Burrito Economics: Why Chipotle’s Wage Hikes Are Not Good News

 


Nathan Mayo
Membership Director
Read more from Nathan

 

 

This article was originally published on The American Spectator on June 22, 2021.

 

A recent column by Robert Reich, former U.S. Secretary of Labor, excoriates Republicans for using Chipotle’s recent price increase to insist that “Democrats’ socialist stimulus bill caused a labor shortage and now burrito lovers everywhere are footing the bill.” Chipotle announced that the current U.S. labor shortage for low-skilled workers is forcing the company to raise prices by 4 percent. While the reality of the labor shortage is uncontentious, there are sharp divisions over its cause, whether it is truly driving price hikes, and whether it will have net benefits for the working class.

Reich argues that the labor shortage is unrelated to boosted unemployment benefits, which provide a mere $15,000 a year. He argues that the price hikes do not necessarily follow from the wage hikes and that the real winners of these economic conditions are low-wage workers. As someone who provides resources for nonprofits that help people in poverty move up the economic ladder, I am always on the lookout for good news for our clients.

Unfortunately, unwrapping Reich’s analysis shows that there is not much meat in his argument.

First, Reich claims that $15,000 a year would not cause any serious workers to stay out of the labor force. He neglects that this is an additional benefit — not the only benefit. Average weekly unemployment benefits are $387 plus the $300 bonus, for a total annual salary around $36,000. Add weekly average benefits from programs like SNAP ($60), TANF ($110), Medicaid ($120), and numerous others and $40,000-plus of tax-free benefits starts to look like a pretty fair wage for not working.

Reich alludes to unspecified “evidence” that individuals are choosing to stay out of the work force for reasons involving health or child care. Regardless of the reasons people may give, however, the evidence is clear: After the reduction in the bonus from $600 to $300 last July, the unemployment rate immediately dove from 10 percent to 8 percent the following month — the sharpest monthly drop other than the one after the initial reopening.

Reich also contends that the price hikes need not follow from the labor shortage because companies like Chipotle have the option to pare back executive compensation. While appealing, this solution fails a simple math test. With their current plans to employ 117,000 workers and raise their average pay by $2 an hour, Chipotle has to come up with around another $300 million a year. Given that the company’s executive compensation is at a temporary zenith due to stock options tied to explosive growth, there is no way that it could plan to save more than $30 million a year even if it started paying the lowest executive salaries in the industry. So yes, Chipotle’s wage hike does require price hikes.

This leads to the most important question: Even if the labor shortage is artificial, won’t the working class still benefit? The current workers certainly profit somewhat, but not for long if their rising wages are washed away by inflation. Price hikes are not restricted to burritos—prices across the economy are rising at the highest rates in over a decade.

The Federal Reserve contends that current inflation is “transitory.” If that bears out, then the economy will soon cool down. Supply chains will normalize, pandemic savings will be spent, and public benefits will expire in time for a wave of low-skilled workers to flood back into the slowing economy and stop wage growth in its tracks.

Alternatively, if the Fed is wrong and Deutsche Bank’s dire prediction of 1970s-style inflation holds true, then inflation will completely wipe out the gains of low-skilled workers into the foreseeable future. And once the sense of security brought by decades of low inflation disappears, the momentum of the new inflation expectations may carry it much further into the future than the pandemic recovery.

The picture gets even worse for low-wage workers who were enticed out of the labor market by generous benefits. They will have lost a year or more of work in which they may have been able to rise out of an entry-level job. Labor force experience is a significant factor in pay rates, and resume gaps make it tougher to find future work. Unemployed people also experience mental health declines during extended periods of non-work and often drop out of the labor force altogether through disability claims or early retirement. Intentionally turning down one of the 8.2 million available jobs in order to receive a free check is tempting for many low-skilled workers, but it is a deal that won’t pay off for most of them.

Given the mixed effects for those in and out of the workforce it is hard to see any cause for celebration. Not only are burrito lovers footing the bill, but it is for a spending party that we will all regret.

