Why Poverty Will Escalate without a New System

The New On-Demand, 1099 Economy  

To resolve poverty requires understanding where the economy is heading and how to support the bottom third of the US earners in having enough income to be economically secure. Companies can make more wealth with fewer people than ever before. They are rapidly shedding US blue-collar jobs through automation, artificial intelligence, and globalization. More of the working poor are being let go from the security of being on a company’s payroll (w2 jobs) and must now take more temporary jobs, presently being described as on-demand or 1099 jobs. While this can be exciting for middle and upper-income people, the working poor and those leaving welfare will need programs that help them navigate this new environment.  

The Middle-skill Gap 

The baby boomers are leaving the workforce by the masses. Increasing numbers of people are unqualified for today’s workforce, creating a temporary crisis in filling middle-skill jobs (high-school graduation required but not a college degree). We at The Poverty Solution are making the argument that solving poverty is no longer just a humanitarian cause. It is imperative to our economic, and workforce wellness. For those leaders working directly with people in poverty our niche is that we understand what it takes for people with backgrounds in poverty to achieve in the workplace.  

The Phantom Workforce 

Communities that are struggling with fewer economic base jobs--those jobs that bring money into a community and generate on average two local service jobs--must mine their own local talent from the unqualified labor pool. Employers will struggle trying to recruit from a “phantom workforce” that will resist entry and middle skill work opportunities until the cliff effects in benefit programs are eliminated. Cliff effects occur when assistance programs like childcare subsidies and Medicaid remove benefits faster than people can earn enough income to replace them. By not pro-rating the exit ramp to these programs, the government creates a financial crisis for people as they earn more income. Due to the lack of benefit calculators and government employees who can easily show people the results of taking new earned income, there will be a level of resistance from perceived changes in benefits, whether these are real and accurate changes. 

The Poverty Solution urges policy makers to address the benefit cliff effect. One of the pilot programs in the Tennessee has been funded to find solutions. There must be easy entrance and exit ramps on and off public assistance programs so that they are used the way they are intended to be used as temporary supports.  

In the next blog we will look at what it really takes to lead a transformational project that can begin to reduce poverty rates.  

-Scott C. Miller 

Founder, The Poverty Solution 

Here's a powerful example of why the Phantom Workforce persists in Tennessee, highlighted by our Research Pilot in Cookeville, TN.