June 24, 2016
Featured Story: The Cost of Childcare
The Center for American Progress released a report this week on how to calculate the cost of interrupting a career for child care. Given how expensive child care is, “many families [have] to choose between spending a sizable portion of their paycheck on child care, finding less expensive—and possibly lower quality—unregulated child care, or leaving the workforce to become a full-time caregiver,” researchers write. In concert with the report, American Progress also released an interactive calculator that allows users to estimate how much money (in wages and benefits) they would lose should they ever decide to make such a decision.
Typical child care costs in Washington, D.C. for a four-year old would cost about $1,400 a month, “paying for five years of care will run a family $84,000,” writes Valentina Zarya in Fortune. While this figure is equivalent to four years tuition at some in-state public universities, it pales in comparison to the $500,000 a family would lose should one parent decide to stay home. Though the potential losses are quite staggering, the calculator is not meant to deter families from making such a decision. “The point is to make it a little easier to figure out those costs,” says Michael Madowitz of American Progress.
Many low-income families in particular struggle with this decision. Speaking to PBS News Hour’s Kristen Doerer, Madowitz said “[We] still see lots of parents who can’t afford to work even if they prefered to.” Due to the high cost, quality child care is out of reach for many low-income families and many have to interrupt work for childcare despite the evidence that this is more costly in the long run. This was the case for Paola Calvo who had to choose between going without food or taking care of her child, says Thomas Kennedy in the Huffington Post.
News Highlights: Welfare Reform, Tax Deductions, and 401(k)s
Congresswoman Gwen Moore is introducing legislation that would require the very wealthy to undergo drug testing in order to receive their tax benefits, Alana Semuels reports in The Atlantic. The bill, entitled “Top 1% Accountability Act of 2016,” proposes that tax filers claiming itemized deductions over $150,000 submit a clean drug test to the IRS or receive the standardized deduction. Semuels writes: “The bill is intended to highlight the fact that it’s not just the poor who receive aid, even if they’re the ones asked to prove their standing. Aid to the wealthy comes mostly in the form of tax breaks, which allow them to keep money that they would otherwise be required by law to pay to the government.” The legislation is being put forth in the wake of several state laws requiring public assistance recipients to undergo drug testing to receive benefits.
Bloomberg’s Ben Steverman reports Senators Elizabeth Warren (D-MA) and Steve Daines (R-MT) proposed a bill into Congress that would create a so-called “Retirement Savings Lost and Found,” allowing savers to locate 401(k) plans from past jobs. The legislation would also invest abandoned plans in target-date mutual funds, which Steverman says “invests in a mix of stocks and bonds based on a participant’s age and retirement date.” Currently, workers who switch jobs often either cash out their 401(k)s, facing the financial penalty of doing so, or accumulate multiple accounts throughout their careers. Rolling one or more plans into another can be a hassle, which keeps many savers from consolidating their retirement assets. The proposed legislation would reduce those barriers.
Dylan Matthews at Vox describes the history and legacy of welfare reform, how it failed to end poverty, and which anti-poverty policies could be more effective today. The welfare reform law, signed by President Bill Clinton in 1996, was meant to “end welfare as we know it.” The earlier cash welfare program, Aid to Families with Dependent Children (AFDC), was thought to increase dependency on government assistance, though Matthews describes how the original intention of the program was to provide assistance for mothers to stay home, negative racial attitudes toward black mothers likely influenced the public distaste for the program. The new program, Temporary Assistance for Needy Families (TANF), functions as a block grant to the states, and introduced work requirements and time limits for the first time. While welfare reform seemed to have moved people from welfare to work in the late 1990s, research today shows that this was likely more the result of a tight labor market than a successful program. Deep poverty appears to have increased since 1996, and TANF, as a block grant program that could not expand to meet corresponding need, failed to protect families during the Great Recession,
Matthews notes that an alternative approach, with the backing of several anti-poverty experts, would be to change state guidelines, like establishing a “permanent TANF fund” to make the program stronger during recessions, and also establishing new assistance programs, popular suggestions including subsidized jobs programs or a universal child allowance.
News in Brief: Retirement Plans, Medicaid Expansion, Housing, and More
- The New York Times’ Editorial Board writes on the Obama Administration’s proposed rule to reign in for-profit universities that saddle low-income students with worthless degrees and significant debt. It notes, “The proposed regulations would be an improvement, but they need more work before they are finalized.”
- While the Department of Labor’s proposed fiduciary rule was much needed, The New York Times’ Steven Rattner makes a case for doing more, specifically in regards to employer-sponsored retirement plans.
- Emily Badger of The Washington Post writes on how 53 percent of Americans have to make some sort of sacrifice to pay for housing costs, like taking on more work, not putting away money for retirement, or accumulating credit card debt.
- The Center for Financial Services Innovation names nine organizations to the second class of the Financial Solutions Lab (FinLab) at the end of their EMERGE Conference.
- Writing for Globes, Amiram Barkat reports on Israel’s recent decision to create universal child savings accounts beginning January 1, 2017.
- The Atlantic’s Gillian White interviews Daniel L. Hatcher, the author of “[a] new book [that] details how foster-care agencies and other safety-net programs hire consultants to maximize their funding and divert it from its intended use.”
- A new report by the U.S. Department of Health and Human Services says “Medicaid expansion improved the financial well-being for new enrollees, reduc[ing] third party collections by $600 to $1000 per individual in expansion states.”
- Jeanne Sahadi writes for CNN on the once-prevalent workplace benefits that are “slowly fading away,” like credit union memberships, subsidized childcare, and mortgage assistance.
Making Government Programs Work for Families: Lessons from States and Next Steps for Improving Access to Work Support Benefits | The Urban Institute | June 28, 2016
Employer-Sponsored Benefits and Family Financial Security | The Pew Charitable Trusts | June 30, 2016