 

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The Surprising Truth About Incarceration and Employment

 


Savannah Aleckson
Events Director/Adjunct Instructor
Read more from Savannah

 


Nathan Mayo
Director of Member Services
Read more from Nathan

 

 

In the year following their release, only 55% of former prisoners have any wages, with the median worker earning a mere $5,900. This fact is sobering, but not necessarily surprising. After all, ex-prisoners naturally face many barriers to employment. However, an in-depth analysis by the Brookings Institution reveals a surprising truth: many of these problems finding and maintaining decent employment are worse in the years before they go to prison than after. 

It is well-established that ex-prisoners have a harder time finding work than non-offenders. A study from Arizona State University submitted pairs of nearly identical resumes online (except for noting prison time on one resume). The resumes with the prison time were less likely to receive a positive response from an employer. The employers later stated that among ex-prisoners, they were more concerned about absenteeism, addiction issues, mental health problems, and limited ability to maintain positive relationships with customers and fellow employees.  Employer surveys also show that 26% of employers of entry level positions either “probably” or “definitely” would not ever hire someone who had been in prison.  (20% would not hire someone who had been in jail.) 

While employers’ prejudices are not necessarily without any merit, they create a barrier that can block even very dedicated employees from ever getting a chance. This concern has sparked efforts to “ban the box” on job applications that requires submitters to denote if they have ever been convicted of a crime. Sometimes this question is removed voluntarily by employers, other times by local policy fiat. The effect of the practice has been shown to boost employment in high-crime neighborhoods by around 4%. 

But “banning the box” won’t address the underlying issues that make the ex-criminal population so difficult to employ in the first place. 

Employment rates of prisoners in the 8 years before they serve time hover around 50%, with median earnings averaging around $6,500.  While some income is likely concealed from the researchers by black market activity, the fact is that a life of crime does not pay well for the typical criminal. Sudhir Venkatesh, a sociologist who embedded himself in a violent Chicago crack gang for years, brought to light that the average drug selling “foot soldier” earned a mere $3.30 an hour.  They often asked him for help in getting a “good job”–working as a janitor for the nearby university. 

What underlying issues cause this complete lack of access to the labor market, even before a criminal record is established?

There’s not one malady to blame, but rather a cocktail of environmental, familial, and personal factors that can keep a young, able-bodied person out of the workforce. The context in which a person grows up is a major, though not an absolute, determinant of future success. After all, the home is the primary training ground for fundamental soft skills, such as basic social skills, proper time management, and emotional regulation, that are key to securing employment. With only 7% percent of children in poverty growing up in stable homes with married parents, the context for learning these vital skills is missing–and the consequences of that fact magnify as children move into adulthood.

Another key factor to securing employment is healthy social capital. Renowned sociologist Robert Putnam explored the extensive benefits of social capital in his groundbreaking book Bowling Alone, finding that healthy connections to family, friends, neighbors, and community members was a key indicator of a person’s success in the marketplace. Unfortunately, the very groups most in need of social capital–the socioeconomically disadvantaged–are the groups least likely to have it. Without pliable social connections necessary to learn about and land lucrative jobs, at-risk young people may find themselves propelled further down a negative path, including under-employment and subsequent criminal activity.

While there are many laudable programs, such as the Doe Fund and Jail to Jobs, that exist to tackle this problem of under-employment for ex-criminals, keen poverty fighters should also note the under-employment that occurs before incarceration–and attack its insidious underlying causes. At a minimum, compassionate people can support nimble private charity that’s better able to address root issues than welfare policies that penalize healthy family structures and isolate the poor from beneficial social connections.

 

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Are Private Charities Able to Provide for Americans Currently on SNAP?

 

On Wednesday, May 26, 2021, True Charity Initiative Executive Director James Whitford testified before the U.S. House of Representatives’ Committee on Agriculture.  During that hearing, Vice-Chair Alma S. Adams (D-NC) posed the following question:

“Do you believe that private charities and nonprofits could immediately and effectively provide for the 42 million Americans who are currently supported by SNAP?” 

Although James did not have the opportunity to respond during the hearing, he submitted the following addendum to his testimony in order to address this question.

 

 

June 4, 2021

To the Chair and Members of the Nutrition, Oversight and Department Operations subcommittee:

Again, thank you for the opportunity to share my testimony at the recent hearing on May 26, The Future of Snap: Moving Past the Pandemic. 

I’m taking the opportunity to respond to vice-chair Adams’ question in writing since her time had expired prior to my response. The question was, “Do you believe that private charities and nonprofits could immediately and effectively provide for the 42 million Americans who are currently supported by SNAP?” 

