The minimum wage is one of the most hotly debated topics on economics, and there is an extensive literature on the subject to rely on. Here is what we know on the effects of a minimum wage increase, and why it is good policy for Connecticut:
- Low wages have a direct cost from the state: we end up subsidizing employers as workers have to apply to government benefits to make ends meet. Wal Mart is probably thebiggest welfare queen in the country, in many ways.
- This graph is still the best reason to raise the minimum wage. Right now, most economists think raising it is a good idea.
- From last year: Wade Gibson and Matt Santacroce´s report on who earns the minimum wage in Connecticut, and how it will help the state´s economy.
- There is a widespread consensus that raising the minimum wage reduces poverty, according to this literature review by Arin Dube at UMass Amherst.
- The classic study on how minimum wage increases affects jobs is this one by David Card and Allan Kruger. The found that the evidence that it killed jobs was almost non existent.
- Since then, further research has shed some additional light on the effects of the minimum wage. Mike Konczal has a good review here. Most evidence still points in the same direction: minimum wage increases raise incomes and reduce poverty without destroying jobs.
- For the truly dedicated, the operational word on why this happens is monopsony. The labor market is "special" as "buyers" of labor (that is, employers) have more market power than sellers (that is, workers). Follow the link to see some basic economic modeling.
- The CBO recently published an analysis on the effects of raising the minimum wage to $10.10 at the Federal level. Their take is that it would increase the earnings of 16.5 million workers, and move 900.000 individuals out of poverty. The only families that see a (very modest) drop of income are those making six times the federal poverty level. The report does say that the increased minimum wage might eliminate some jobs (500,000, to be exact), but the tradeoff in terms of families with higher incomes (and which families get those incomes - mostly working poor) is probably worth it.
We at CAHS support the increase - any potential costs are modest, and the benefits greatly outweigh the drawbacks. Any economic policy has trade offs. An increase in the minimum wage greatly favors those that are the most in need.
If you are looking for some effective policy proposals to help low income families thathappen to have broad bipartisan support, Washington has not been the best place to look of late. After the SNAP cuts approved last week in the House, it is hard to believe there is much interest in helping low income families in the short term.
There is one policy that it is both very effective and that has been receiving plaudits from both sides of the aisle of late, however: the Earned Income Tax Credit, or EITC. The Center on Budget and Policy Priorities has a great article about the EITC, a policy that both works and has some Republican Senators arguing that it need to be expanded. The data certainly shows its effectiveness:
Next to Social Security, the EITC combined with the refundable portion of the Child Tax Credit constitutes the nation’s most powerful anti-poverty program. These two credits lifted 10.1 million people out of poverty in 2012, including 5.3 million children (see chart). As AEI’s Michael Strain points out, the EITC “is a very effective anti-poverty tool because it supplements earnings and incentivizes employment. Expansions of the EITC have been very successful at encouraging work, particularly among single mothers during the 1990s.”
We were very vocal, in fact, arguing for a state EITC. The state tax credit was cut last year due to the tough budget situation from 30 to 25% of the federal refund. Governor Malloy has promised restoring the state EITC to 27.5% this budget year (and to 30% in 2015), and CAHS will work to ensure this program is restored.
CAHS, through our very successful VITA program, has also worked for years to make the help families get access to the program. You can learn more about our VITA program here - and get information on all sites in the state by calling 211.
Connecticut passed in 2011 a paid sick leave law. It was the first state in the country to do so; although paid sick leave is common in other countries, our state took the first step in the US. The law applies to 400,000 workers in business with 50 or more employers, allowing them to earn five paid sick leave days a year.
