by Marco Rubio
He should know. Doar and his colleagues were spectacularly successful in moving New Yorkers from dependence to independence. The city’s welfare rolls were reduced from more than a million recipients to fewer than 350,000 between the passage of welfare reform in 1996 and Doar’s departure in 2013. More important, work rates increased, dependency decreased and child poverty fell. Today, even in the aftermath of the recession, child poverty in New York is almost 10 percentage points lower than it was before welfare reform.15
How did they do it? Doar gives the lion’s share of the credit to the work requirements in welfare reform. Under the law, welfare recipients had to be working or looking for work in order to receive benefits. According to Doar, when it came to getting off welfare, nothing substituted for a job—not education, not training. New Yorkers who were quickly employed stayed employed longer. Work participation rates rose faster than even the most enthusiastic welfare reform advocates had anticipated—even among never married single moms.
It takes a vibrant private economy to create jobs, but the New York example highlights how government can play a role in getting people in these jobs and keeping them there. The most successful government antipoverty programs are the ones that don’t try to substitute for employment but instead help people get employed and stay employed. The clunky-sounding Earned Income Tax Credit (EITC) is one such program.
The EITC works by providing a tax credit for low-income families that work—but only to families that work. It effectively boosts wages by dramatically lowering taxes on low-wage workers. And because it’s a refundable credit, families can get a check even if they make too little to owe income taxes. It has been shown not just to encourage work, but to decrease poverty as well. The Census Bureau found that the poverty rate in 2011 would have been a full 3 percentage points higher—up to 19 percent—if it weren’t for the EITC and the Child Tax Credit.16
The EITC embodies the right philosophy: the importance of work, even for low wages, as the gateway to self-sufficiency. But it has significant shortcomings. It is paid only once a year in a family’s tax return, making it hard to plan a monthly budget around. And it’s a complex credit. That means the IRS makes lots of mistakes in awarding it and most families that claim it use professional tax preparers, which eat up a lot of their refund.
There’s a better way for government to support work. I have proposed that we build on the success of the EITC by substituting it with the Wage Enhancement Credit for low-income workers. Under my plan, workers making less than $20,000 would receive a monthly 30 percent credit from the government. This would allow an unemployed individual to take a job that pays, say, $18,000 a year—which on its own is not enough to make ends meet—but then receive a wage enhancement to make the job a better alternative to collecting unemployment insurance. This wage enhancement would gradually diminish up to a yearly income of $40,000.
Unlike the EITC, which delivers the wage subsidy in a once yearly lump sum, the Wage Enhancement Credit would be delivered monthly through a check from the Treasury. So instead of blowing the money on year-end vacations or flat-screen TVs, the money is more likely to be used for monthly living expenditures or even saved. Moreover, the wage enhancement would function like an increased minimum wage but with a critical difference: It would increase available jobs rather than decrease them. Nor would it force employers to pass higher labor costs along to consumers.
An important final difference between the Wage Enhancement Credit and the EITC is that my proposal is directed at the individual, regardless of family size. It makes little sense not to encourage noncustodial fathers to work and be able to support their children. And as I will discuss in Chapter Seven, the marriage crisis that is at the heart of poverty and low mobility in America today is in many ways a crisis of marriageable young men. Unlike raising the minimum wage, which will reduce the available jobs for young fathers, supporting their wages and encouraging their work will help reintroduce the institution of marriage to a population that desperately needs it. And in order to ensure that families with children aren’t adversely affected by my proposal, part of my opportunity agenda includes an expanded Child Tax Credit. I will discuss this tax credit as well as my plan for a family-friendly tax code in Chapter Five.
Together, the Flex Fund and a federal Wage Enhancement Credit would transform our approach to poverty by turning the dead end of government dependency into a pathway to work and independence. Because the system gives states new accountability for their antipoverty programs—and rewards them if they are successful—states will create incentives for the poor to prefer working and receiving the Wage Enhancement Credit to not working and collecting assistance. In fact, the states would be smart to use their Flex Funds to pay for greater wage enhancements for workers to further incentivize work. And once the poor have taken that first step through working, they’re more likely to stay on the path to self-sufficiency.
It has been eye-opening to me how many roads to restoring the American Dream lead to education. The ultimate opportunity equalizer—the ultimate wage enhancer—is a good and relevant education. But the children of the poor begin the race for the American Dream three steps behind the rest. It’s no wonder, then, that so many are failing to catch up.
The education necessary for good jobs doesn’t end once you’re in the workforce. For those in low-wage jobs especially, training in the skills necessary for the jobs of the new economy is essential. But many don’t have the time or the money to pursue a traditional higher education. We can help them by bolstering and reinvigorating our nation’s existing job training system, giving high school students the skills that lead directly to well-paying work after graduation.