Thank you for the question vice-chair Adams and I’m sorry our time didn’t allow me to respond while we were together virtually. 

In one regard, the question encourages me – if the number of Americans dependent on SNAP were low enough, might you be favorable toward such an idea?! If that is indeed the case, then it stands to reason you may also be in favor of the program’s privatization if there were enough private nonprofits and churches who could do the job. We should hope!

Even though I have no doubt of the private sector’s capacity to feed the hungry in America, I certainly assert that “immediately” and “effectively” are mutually exclusive. We could do so “immediately and chaotically” but a thoughtful and effective plan would require time.  That said, I am hopeful we can all agree that 1 American or 42 million Americans “supported by SNAP” is not optimal and that our common ground upon which to rally together is to see as few people as possible supported by the government. This reminds me of some words written by one of my favorite Presidents, Democrat Grover Cleveland, when he vetoed the Texas Seed Bill of 1887: 

“A prevalent tendency to disregard the limited mission of this [government] power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the Government, the Government should not support the people.”  

 In further justifying his dissent, he pointed to the great strength of American charity, demonstrating his remarkable and beautiful faith in the generosity and neighborliness of American citizens. He also commented on the risk “federal aid” poses to the bonds between people.  

“The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.”

There are other great thinkers who saw the danger of people “supported” by government programs. In Alexis de Tocqueville’s observations of American life in Democracy in America, he recorded his amazement of Americans’ tendencies to associate. He foresaw the growth of government and the threat it would pose to those natural, communal relationships, writing: 

“The task of the governing power will therefore perpetually increase, and its very efforts will extend it every day. The more it stands in the place of associations, the more will individuals, losing the notion of combining together, require its assistance.”

My intent here is not a history lesson. I simply argue that throughout American history, whether a Democrat President or a French philosopher, leaders have realized that “support” on the Federal Government has a myriad of disruptive effects that adversely impact the natural affiliations within family and community. 

To continue examining private sector capacity, I am not able to estimate the reduction of SNAP enrollees if effective and empowering charity took over. Certainly, without the current and easy path to liquidate and abuse the benefit, not to mention the attrition of able-bodied adults who take advantage of the program unnecessarily, there would be a significant reduction representing a more accurate and true need for food.  

One church in my city partnered with an organization called the Pack Shack who facilitates “funnel parties.” The entire church assembled on a Sunday and instead of a sermon, they packed 40,000 meals during their normal two service times. These meals are dry-stored, nutritious and they even taste good. I know – it’s a drop in the bucket, but it was one church on one Sunday. There are approximately 380,000 churches in the United States. If half of them did the same just twice per year, it would provide a meal to each of those 42 million people every day. 

Even my small mission provides more than 60,000 hot meals each year and nearly that in additional pounds of food for families in need. Our mission is just one of more than 300 in the Citygate Network of missions that prepare and serve more than 50 million meals annually. 

I’m sure you’re grateful for the hard work of these amazing compassionate soldiers fighting for social justice. I also imagine you would love to see people fed and cared for by their neighbors, local churches and communities. If so, then you would naturally hope SNAP to be merely “supplemental” to what’s being provided by those more meaningful sources. Unfortunately, it’s not. An unemployed homeless man yesterday shared a letter with me sent to him from our state’s DSS office regarding his SNAP benefits. It reads, “The amount of benefits you will continue to receive are: $234.00 thru 05/2022.” Certainly, you’d agree this amount is more than “supplemental” for a man who is being fed by the mission where he currently resides.  Certainly, this indicates the number 42 million is woefully inflated compared to real need. 

No less important than my confidence in private charity to meet the true need is the assumption I perceive behind the question you asked. The use of that overwhelming number, 42 million, causes most minds to quickly couple quantity with justification. However, the number of people subscribing to any sort of thing does not necessitate its justification, regardless of the quantity who subscribe. If it were not so, then communism could be justified by the number of communists or mob-rule by the quantity of the mob. If we so readily justify USDA’s SNAP program, we must also toss out, among many other things, those valid and thoughtful arguments put forth by a few of our Founders in the Federalist Papers as they argued for a federal government but assured a newly liberated people that it would never grow beyond its enumerated powers. In number 41, Madison reassures us:

For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power? Nothing is more natural nor common than first to use a general phrase, and then to explain and qualify it by a recital of particulars.