The law was greeted with a great deal of skepticism from a business community (to put it mildly) that feared an increase in labor costs. Two years after it took effect too economists, Eileen Appelbaun (CEPR) and Ruth Milkman (CUNY), surveyed 251 Connecticut employers and interviewed 15 business managers. Their preliminary findings are striking:
The authors found that the law had minimal effects on businesses. A large majority of employers reported that the law did not affect business operations and that they had no or only small increases in costs. Businesses most frequently covered absent workers by assigning the work to other employees, a solution which has little effect on costs. Just 10 percent of employers reported that the law caused their costs to increase by 3 percent or more. Since the implementation of the paid sick days law, Connecticut employers saw decreases in the spread of illnesses and increases in morale, among many more effects [PPT].
About 89 percent of employers already offered paid sick days to some or all of their employees prior to the law. An important effect of the law is that paid sick days coverage was extended to part-time employees who previously lacked such paid time off. The sectors with the largest changes in coverage to employees were hospitality, retail, and health, education, and social services.
Eighteen months after the law took effect, over three-fourths of employers reported that they were very supportive or somewhat supportive of the paid sick days law. Find out more in the authors’ presentation [PPT].
As Bryce Covert points out, business in other cities with paid sick leave legislation have experienced similar results: no effect in business relocation, largely positive results. Currently four states are considering similar legislation (Massachusetts, Oregon, New Jersey and Oregon), and they should be encouraged by the Connecticut results. Currently 40% of private sector workers do not have access to paid sick leave; the US stands alone among developed nations in this regard.
CAHS hosted today an introductory webinar to explain how the Affordable Care Act ("Obamacare") is being implemented in Connecticut. Deb Polun, from the Community Health Center Association of Connecticut, and Kate Gervais, from Access Health CT, were the main presenters, going over the legislation and how Connecticut residents can access to the new benefits.
You can download the full presentation here (WMV, 133 MB - there is a bit of a pause in the middle - wrongly muted microphones). Here is Deb's presentation on the basic structure of the Affordable Care Act (PowerPoint); here is Kate's slides on how the new law is being rolled out in Connecticut, and how people can apply for benefits or get help if they need assistance with the process (PowerPoint).
Most political reporting is focused on the comings and goings in Washington, but the truth is that a lot of the most important policy decisions are taken at the state level. Take Medicaid: the Federal government funds the program, but state legislatures decide eligibility levels. The safety net might be paid mostly with Federal dollars, but it is the people in Hartford, Austin, Albany, Madison or Montgomery that decide who has access to it.
Paul Waldman, at the American Prospect, illustrates this reality:
The numbers above are the income limit to apply for Medicaid for a family of three. Connecticut's are more than ten times higher than Arkansas. At least in Little Rock this will change soon, as the state has signed up for the Medicaid expansion under the Affordable Care Act (starting January 1, the income limit there will be the same as in Massachusetts). Many of the stingiest states, however, are not participating, so in some corners of the country families will have well below the poverty line to qualify for health insurance.
That's one of the reason why CAHS does so much policy work at the state level, and that's why what we do in Connecticut matters. It is the state who decides how generous our safety net will be, not just Washington.
We work every day to make Connecticut a better place. Our policy work has helped improve the safety net on our state in many ways, from the state EITC to Care for Kids. If you believe that our work is important, please donate.
Download this report on PDF: GED in CT - a look at the data
The old GED exam is changing. Starting next year, the traditional pen-and-paper test will give way to a new, computer-based system. The transition raises some important issues: the new exam is more expensive, testing facilities need to be upgraded, and test-takers need to be made aware of the new format. CAHS is monitoring these changes, and working with other organizations and state officials to ensure that the new GED test improves on the old.
As we move to the new system, this is an opportunity to look at where Connecticut stands in terms of adult education.
Connecticut leads the US in state resources allocated per adult without a High School Degree or GED. We invest a considerable amount of money in adult education, as it stands now.
Connecticut is ranked first in adult education spending, nation wide. But, what are the returns of this investment? We enroll a lot of students in our adult education system.