As usual, local communities are racing ahead and waiting for the federal government to catch up. For instance, in Miami, one local school district has partnered with a car dealership to create an innovative approach to career education. The Braman Automotive Training Center is a free vocational training program for inner-city high school students. Students spend six months in the classroom and then a year getting on-the-job training in Braman’s service, parts and body departments. Each student is paid for his or her work and is paired with a senior employee as a mentor. There have been two graduating classes so far, and with the help of the program all graduates have found jobs, either at Braman’s or at other automotive shops. This is just one example of how we need to change our education and job training approach. While our workforce delivery system must be driven by states, the federal government can help address the shortage in many skilled-labor jobs by creating more pathways toward obtaining these certification credentials and by encouraging alternatives to the traditionally accredited.
The millions of people currently trapped in poverty and low-wage jobs are a tremendous untapped resource. Just think of what it would mean for America to gain full use of the talents and abilities of all its people. They would develop new innovations to improve our lives, or help build the next great American company. They would be doctors in our hospitals and scientists in our labs. They would be customers for our businesses and partners in our investments. They would be leaders in our government and pastors in our churches. Imagine how much greater a country we would be if the dreams and talents of over forty million human beings were unleashed into our economy.
As with many Americans, this fight is personal to me. My mother was one of seven girls whose parents often went to bed hungry so their children wouldn’t. My father lost his mother when he was nine. He left school and went to work at about the same age of my youngest son now.
I’m one of the blessed ones, and I try to never forget it. I live each day one generation removed from poverty, grateful to my grandparents, to my parents and to my country. Our status as a land of equal opportunity has made us a rich and powerful nation, but it has also made us a special one. It has transformed lives and families. It has given people like me the chance to grow up knowing that no dream was too big a
nd no goal out of reach, that the son of a bartender and a maid could have the same dreams and the same opportunities as the son of a millionaire or a president.
Now there are millions of Americans trying to access these same opportunities. There are struggling parents trying to give their children the chances my parents gave me. There are children growing up like I did, with dreams just like mine. Whether or not they get the chance to improve their lives will determine whether we remain a special place, or become just another country.
For when America ceases to value opportunity, work and independence for all, we will cease to be America. What makes our country special is that we don’t just fight poverty—we honor work. Work, and the sense of purpose and accomplishment that it brings, is essential to human happiness. Arthur Brooks of the American Enterprise Institute calls this “earned success.” That means achieving success—whether you define that as making money, raising good kids or mentoring seventh graders—on your own terms through your own hard work and merit. Brooks cites studies that show that people get less happiness from unearned things—even good things like money—than they do from things they’ve earned through work. For Christians, the centrality of work to human meaning and happiness comes from our being made in the image of God. Being made in His image means we have dignity, worth and creativity. Work is how we use these gifts to contribute to our fellow men and women and to honor His name.
Fifty years ago we set out on a big-government approach to fighting poverty and for fifty years we’ve been doubling down on that approach, tinkering around the edges at best. It has failed and this failure not only morally implicates all of us, it goes to the heart of the health of the American Dream. Now is the time to try a new approach.
Chapter Four
MAKING COLLEGE A GOOD INVESTMENT AGAIN
As dreams go, Kristi’s isn’t what you’d call outrageous. She wants a job and a life, in that order. But at age twenty-nine, Kristi has become cynical about the American Dream.
“You’re told that life is supposed to be a certain way,” she says. “You go to high school, then you go to college, then you graduate and get a job. Then you get a husband and a white picket fence and a dog and a cat and a son and a daughter and life is just grand.”
This isn’t how life is working out for Kristi. She had the great misfortune of graduating in late 2006 from the University of Central Florida (UCF), at a time when the Florida economy was the leading indicator of the Great Recession to come. But long before the grass stopped being cut in the yards of foreclosed homes across Florida, the job market that Kristi would face when she graduated had begun to change. The industrial manufacturing economy that had created once great cities like Detroit and lifted millions into the great American middle class was long gone. What was left in its wake was a postindustrial economy in which jobs that could be outsourced to cheaper labor and less regulation overseas had been, and jobs that could be automated were rapidly being taken over by machines and technology. By the time Kristi took her last exam at UCF, it wasn’t just that jobs were harder to find; it was that the jobs themselves had changed, and the higher education system she had just left hadn’t kept up with the change.
