Carrie Sheffield joins the podcast to discuss this month’s policy focus: Public Policy Should Reward Work, Not Compete With It. We focus on the reasons why work is a vital component of fighting poverty and why policymakers should avoid using COVID-19 emergency tools to create permanent policies that are magnets for fraud and risk-triggering inflation.
Carrie Sheffield is a columnist and broadcaster in Washington, D.C. She earned a master’s in public policy from Harvard University and has managed municipal credit risk at Goldman Sachs and rated healthcare bonds at Moody’s Investors Service. While serving as executive director for Generation Opportunity, a project of Americans For Prosperity, she spoke at the U.S. Senate alongside key senators in favor of landmark tax reforms passed by Congress in 2017. Carrie is a member of the Harvard Christian Alumni Society, The National Press Club, and the Society of Professional Journalists. She is a 2018 winner of the William F. Buckley Awards by America’s Future Foundation, is listed in Maverick PAC’s “Future 40” 2019 class of influential young conservatives, and has been named a Most Inspiring New Yorker by Bumble, a social connection app with more than 55 million global users.
And welcome to She Thinks, a podcast where you’re allowed to think for yourself. I’m your host, Beverly Hallberg. And on today’s episode we discuss this month’s policy focus, public policies should reward work, not compete with it. We’ll delve into the reasons why work is a vital component of fighting poverty and why policymakers should avoid using COVID-19 emergency tools to create permanent policies that are magnets for fraud and risk triggering inflation. Well, joining us to talk about this policy focus is the author of it. So she’s the perfect person for us to talk to.
Carrie Sheffield joins us. Carrie is a columnist and broadcaster in Washington, DC. She earned a master’s in public policy from Harvard University and has managed municipal credit risk at Goldman Sachs and rated healthcare bonds at Moody’s Investors Service. She is the member of the National Press Club and the Society of Professional Journalists and is listed in Mavericks PAC’s Future40 2019 class of influential young conservatives. Carrie, always a pleasure to have you on the show.
Hey, Beverly. Great to be here. Thank you for having me and thanks for all the great work you’re doing.
Ah, thank you so much. And I think as we talk about work and the great work that IWF is doing, we focus a lot on work and what it means for people to work in various situations, whether that’s people working from home, how people have adjusted to COVID. And so I thought we would just start by taking a broad stroke of in the last year and a half due to COVID work has changed a lot. What have we learned about work and how it relates to poverty?
Absolutely. So we know that the poverty rate before COVID hit had been hitting historic lows, which is a great trend, especially historical lows among black and Latino groups and families. And these were all good things. Also historically low poverty rates among women. And sadly the pandemic hit and that traction, that positive traction of reducing poverty, it stopped. And we saw the poverty rate go up in 2020. We’re still waiting for the official poverty figures from the US Census Bureau. But the good news is at least based on 2020 and early 2021 has been hard. There was a big hit to the economy in January and February. It was rough, but we’re seeing the rebounding now, but we still don’t have exact statistics on government saying, “This is the official poverty rate.”
But we do know from some academic estimates that it’s actually because of how quickly the recovery was and how quickly the government acted in terms of doing some things to help people who are temporarily going through hard times, that the poverty rate at least according to this estimate in 2020 was about where it was in 2018. So the growth that we saw in people getting out of poverty, the improvement was through 2019. So the good news is that the drop in poverty wasn’t as high as I thought it might be due to COVID, but sadly the hardest hit were people working in the retail industry and the service industries. And guess what? Women are much more likely to be working in the service industry. So that’s why COVID hit their jobs the hardest.
And in this policy focus, you focus on the fact that public policy does matter. It either creates incentives to work or disincentivizes people to want to work at all. So break down for us. Due to COVID, we did see that there was this extra $300 that was given to individuals who are unemployed. That was on top of the baseline unemployment payments that they already received. That seems to have kept a lot of people afloat, but there have been some negative consequences to these public policies, correct?
