Congress needs a pro-work agenda for financial security of Americans

Much of the debate over tax reform has centered on how many jobs will be created, and how much they will contribute to economic growth. But the long-term health of the American economy is not only about how many jobs can be created. An equally important question is who will fill these jobs should the most favorable job predictions come true? Labor force participation is at the lowest point in 20 years, and a pro-work policy agenda coinciding with tax reform is urgently needed.

Current trends suggest that labor shortages could become a real problem, and policy efforts to boost labor force participation will be as critical for robust economic growth as tax cuts. It’s often taken for granted that workers will be available if jobs are created, but without the needed changes in policy that address the disappearing American worker, a significant number of Americans will never experience the social and economic virtues of work.

{mosads}Even in this current, relatively healthy economy, millions of prime age people no longer seek work. Many of them claim health reasons or family responsibilities for not working and most end up poor or near poor. Ensuring that enough workers are available to meet future job demands will depend on the reform of the country’s welfare programs and the expansion of work-related tax benefits.

The Trump administration and Congress need a pro-work agenda that will reform the nation’s safety net programs so that they encourage rather than discourage work, especially disability assistance programs. The policy should also maintain and expand tax provisions that reduce the cost of work.

President Trump has indicated his intention to pursue the reform of welfare programs after his tax reform effort. The administration can work within federal agencies to ensure that work becomes a priority for welfare recipients. It can use a waiver authority to encourage states to take pro-work steps and adhere to laws already on the books. The Centers for Medicare and Medicaid Services is already going down this path, and could serve as a model.

Congress should also consider legislation to add reasonable work requirements to various programs. Disability programs are particularly ripe for reform, as are food assistance, housing and public health insurance programs. Legislators should ensure that education and training programs are accessible and effective, and hold states accountable for putting program recipients to work.

More pro-work provisions are possible in tax policy as well. Congress could start by expanding the child and dependent care tax credit and making it refundable, meaning that it also goes to families who have no federal income tax liability but pay other taxes. Research shows that lowering out-of-pocket child care costs can boost employment. Treating child care costs as a work expense is consistent with how other work expenses are treated for tax purposes.

Increasing labor force participation should be one of the goals of the proposed tax bill. Giving tax breaks for child care is not simply redistributing income. Instead it recognizes that increasing the share of people who work, especially the poor, is necessary for the long-term health of our economy. Estimates suggest that about $10 billion would be needed to expand the child care tax credit and make it refundable.

This would add $100 billion to the total $1.4 trillion cost of the House tax bill over 10 years, with the majority going to those who make less than the median household income. This could be offset by reductions in other tax cuts that disproportionately benefit higher income households, making the distributional aspects of the current bill more appealing.

Job growth through tax reform is a worthwhile policy goal, not only for the broader economy, but also for those who are jobless and stuck at, or near, the poverty line. Tax cuts to spur new jobs will be practically useless if there are no workers to fill them. Increasing labor force participation, particularly for those at the bottom of the income distribution, is crucial for America’s financial health. It is equally essential to the security and dignity of those who find themselves without work.

Angela Rachidi is a research fellow in poverty studies at the American Enterprise Institute. She previously served as a deputy commissioner in New York City’s Department of Social Services.