Kristi grew up in Apopka, Florida, outside Orlando, where her parents own and operate a greenhouse construction company. She had a pretty comfortable middle-class life. That she would go to college was never really in question—and for good reason. The value of a higher education has never been higher than it is for her and other members of the millennial generation, meaning those born after 1980. The unemployment rate for graduates with a bachelor’s degree or more in 2014 was 3.8 percent, compared with 12.2 percent for those with a high school degree.1 Although it’s no guarantee you won’t get laid off, a college degree means having a better chance of keeping your job, even in today’s economy. When the federal government tracked the high school class of 2004, it found that 40 percent of those with high school degrees and 45 percent of high school dropouts had lost a job within the past six years, compared with just 19 percent of those who’d gotten their bachelor’s degree.2 In addition, college graduates earn more—an average of $17,500 more per year—than high school graduates. In 1965, when my parents were supporting a family with less than high school educations, that gap was only $7,500.3
The reason the gap between high school and college graduate earnings has grown is more evidence—as if we needed it—of how much our economy has changed. College graduates are outpacing high school grads not because their earnings have grown that much, but because the earnings of high school graduates have shrunk that much. When my parents first came to this country, the typical high school graduate earned 81 percent of the salary of a college graduate. Today’s high school graduates earn just 62 percent of the salary of those with college degrees. But it’s not just the difference between driving a new Audi and driving a used Toyota that’s at stake. Today, not going to college increases your chance of living in real poverty, the kind of deprivation in which a family of four survives on around $23,000 a year. In 1979, just 7 percent of high school graduates were this poor. Today that number is a depressing 22 percent.4
No matter who you are or who your parents are—black, white, Hispanic, rich or poor, educated or less educated—getting a college degree significantly raises your chances of success in America. The poorest children increase their chances of escaping poverty from 55 to 84 percent if they get a four-year degree. Not only that, their chance of making it all the way to the top to be among the wealthiest Americans quadruples with a college degree.5 This effect stands in direct refutation of those who argue that the American Dream is dead for the poor and minorities.
These data about the mobility that comes with a higher education are compelling, but they beg a significant fact: First you have to get one. It’s like the old Steve Martin joke about the secret to becoming a millionaire. It begins, “First, get a million dollars . . .” A college education may be the surest route to making it in America today, but for millions of Americans, being prepared for that education and being able to afford it are the real roadblocks to the American Dream. And here, who your parents are and how much they make does, unfortunately, make a difference. Higher-income high school graduates are more likely to go to college—and more likely to stay in college—than the less well-off. They can better afford to, for one thing. Plus, they usually have another advantage that we’re only just beginning to truly appreciate: They are more likely to come from intact, two-parent families and communities that encourage achievement, responsibility and self-restraint.
A college degree is still a good investment, but for middle-class families the math on affording one is terrifying—and getting worse. Even as the typical family’s income has declined 6.6 percent since 2000, the cost of going to a private college has increased 24 percent—and that’s after adjusting for inflation. For public universities, allegedly the less expensive route, the increase was 37 percent.6 This relentless climb in tuition rates, moreover, seems impervious to what’s going on in the economy as a whole. Even when the Great Recession took hold five years ago and Americans had less to spend, tuition kept rising, even accelerating in its rise. Between 2006 and 2012, the cost of college increased by 16.5 percent.7 By the 2013–2014 school year, students and their parents could expect to pay an average of $40,917 a year to attend a private four-year college, and $18,391 to go to a public one.8 For would-be collegians and their parents, these prices are devastating. For parents of young children, they’re virtually prohibitive. The parents of a baby born today may never have to worry about her driving her own car or learning to write cursive, but they will need to save $150,000 to send her to a state school, and almost double that if she wants to go to a private college.
The competing pressures of the importance of a college degree and the high cost of getting one are putting Kristi and millions of Americans like her in a bind: They can’t afford to go to college, and they also can’t afford n
ot to go to college. The cost of a higher education is rising at a time when it’s worth more in future earning power than ever before. The only way out of this conundrum for students like Kristi is to go into debt. For others of less means, there is no way out; the challenge of affording to go to school—and to stay in school—is too great. Students from the poorest American families are now graduating from college at the lowest level in thirty years. Fewer than 10 percent get their degree.9 Overall, only 58 percent of full-time students who entered college in 2004 graduated within six years.10 For the rest—those who attend some college but fail to graduate—the burden of student debt is truly tragic. They face the worst of all possible outcomes: having taken on debt without obtaining the credential to allow them to make enough to repay it.
The resulting situation confronting American families is a curious one—one that says a lot about the dysfunction of our higher education system. Despite the demonstrated positive wage effects of a college degree, 57 percent of American adults now believe our higher education system fails to provide good value for the money it costs.11 At a time when Americans should value a college degree most, they increasingly doubt its worth. Colleges and universities are pricing out what should be eager customers. How is it that some enterprising entrepreneur hasn’t come up with creative ways to educate Americans for the modern workforce that don’t involve harnessing students with unsustainable debt?
Kristi is a good example. While she was at UCF she landed an internship with one of the largest McDonald’s franchisers in central Florida. She was responsible for the “point of purchase” advertising in the restaurants. That meant that if Barbie was featured in the Happy Meals that month, she had to make sure that there was Barbie advertising in the store and at the drive-through window to entice customers to make a last-minute impulse purchase. She loved the job and she was good at it. It inspired in her a love of marketing that she pursued all the way through a degree in interpersonal communications at UCF.