And in number 45: 

The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.

As radical as it may seem to anyone in our culture today, I believe more justified than any government program is the expectation that the Federal Government should restrain itself to that list of “few and defined” powers. It is not so much that I argue for diminishing government as it is that I desire to magnify people. However, the more power the government holds, the less the people are empowered. Empowerment does not come by the simple transfer of wealth, but at the moment a person realizes he or she can create it for himself. So, the more the government grows in its unmerited transfer of wealth to the poor, the less the poor person will find the flourishing life and freedom for which he or she was created. Certainly, none of us should embrace such a perversion of justice. 

I am not asking you to close the SNAP program tomorrow. I only hope you’ll consider that the involvement of the Federal Government in helping people in my community has also brought its share of hurt. At least, I ask you to consider the following: 

  • Do not expand the program as our economy regains its footing. 
  • Require work from able-bodied adults without dependents.
  • Seriously consider how the program could be turned over to the States. 

Lastly, please remember that the excellence of our nation stems in great part from its establishment as a republic. We were never intended to, nor should we be a nation ruled by mob nor by an elite aristocracy, but by the people. In his letter to John Taylor in 1816, Thomas Jefferson wrote;

“The further the departure from direct and constant control by the citizens, the less has the government of the ingredient of republicanism.”

Thank you for working with me to realize a grander America in which we have rightfully returned to the citizenry’s direct and constant control that which it does best; love and care for neighbors in need.  

James Whitford

 

 

FURTHER RESOURCES

 

 

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This Isn’t the Great Depression

 


James Whitford
Executive Director
Read more from James

 

 

A version of this article was published on InsideSources.com on April 4, 2021.

 

“We want to avoid a situation where people are unaware of what they’re entitled to,” said Vice President Harris last Monday. She was explaining the purpose of the Biden administration’s “Help is Here” tour, showcasing the third round of national stimulus legislation passed into law this month.

I hope someone meets them along the way and hands off the book When Helping Hurts. This fundamental read, authored by leaders in community development, highlights the harm done when indiscriminate charity fails to discern true need on an individual level. Certainly, the most recent stimulus package represents another round of indiscriminate charity marketed on the grounds that nearly all Americans need relief. Accordingly, HR 1319 was titled American Rescue Plan Act and infers we the people are in the direst straits.

But are Americans in need of a government rescue?

I run a poverty-fighting gospel rescue mission alongside hundreds of other nonprofits like mine in a national network, Citygate. We know about the work of rescue. From a life of being trafficked, attempted suicide, or a sub-zero winter’s night, we have rescued a lot of people. Even so, the majority of the poorest who come to us are more in need of encouragement, guidance, and a friend than to be rescued.

Unnecessary rescue diminishes a person’s dignity, and if repeated enough, births a debilitating dependency.

Marvin Olasky in his seminal work, The Tragedy of American Compassion, notes “Dependency is merely slavery with a smiling mask.” In my two decades of fighting urban poverty, I’ve seen just that— indiscriminate aid resulting in the bondage of dependent poverty. Jocelyn who manages our emergency shelter is a good case in point. In a news interview highlighting her successful transition from a chronically homeless drug addict, she was clear about her dependency on welfare: “It was harder for me to give up food stamps than heroine.”

In his 1935 state of the union address, FDR noted this tendency to get hooked on government handouts after millions signed up for his New Deal welfare programs: “The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.”

In one recent interview, President Biden said, “I’m kind of in the position F.D.R. was,” and regarding the pandemic, “I think it may not dwarf but eclipse what F.D.R. faced.”

However, data on economic health reveal an inconvenient fact: March of 2021 and March of 1933 are quite different.

Unemployment is 6.2% now. Then? An all-time high of 24.9%. Home foreclosures then? At least 1.3% – twice that of the first half of 2020 when the pandemic inflicted its greatest economic impact. And in early March of 1933 just before FDR signed the first bill launching the New Deal package, GDP had plummeted 12.9% from the previous year. In contrast, the GDP had fallen 3.5% before Biden signed the American Rescue Plan Act.

