labor income for their survival. Republicans and Democrats tend to agree that the “dignity of work” is one of the most important things a person can have.

Rep. Glenn Thompson (R-Pa.), chairman of the subcommittee that wrote the food stamp parts of the farm bill, said he’s not out to create more workers, contrary to the heap of statements from others in his party. He said that using the program to shunt more people into training programs and jobs will ultimately make them less hungry.

“For me, it’s not doing things to people in any way, it’s providing for people,” he said. “We only want them to have better food security.”