Correct. Yes. What we’re seeing is as economic analysts would call it, a crowding-out effect. So the government effectively wages, so money for not working is crowding out private sector employment in many cases, and many people would actually make more money by being unemployed than going and working. And so I don’t blame them. It’s a rational economic choice. If you can get paid the same or more by not working versus working, I think most people would choose to stay home and be with their families. I think that that is a very rational choice. I do think it is a harmful choice from everything we know about work. We know that when people step away from work, it is actually really difficult to get back in some ways. It reduces the seniority that you have. It makes it harder to get and slower to get a promotion.
It makes your skills rusty, and it just hurts your overall confidence and the ability to get a pay raise later on once you do get back. And so all of these issues are very problematic when people are getting more money by not working than working. And you mentioned the unemployment, the extra $300 federal benefit that is now… It’s been kicked out. It expired last year, but then it was renewed in the January COVID bill. And now it’s going to be running out on Labor Day. But a lot of states, in fact at least 25 states, that’s half the country, the governors have said, “No, we’re not going to allow this to continue to basically encourage people to stay home and not work. And so we’re going to stop that extra money early.”
And guess what we see in those states. More people are incentivized to work, and that’s a good thing because we want more people in the private sector compared to getting basically borrowed money, money that’s borrowed from taxpayers because we have so much debt now. And our deficit is so high that the more we do this, the more we kick the can down the road. And the more this is going to be on our shoulders as the next generation.
And of course it impacts people. Personally, you mentioned some of the negative effects of not working, including just the personal side of losing that sense of fulfillment or your skills getting rusty. But what we’re seeing at the same time is that businesses just can’t find enough workers. I was talking to a friend recently who is a manager at a Chick-fil-A and said they are paying high schoolers over $15 an hour. Anybody who wants to come in, the hourly wage over $15. And they can’t even find enough people to come in and want those jobs. What has this done to the business community when people are incentivized to stay home and not work?
Yeah. I mean, that’s a great example that you just gave, that they are going to have to increase the price that they have to pay the laborers. And so what does that do? As you mentioned at the top of the podcast, that triggers price increases and that triggers inflation. So in this policy paper that I looked at, I looked at some polling that was done by Harvard University and HarrisX. And they asked Americans, “What do you think is the top driver or some of the top drivers for inflation?” And the number one choice that Americans said was uncontrolled or large amounts of government spending is the top contributor to inflation. I agree. I agree with these Americans, and this is just common sense that the more money you have to spend to get the same thing, the less valuable your money is.
And that’s what happens when you’re using… Essentially the government treating taxpayer money like monopoly money to pay people to not produce anything. That’s a problem because you’re paying people to just sit there and not be productive. Therefore you’re going to have to pay people in the private sector who are productive. You’re going to have to pay them even more. And so that’s going to drive up the prices of everything else. And so right now we’re seeing new records on inflation, 5% inflation in May. This is a big problem because especially I was… Bloomberg reported inflation is hurting black and Latino families the most. They’re the most likely out of all households in America to report they’re feeling the pinch at the grocery store due to inflation. And they’re having to spend a bigger portion of their family budget on groceries. Again, it sounds nice and we want to help people.
There’s no shame if you need some help. My parents were on welfare when I was younger. I lived in trailer parks. I went to some inner-city schools where I was one of the only white kids. Sometimes you need help. Sometimes your family is down on their luck, but there’s a big difference between temporary benefits and temporary lifelines and help, versus making things permanent. And that’s a big concern that I raised in the paper, is that a lot of these policies Democrats are wanting to use as an excuse, the COVID pandemic, they’re wanting to use as an excuse to make them permanent. And they want to make them permanent with no strings attached. For example, well, in addition to the unemployment, we have this new child tax credit that is going to be going automatically into people’s bank accounts. And the problem with this is that there’s no work mandate.