If President Biden insists on comparing the current economic situation to the Great Depression, he should also consider what FDR learned from massively expanding social services. In that same 1935 address, his mind was made up: “The Federal Government must and shall quit this business of relief.”

Unfortunately, there is no such intention in the current legislation: $390 million is designated toward outreach and innovation of the WIC welfare program through 2024, $25 million is designated to improve food stamp (SNAP) technology through 2026, $21.6 billion toward rental assistance will remain available until 2027, and $5 billion in Emergency Housing Vouchers will be around until 2030.

The greatest problem, though, with sweeping rescue-rhetoric legislation is that it shifts our attention toward a paternalistic federal government, rather than creative local solutions, our family members who need support or who can lend it, and to our neighbors in need.

A more apt name for HR 1319 might be “The American Civil Society Disruption Act.”

For more than two decades, I’ve witnessed how government programs intended to address social ills instead crowd out the private efforts of civil society and disrupt the natural, relational ties vital for families and communities to flourish.

Section 1107 of HR 1319 will reimburse shelters for the meals they serve children, but it will also crowd out private donors and volunteers whose service will seem less necessary. Section 1104 that expands government food commodity by $37,000,000 but ties the hands of organizations to a no-questions-asked mode of charity, will reduce the need for people to come through local food banks that offer more than a hand-out. I also know from experience the penalty associated with unused Emergency Housing Vouchers (section 3202) will tend to motivate local housing agencies to qualify more people as homeless, perversely incentivizing just that–homelessness.

This bill is far beyond a rescue. It’s a gross expansion and entrenchment of the welfare state. To use the word “rescue” is more than a little disingenuous and though many might be sincerely thankful that “help is here,” there’s a lot of hurt that comes with it, too.

Photo Credit: Sonder Quest on Unsplash.

 

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A $15 Minimum Wage Would Hurt Those It’s Meant to Help

 


Nathan Mayo
Director of Member Services
Read more from Nathan

 

 

This article was originally published on CNN Business on February 9, 2021.
The full text can be found here.

 

The fight for the $15 minimum wage is heralded as the way for low-income workers to earn a decent living and possibly lift them out of poverty. This claim sounds reasonable, but it is founded on two unspoken assumptions — that the poor currently work and that they will continue to work once higher minimum wages take effect. Unfortunately, these two assumptions are not the reality.

First, it is not low wages that trap people in poverty; it is utter lack of employment. In 2019, when unemployment was at record lows, 70% of poor adults did not work at all. A mere 10% of the American poor held down a full-time job for a year. Given that 83% of people living in poverty have no disabilities, a significant percentage of the non-workers are able-bodied and still do not work.

Click here to read the full article on CNN Business »

 

As per CNN’s policy, the full article is only available on their site. In addition to that content, here is some additional argumentation that was cut from the final published version:

The Congressional Budget Office projects a “mere” 1.4 million jobs will vaporize from a $15 national minimum wage. However, the CBO assumed that employers are more willing keep their low-skill workers than the Seattle results demonstrated. Their estimate is eight times more optimistic than the real-world results observed in Seattle (for those interested, the CBO assumes an “elasticity of demand” of -0.38, Seattle observed one of -3.0). The CBO’s miscalculation will have a significant impact on low-skilled workers during an already difficult time. If the Seattle observations hold true, we could easily see a reduction of 10-15 million entry-level jobs.

Not only will the poor be excised from the labor force, but they will also have to pay more for their necessities.  Employers in labor-intensive industries will have no choice but to raise prices and pass labor costs along to consumers. Comparing common menu items at Dominos, McDonalds, and Taco Bell in Alabama ($7.25 minimum wage) versus California ($14 minimum), we see that prices in California run about 28% higher. These costs accrue disproportionately to people who buy low-end goods, because high-end restaurants and retailers tend to already pay more than $15 an hour to create excellent customer experiences. People who eat at McDonalds and buy groceries from discount stores will see the greatest change in their budget.

 

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The Equality Act’s Potential Impact on Faith-Based Efforts

 


Jeff Lofting
Director of Education
Read more from Jeff

 

The U.S. House of Representatives passed a “nearly identical” version of the bill referenced below on February 25, 2021. Learn more in this article from The National Law Review.

