Discussion in policy and political circles very often focuses on income inequality, and in particular, the growing disparity in incomes between the top 1 percent and everyone else. Unfortunately, a focus on inequality can shift our focus away from the poor to the wealthy. In a new book titled $2.00 a Day: Living on Almost Nothing in America, authors Kathryn Edin and Luke Shaefer focus our attention front and center on the poor. The inequality they highlight is between the working poor and the non-working poor. The distinction is meaningful and provides an interesting insight into how policies aimed at encouraging low income families to enter the labor market have left those unable to find work on the sidelines.
Welfare reform in 1996 ended the traditional cash welfare program called Aid To Families With Dependent Children (AFDC). In place of AFDC came a new program titled Temporary Assistance to Needy Families or TANF, which made assistance payments contingent on job search or participation in job training activities. Welfare reform placed a renewed focus on encouraging and rewarding work, a focus also shared by the Earned Income Tax Credit program (EITC). A large line of research on the EITC shows that the program encourages labor force participation, particularly for single mothers, and offers long-term benefits for children in EITC-receiving households. As these studies show, the system has worked well for those low-wage workers who are able to find work by boosting their incomes and encouraging sustained long-term employment. But what of the non-working poor?