There’s no mandate to even be looking for work in order to get these benefits. And Robert Dore who ran the welfare program for the city of New York and who is now the president of the American Enterprise Institute think tank, he wrote a great op-ed for the wall street journal saying how this just basically depositing it to checking accounts or mailing checks, just cutting a check from the IRS machine, computer is very different and it’s a problem because it doesn’t require anything else. For example, social workers. He said that social workers in the home are a great source of… people who are struggling with addiction to get the treatment they need, to help prevent violence in the home. Just all sorts of things that are just going to go unnoticed without having an extra pair of eyes there in the home. And so it’s going to have the unintended, opposite effect that in many cases, both for employment, but also for family situations, it’s going to actually do a lot of harm.
And you use the word work requirements. And we’ve heard this phrase even prior to COVID. This has been instituted when it comes to any type of welfare reform, is that work or at least looking for work should be part of receiving any type of benefit. What do you say to people who think that on the surface that’s just not the right way to do things, that it’s cruel to people who are struggling? You talked about your own experience in struggling, your family struggling to make ends meet. That people do find themselves in hard times. Why is a work requirement important for those people who really are down and out?
It is so important in so many ways. A top reason is because of poverty. So when you look at the statistics, the poverty rate for people who are working at least full-time for half of the year, the poverty rate is four times lower for people who are working only part-time and the general public. So the more likely you are to be working full-time the far less likely, four times less likely you are to be in poverty. So that’s a huge, huge benefit in terms of just looking at your overall quality of life. There are also a lot of other big benefits associated with work, including preventing substance abuse.
Unemployment is also associated with depression, suicide, and just abuse in the home, domestic abuse. And it’s got these, as you mentioned, the positive externalities of things like happiness and fulfillment. So there are just so many reasons why work is so important, both tangible and intangible. And we as a society and as a culture, I know some people like to say, “Well, oh, the Europeans, they have it right. They work fewer hours. They take more vacations. They have better work-life balance. We should be more like them.” But when you just look at what has happened to Europe in terms of… They’re basically in a slow decline and not so slow in some cases, but Europe is really lagging behind the United States in terms of everything from birth rate, to productivity, to GDP per capita.
As Margaret Thatcher would say, “The socialists want us to all be… Everyone to be more equally poor.” But here in America, if you are lower to middle income, you would be middle to upper income in Europe. So the scale is just… And money obviously is not everything. And so as we talk a lot about values and family values are so much more important than anything you could purchase. But at the same time, we’re not going to pretend that having your basic needs taken care of and not having to live in fear of poverty, those are very important in that hierarchy of needs.
Well, before we continue the conversation, I’d like to take a moment to highlight IWF Champion Women profile series, which focuses on women across the country and world that are accomplishing amazing things. The media too often ignores their stories, but we don’t. We celebrate them and we bring their stories directly to you. Our current profile is Christie Craddick. She is the chairman of the Texas Railroad Commission. To check out her story do go to iwf.org to see why she’s this week’s Champion Woman. Well, Carrie, going back to the policy focus again, it’s called “Public Policy Should Reward Work”, not compete with work. People can find it at iwf.org. So do go check it out. You mentioned different areas and how work is a help. And one thing that you focused on is work is an equalizer. What do you mean by saying work is an equalizer.
Yeah. Absolutely. So when you have policies that are very much focused on growth and reducing barriers to entry, reducing regulation, safely, you actually see that which is what we saw during the first few years of the Trump administration, the economic policies there, it reduced inequality. So there’s the Gini coefficient, which is the standard, kind of gold standard for measuring inequality around the world. The Gini coefficient fell during those first three years of the Trump administration, arguably because… I would argue there were pro-growth policies that incentivized working. For example, in order to get public assistance, you had to either be working or looking for work. That’s one policy. But also reducing the burden that is made on businesses who want to hire. And what we see over and over is that very often it’s the lowest skilled, last hired is the first fired.
So people who are lower-skilled, less educated, essentially more vulnerable, they’re most likely to be fired when you’re dealing with things like a minimum wage hike or regulatory burdens. The companies have to respond by making cuts. And what we saw is during those first three years of the Trump administration, we saw the businesses doing more hiring and more hiring of working-class Americans. And so what was very interesting was from 2007 to 2019, the income for the bottom percentiles of Americans rose faster than the top income earners. And so that’s pretty amazing.