 

Imagine for a moment this scenario: You’ve finally escaped a traumatic and abusive relationship at the hands of your husband and found refuge in a local faith-based women’s crisis shelter, which is helping you begin the long process of healing.  For the first time you can remember, you feel safe.

One study shows that 92% of homeless mothers have experienced sexual and/or physical abuse.  Because of this reality, shelters implement strict safeguards to protect the emotional and physical well-being of vulnerable individuals who have placed trust in that shelter, and they have had the discretion to do just that. President Biden’s promised resurrection of the Equality Act during his first 100 days, though, endangers that discretion.

Over the past few decades, a rising tide of efforts grew into the Equality Act of 2019, which threatened to permanently handicap faith-based organizations (FBOs) by limiting their freedom in day-to-day decisions.  Although this legislation only passed the Democratic-led House of Representatives in 2019, there is now a greater possibility that a similar bill could be signed into law with one-party control of both the legislative and executive branches.

In section 3 of the Equality Act, an amendment to the language of the CRA would have effectively prohibited sex-specific facilities, such as homeless and women’s crisis shelters, from separating biological males and females.  One can imagine the emotional and physical dangers this might pose to the safety and well-being of residents who have experienced sexual and physical abuse from the opposite sex.  This nine-page list of individuals charged with sex crimes in intimate facilities suggests that similar incidences could occur in shelters (pg. 26).

Anchorage’s Hope Center, a self-described “safe haven…for homeless women,” recently faced an incident in which an inebriated biological male identifying as a female expected a bed for the night. A representative for the shelter stated, “Some of the women have said to the shelter, if you allow biological men to sleep right next to us at night, to disrobe and change right next to us at night, we’ll brave the cold.” The Hope Center explained that “it would rather close than deviate from its religious views and its mission to serve vulnerable women.”

A quick glance into the history of social work, philanthropy, medicine, and education reveals that faith communities have been the primary providers of assistance and aid to marginalized populations—the sick, poor, enslaved, and the refugee. The love that drives these humanitarian efforts is rooted in a deeply held faith, one which places a moral imperative on caring for those in need and affirming the inherent worth and dignity of every individual.

While the policymakers responsible for the Equality Act likely have good intentions, the unintended consequences of the Equality Act threaten not only FBOs but also individuals in need. The underlying faith that drives the work of FBOs will not allow most to violate their deeply held convictions and would likely cause these organizations to cut back or cease operation entirely in their present realm.

Currently, FBOs are a major player in providing social services for the marginalized populations in their communities. A 2017 study by Baylor University involving eleven major cities found that FBOs are responsible for providing, on average, 60% of all emergency shelter beds and lead the way in measuring positive outcomes for those they serve. The study also linked those outcomes to taxpayer savings of $119 million over three years. Not only do private FBOs save Americans money, but they require less of it to accomplish better results than their public counterparts.

Economist James Rolph Edwards further determined that FBOs are far more efficient in utilizing funds, with two-thirds of income directly impacting those in need—government agencies are half as efficient.

Faith-based efforts to care for those in need clearly have immense benefits for the individual and society as a whole.

Those working in charitable efforts, whether faith-based or secular, are not simply cogs in a social assistance machine—they are individuals making significant sacrifices for the opportunity to impact their communities. They do so joyfully, freely exercising their beliefs in the care of those in need.  The aim is not to turn away those in need, but to help the most vulnerable in the most effective way that they know, based on their convictions.  The Equality Act would handicap their ability to do so and may cause those they seek to protect to “brave the cold.”

It is imperative that leaders of faith-based organizations understand the potential implications of similar future legislation, as well as their rights.  We recommend beginning with the following three steps:

  • Make the faith-based aspects of your mission clear.
  • Remove the necessity for government funding in the operation of your organization.
  • Utilize the resources in the “Further Reading” section below to learn more about this issue and the rights of faith-based organizations.

True Charity Initiative can work with you to take the first two steps above.  Consider joining the True Charity Network to learn, connect, and influence public policy to ensure effective charity.

FURTHER READING:

 

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Researchers Gave $5,700 to Homeless People. Misunderstanding Ensued.

 


Nathan Mayo
Director of Member Services

 

 

This article was originally published on RealClearPolicy.com on December 2, 2020.

