How to help working families
To understand the challenges that today’s working parents face, it is helpful to consider the dramatic evolution of work and family over the last 50 years. Many of our labor policies, such as the Child and Dependent Care Tax Credit and the Earned Income Tax Credit, were created in the 1970s and have changed little since.
But the nature of family and work has changed dramatically. The share of U.S. households headed by single parents has more than tripled since 1960, with unmarried parents now representing approximately one-third of American households.
The majority of women participate in the labor force and women are now the sole or main breadwinners in 40 percent of American households, according to the Pew Research Center. And wages, especially for workers on the wrong side of the skills curve, have stagnated in recent years.
This has had a number of cascading effects.
Child care costs increased by 70 percent from 1985 to 2011, in 2011 dollars. For parents living in poverty, child care costs can consume up to 30 percent (or more) of their monthly income, discouraging mothers in particular from working.
Another issue is the lack of paid parental leave. Only 12 percent of employees have paid leave through their employers, according to the Department of Labor. The United States is alone in the developed world for not having a paid family leave policy.
More generally still, our tax and benefits system introduces high effective marginal tax rates on dual-income households in the form of higher taxes or lost benefits. This has the effect of discouraging spousal employment or marriage all together.
All of these results suggest it is time to rethink our labor policies and modernize them for the 21st century. The incoming administration has voiced a commitment to family-friendly policies, which complements House Speaker Paul Ryan’s economic opportunity agenda.
Many of the necessary changes involve not creating new policy out of thin air, but restructuring existing programs to make more sense for today’s world. Consider child care. A significant portion of working parents are ineligible for child care support under the current system, which directs assistance namely to those below the poverty line and those with a significant income tax liability.
Instead of introducing a new and expensive program, the most straightforward child care reform would be to make the existing Child and Dependent Care Tax Credit partially refundable, phased out at a lower income threshold, and indexed to child care inflation.
Or consider the Earned Income Tax Credit, which functions as a wage subsidy for low-wage workers and has been perhaps the most successful government program for countering low wages and promoting workforce participation.
This year offers an opportunity for Washington to change that and improve the lives for working parents across America.
Abby McCloskey is founder of McCloskey Policy LLC and a former adviser to Jeb Bush and Rick Perry. This essay originally appeared in The Catalyst: A Journal of Ideas from the Bush Institute. This is distributed by InsideSources.com.