Summer reading: New reports show that policy choices build ladders to economic opportunity

Ben Horowitz
Jun 25, 2015

With the legislative session over, we’ve had the opportunity to pick up some of our ideal beach reads: the latest and greatest research demonstrating that policy choices can knock down barriers on the road to economic opportunity. They make a strong case for investing in proven ways to help all boats rise as the economy continues to recover.

When families can afford to live in lower-poverty neighborhoods, their kids succeed. Researchers at Harvard re-visited a policy experiment from the mid-1990s that provided housing assistance to families living in areas of concentrated poverty so that they could move to lower-poverty neighborhoods. They found that the children who relocated grew up to earn significantly more and were more likely to attend college. Their research shows that kids up to age 13 saw a benefit from living in lower-poverty neighborhoods, with each additional year spent in a new, lower-poverty neighborhood leading to higher predicted earnings.

A summary of child care research reveals that mothers receiving child care assistance are more likely to work, and their employment leads to increased levels of social and emotional well-being for their children. Parents with child care assistance also worked more hours, and were more likely to have more stable jobs. This research demonstrates the economic and other benefits from child care assistance, such as Minnesota’s Basic Sliding Fee Child Care Assistance. Basic Sliding Fee brings down the cost of child care for parents with children up to age 12. It allows children to thrive in stable environments while parents go to school or work. This session, policymakers reversed a long-term trend of disinvestment by increasing funding for Basic Sliding Fee. It was a great step in the right direction, but thousands of Minnesota families still remain on a waiting list.

The federal Earned Income Tax Credit (EITC) is a powerful tool for reducing poverty and increasing employment. The nonpartisan Congressional Research Service found that the federal EITC reduces the national poverty rate by 14 to 29 percent for families with children, depending on their household chacteristics. In his 2015 budget proposal, Governor Mark Dayton proposed improvements to the state’s version of the EITC, the Working Family Tax Credit. Both the federal and state government could strengthen this policy even further by ensuring these credits make work pay for all kinds of families.

Policies like the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) and the EITC cut poverty in Minnesota in half in 2012. These policies would have an even greater impact if they reached a higher percentage of eligible families. An overview of participation rates for nutrition assistance shows that Minnesota and the nation are getting better at ensuring eligible families receive the assistance they qualify for – but we still have a way to go. For example, Minnesota’s SNAP participation rate increased from 65 percent in 2000 to 86 percent in 2012.

This research used a diverse array of statistical techniques and comes from the spheres of government, academia and nonprofits. They all point to the same general conclusion: policy choices make a difference. Child care assistance, access to affordable housing, the EITC and SNAP make it easier for struggling Minnesotans to make ends meet.

-Ben Horowitz