Connecticut is ranked 7th in adult education enrollment in the country; we are working with a considerable amount of students in pursuit of their GEDs. As a result, the percentage of adults without a High School diploma or GED is well bellow the national average:
These figures, however, are not as impressive as the look. Connecticut is ranked 15th nationwide for adults 25 to 54 with a GED or High School diploma; 16th for adults 18 to 64. With all the investment and all the enrollments, the current adult education system is not reaching everyone. The breakdown by groups shows who:
Connecticut ranks 6th in the nation for educational attainment for non-Hispanic whites. On the other hand we rank 16th for Hispanics, 25th for African-Americans and 23rd for minorities, on aggregate. We are barely above average with groups other than non-Hispanic whites. This is a reflection of Connecticut’s vast wealth and income disparities (Connecticut ranks 49th on income gap between the top and bottom quintile of working families), and of the achievement gap in our education system, in part one of the consequences of inequality.
As Connecticut embarks on a new GED, we need to make sure our investment in adult education is going where it is needed.
 All data from the Population Reference Bureau for the Working Families Project and Complete College America.
Oregon lawmakers are facing a problem shared with the rest of the country: the constant, relentless, excessive increase in the cost of higher education. The tuition increases in the past few years have stretched the current system of financial aid, subsidized loans and scholarships to the breaking point, and it is both pricing students out of college and swallowing an ever increasing portion of public resources.
It is time for a change, that´s for sure - and the solution that Oregon has devised to make college affordable is really remarkable:
Oregon’s legislature is moving ahead with a plan to enable students to attend state schools with no money down. In return, under one proposal, the students would agree to pay into a special fund 3% of their salaries annually for 24 years.
The plan, called “Pay it Forward, Pay it Back,” would create a fund that students would draw from and eventually pay into—potentially bypassing traditional education lenders and the interest rates they charge. The state would likely borrow for the fund’s seed money, which could exceed $9 billion, but the program’s designers intend it to become self-sustaining.[...]
Under the Oregon plan, students who don’t graduate would still pay a fraction of their incomes into the fund; the amount would depend on how long they were in school.[...]
Using 2010 census data not adjusted for inflation, Mr. Gettel estimates students would pay an average of about $800 back into the program the first year after graduation. As their incomes grow, that would increase to about $2,000 in year 20, by which time they would have paid off the cost of their educations. Over the next four years they would contribute an additional $7,400, which constitutes the pay-it-forward aspect of the program—a sort of finance cost, Mr. Gettel said. Students would pay more or less depending on how much money they earned.
In a few words: no cost upfront, 3% of student earnings for the following 24 years. Oregon is implementing a universal income-based repayment (IBR) system that is both financially sustainable and remarkably progressive. It is, in fact, a much more fair and balanced than subsidizing college directly through general revenues; Matt Bruenig explains:
The problem with financing higher education in that way is that it is deeply unfair to those who do not attend college. Those who attend college come from disproportionately affluent backgrounds, and have disproportionately affluent futures. Funding college through general revenues therefore represents, at least in part, a transfer from the relatively poor people who do not attend college to the relatively rich people who do. (...)
A universal IBR system like the one Oregon is proposing does not have these fairness problems. Only those who attend college pay into the revolving fund that makes college tuition-free. The relatively poor set that never attends do not pay into the system at all.
Additionally, because a universal IBR system requires individuals to pay back a percentage of their income, it ensures that graduates that go on to more lucrative careers effectively subsidize graduates that do not. So, it is (in a sense) internally redistributive, which is a positive from an egalitarian perspective. Finally, because repayment is based on income, no one will find themselves overly burdened by the repayment obligation.
Some Federal student aid programs are based on IBR-like systems, certainty, but the Oregon scheme of making it truly universal is a step on the right direction. This is a sound, innovative way to pay for higher education that is working well in other countries; Connecticut should consider following Oregon´s lead in this field.
Word has surfaced that Governor Dannel Malloy and the Democrat-controlled legislature have agreed on a tentative two-year budget plan. The initial budget plan that the governor proposed, which would have broken the designated spending cap, proved unsuccessful. Under Governor Malloy's original plan, a new spending cap with higher limits was presented; however, the new spending cap required the support of three-fifths majority from both houses. To attain this majority, Malloy had to aggregate the votes from all 22 Democratic senators, including those who are fiscally conservative, which was impossible.
