A better approach to poverty.
Efforts should begin with the most obvious incentive: direct cash grants to help people move. Moving a four-member household to a different part of the country generally costs about $5,000, presenting a significant barrier to mobility. Using “mobility grants” paid through the unemployment system, states could allow unemployed people with modest resources to take a lump-sum distribution of future unemployment benefits to help pay moving expenses. Since many depend-ents of the unemployed receive costly benefits like Medicaid, this sort of program could provide a net savings even if the relocation grants cost slightly more than the unemployment benefits would have.
Encouraging relocation also offers an alternative to making the supposedly temporary extension of unemployment benefits (from 26 to 99 weeks) permanent federal policy. Since skills tend to atrophy during long periods of unemployment, such a system would serve the unemployed themselves better than Democrats’ desired course.
There’s reason to believe a well-structured relocation voucher could work. In a limited experiment in the 1970s, 40 unemployment offices across the South offered cash assistance as well as help to those willing to search for work in other states. The program didn’t force anyone to relocate but allowed individuals to indicate their willingness to relocate when signing up for benefits. Different offices offered varying levels of assistance; those with the most thorough counseling and benefits experienced the highest success rates. The program worked well for the young, the less educated, and for African-American males, groups that often have the hardest times finding jobs in the current economy.
In the longer run, we should consider restructuring policies that currently provide powerful incentives to stay in place. In particular, since nearly all social assistance programs are administered at the state level, the proliferation of more and more programs provides greater and greater incentives not to move.
Even the mostly federal Medicaid and the Supplemental Nutrition Assistance Program (better known as food stamps) have different eligibility criteria and application processes in every state, making the decision to move, and the need to reapply for each, very expensive. Making these benefits simpler and more portable would encourage mobility. Obviously, the aim of taking work in a new location is to no longer need such benefits. But for some, the risk of a temporary loss in benefits is a high hurdle.
The best solution might be to “cash out” as many of these benefits as possible into an expanded version of what’s already the largest antipoverty program: the Earned Income Tax Credit. The EITC, which rebates employer and employee payroll taxes to people with modest incomes, has virtually perfect incentives. Because it is administered through the federal tax code, it’s also entirely portable. That said, it remains quite modest. A single person with no dependents gets less than $500 in EITC. Making the credit larger—even expanding it into a full-fledged “negative income tax”—could promote mobility.
Finally, housing policy should move away from prioritizing homeownership as strongly as it does currently. Moving people into homes they cannot afford does no good for anyone. Even worse, it discourages mobility. In all but the hottest real estate markets, selling a house or apartment is much more difficult than moving out of a rental. In many distressed areas, individuals now find themselves trapped “upside down” by loans with balances that exceed their home’s resale value. This makes moving impossible.
Instead, housing policy could do more to help people find good, affordable rental properties. High housing costs in areas with rapid job growth are a major barrier to individuals relocating there. Programs that can mitigate those costs would be a step in the right direction.
Evidence continues to mount that the mortgage interest deduction does little to increase homeownership rates. Capping the deduction at $400,000 in home value (about twice the U.S. average) would free up billions of dollars that could be used to make rental costs deductible for low-income people.
President Obama’s latest effort at place-based poverty relief is unlikely to work any better than similar programs liberals and conservatives alike have already tried. Government simply cannot create successful communities. But government policies can encourage people to move. To help lift the poor who are trapped in failing communities, conservatives and liberals alike can return to America’s roots: an antipoverty agenda founded on geographic mobility.
Eli Lehrer is president of the R Street Institute. Lori Sanders is a senior fellow at R Street.
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