And it goes against what you see so often in the liberal media where they say that conservative policies hurt the poor, the exact opposite happened here. The household income was increasing for those who are on the lower end of the income scale, compared to those who are at the upper end. And as I mentioned, the poverty rate if you’re working is much, much, much, four times lower than if you’re not working. So if we want to give dignity, if we want to empower people, if we want people to stand on their own two feet instead of getting them trapped in an endless bureaucracy of waiting around for the government to pay you, the best antidote to all of that is work.
And you bring up another interesting angle on this as well. You say that lower-wage work is a stepping stone. And I think this is interesting because there has been that minimum wage debate where you have a lot of progressive’s that want to raise the minimum wage to $15 an hour and on paper that sounds great, but there seems to be some problems with it. First of all, kind of getting to what you were saying, it’s the low wage earners typically are let go first because businesses can’t afford a hike in the minimum wage, but I think there’s another part. The fact that for most people the low-wage job is just an entry into a company, into a business, and in time they should make more. I think we often think about minimum wage as a static thing that people never break out of.
Bingo. You’re exactly right. And not only is it that stepping stone to getting in many cases your first job, it’s also your ability to get that promotion so that you’re not… If you look at the statistics of people who are first entering minimum wage, the vast majority do not stay there. They quickly get promoted. They get other opportunities. They don’t stay there. A lot of people who are working minimum wage are also a second earner. They’re not the primary earner. And a lot of them only work part-time. And again, this is the reverse of what we hear in the liberal media that, “Oh, if you don’t have a minimum wage increase, you don’t care about the poor and racial minorities”, but again, racial minorities and the less educated, and the more poor are the most likely to get fired in the case of a minimum wage hike.
But what’s also interesting is… I haven’t written about this. I’m actually working on a new op-ed about this. So breaking news on your podcast, there is a new study about the minimum wage. Looking at what happened, it was the same store. So everything was the same, but it was stores. It was a chain and they didn’t name the chain. It was a study that was done by professors at Cornell, at the University of Washington and the Georgia Institute of Technology. And so this chain was present in both Texas and California. So California had the minimum wage hike and Texas did not. And what they found was very interesting. So California where they made these changes…
There was essentially no change in Texas because there was no change in the minimum wage. In California, there were lots of changes. What was interesting was that they didn’t find that as many people were fired per se, but what they did find was that many people’s hours were cut. And that meant that effectively they got a pay cut because of minimum wage in practice because their hours were cut. So their paychecks actually got smaller even though there was a minimum wage increase. So the way they calculated it, they found that the average employee was earning $11 an hour, and this effectively translated to a wage cut of 13.6% because their hours were cut by 20.8%.
So again, this is one of those unintended consequences. Minimum wage hike sounds great if you’re working minimum wage. And I’ve worked minimum wage, no shame in it. Oh, it’s going to go up. Guess what? You’re actually going to get almost a 14% pay cut. And here’s the other thing. They also found that these employers… As they say in physics, for every action there’s a reaction. The employers also what they did was by cutting the hours, they cut the standard by which someone would be able to… Or the hours. Because the standards for qualifying for retirement plans and for health care, they cut people so that they weren’t able to be eligible.
So it was they had to be working for 20 hours a week to qualify for retirement plans and 30 hours a week to qualify for healthcare. So you can imagine there are a lot more people out there only working 19 hours a week or 29 hours a week. And so effectively what a minimum wage hike did in California was it meant you were going to get less take-home pay, you could potentially lose your retirement plan and your health care all because of that.
Well, Carrie, we love breaking news right here on She Thinks. So thank you for bringing that to us. I want to again encourage everybody to go to iwf.org to check out this month’s policy focus entitled “Public Policies Should Reward Work, Not Compete with It.” Carrie Sheffield, thank you not only for your work on this, but also joining us today.
Thank you, Beverly. Appreciate it. Take care.
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