With this new, more reasonable budget plan, Malloy has agreed not to include any new taxes or exceed the spending cap that currently exists. To fulfill his goals, Malloy has considered an alternative counting method for Medicaid money in which Medicaid dollars would be recorded off the books, since the federal government will be paying for all Medicaid in Connecticut starting in 2014.
Due to the weakened economy, Malloy's simultaneous goals are difficult to accomplish, and they have created debate between Republicans and Democrats. Specifically, there has been much debate over changes in taxes and old tax laws that are set to expire in the coming years.
For one, the tax on electric generating companies has sparked serious discussion over the past several weeks. Democrats want to gradually end the tax, however, this poses problems because electricity customers will receive a greater tax burden during its gradual removal. Currently, it is decided that the tax will remain with a decreased amount, but this is not definite.
Several other taxes are still under discussion and a few budget cuts have yet to be made. Although all specifics within the budget plan are not determined yet, it is likely that Democrats in the legislature and the governor will come to a final decision. Lawmakers are scrambling to pass a budget plan before the session ends on June 5th. We are hopeful to hear good news from the Capitol until then!
Way back in 2009, when the CBO was estimating how much people were going to pay for health insurance in the soon-to-be-created exchanges, they gave a pretty startling number: $433 a month per person, on average, for a silver plan.
A lot of studies looked similar, and critics started talking about "sticker shock" once the law was implemented. The Affordable Care Act would be forcing people to get expensive insurance that they can not pay, and so on.
Well, we are starting to see the exchanges come to life, and it turns out that the premiums are coming much lower than everyone expected. California just published the list of plans and premiums from their (gigantic) exchange, and the cheapest silver plan for a 40 year old male costs $276 a month, or a 63% of the expected cost. This premiums would be for unsubsidized plans; for individuals below 400% the Federal Poverty line, the costs would be actually much lower (in grey, the subsidy amount):
¿Surprising? Well, sometimes it turns out that legislation does work as intended; a big pool of potential clients, plus standardized, comparable plans, plus plenty of competition between insurance companies translates into pretty affordable prices. Admittedly California is a huge market with more than seven million uninsured and their exchange have pretty detailed cost-control regulations, but the basic structure of Obamacare is sound, so it is not surprising that it might just deliver.
The most important bit of this prices, by the way, are not the premiums for forty-somethings; the success of the law lies in convincing low risk, young patients to enroll instead of paying the penalty. The premiums on that end are pretty affordable, all things considered. Here we have the cheapest bronze (less generous) plans:
Again, not too bad, and the subsidies make a huge difference. This legislation might just work as promised. And that´s very good news. The rates so far in Connecticut don´t look terrible, but we haven´t seen the insurance carriers competing yet. We´ll see.
A recent Legislative bill aims to make changes to the Care4Kids program so that women taking unpaid leave from work due to birth or impending birth will be given six weeks of payment eligibility during leave. According to SB 887, "An Act Concerning the Care4Kids Program," women will be guaranteed paid leave as long as the recipient intends to return to work, verifies that eligibility is needed to prevent a lost pre-school or child care slot, and the child continues to attend the program during the recipient's leave.
The bill, which was co-sponsored by state representatives from both political parties, will help low-income families who otherwise would have lost the Care4Kids childcare subsidy and been forced into an even more difficult financial predicament.
On May 1st, the bill passed through the Senate with an unanimous "yea" vote, and on May 20th, it passed through the House and became a public act. Notably, the bill passed by a large margin in the House- only seven members voted down the bill out of the 130 representatives voting that day. Currently, we are waiting for the bill to be signed by Governor Malloy and put into effect.
The strong backing from across party lines shows the true importance in helping low-income families attain necessary child-care. Moreover, it shows the overwhelming support throughout Connecticut to help working poor families achieve economic stability and fully provide for their children.