 

“Researchers gave thousands of dollars to homeless people. The results defied stereotypes.” “Cash transfers help homeless to find stable housing and jobs.” “Trailblazing study gave homeless $7,500 [CAD] – and it worked.” These recent headlines and articles about a new Canadian study are a cringeworthy — and destructive — distortion of reality.

 

At first glance, this unbridled optimism seems to be a reasonable synopsis of the study. Canadian researchers did give $5,700 USD to 50 homeless people and most of the recipients used the cash responsibly. Nearly every news outlet that reported on the New Leaf Project covered the study as proof that we should give more money directly to homeless people; they said we should give cash through charity, government programs, and drop it into Styrofoam cups. Unfortunately, this is a tragic misreading of the facts.

 

The root problem is that the study participants do not resemble the average homeless person on a street corner. Project New Leaf’s website is very forthright: “Project participants were carefully screened for program eligibility to ensure the highest likelihood of success.” This means they selected participants who were adults, newly homeless, citizens or legal residents, and who had low risk of mental health challenges and substance abuse.

 

The magnitude of those screening criteria is lost on those unfamiliar with homelessness. It is comparable to a survey finding that “a majority of registered Democrats voted for Donald Trump in 2020” — but the survey only allowed responses from Democrats who voted for Trump in 2016. So how representative were these study participants of the homeless population?

 

On a single night in 2019, The Department of Housing and Urban Development finds that there were around 568,000 homeless people in the US. Of these, roughly 100k were chronically homeless, and would have been excluded from the study. Add to that exclusion a segment of the population classified as “episodically” homeless. Those approximately 57,000 people are homeless occasionally, but not quite chronically.

 

Of the remaining “transitional” homeless, a factsheet from the US Substance Abuse and Mental Health Services Administration (SAMHSA) informs us that around 30% of them abuse addictive substances (80% of the chronically homeless do). SAMHSA also estimates that around 5% of the transitionally homeless have mental health issues (these issues have affected 60% of the chronically homeless).

 

The actual screening criteria may have been more specific than that, since the New Leaf Project reports that they screened out any who were at risk for those disorders. Depending on how they defined “risk of mental health challenges and substance abuse,” the New Leaf Project screened out between 55% and 90% of all homeless people from participating in their study.

 

The disconnect between findings and perception gets worse. A typical person associates homelessness with panhandling. However, panhandlers are only a fraction of the homeless and are predominately the chronically homeless with addictions that this study did not examine. For example, a 2019 survey of Orlando’s panhandlers found that 92% of them were substance abusers. Most freely admitted to using their “earnings” on drugs and alcohol. An earlier study in Toronto found nearly identical results; 87% reported drug and alcohol use and the median self-reported spending on drugs, alcohol, and tobacco was greater than their spending on food.

 

The New Leaf Project showed potential for giving cash to a small, stable, and high-capacity tier of the homeless. There is nothing wrong with the fact that they only tested a solution on a subset of the homeless population — situations and solutions vary from person to person. Cash transfers may work for someone in a temporary crisis and may harm someone with a chronic addiction, destructive habits, or a mental disorder. Effective charity should offer different solutions for different situations.

 

However, that means that the findings of the New Leaf Project offer a policy option for a tiny fraction of the homeless. Thus, the study has essentially no application to the people you see on the street corner with a cardboard sign. Nine out of ten of those people will continue in their addictions, until passersby stop enabling them and start connecting them with the real help they need.

 

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Subsidizing Isolation: Unintended Consequences of the FCC’s ‘Lifeline’ Program

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This article was also published on RealClearPolicy.com on December 7, 2020.

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I was reminded of the lost art of “truth in love” recently while volunteering with Watered Gardens Ministries’ overnight shelter. As I listened to a homeless man confidently share about the quality of his romantic relationship, I noticed some red flags. So, I asked him a tough question: I asked him how he knew their relationship was as healthy as he said.

Immediately, his eyes glazed over and, wordlessly, he pulled his phone out and began scrolling absentmindedly. He ignored my presence and left my question hanging in the air, unanswered. It made him uncomfortable, so he dodged it—and his smartphone made it easy.

Jobless and staying at a homeless shelter, how could he afford such a phone? It looked a lot like mine: a touchscreen that clearly came with data as he scrolled through social media. A cursory glance over the shelter dining area revealed that he was not the exception; many residents stared listlessly at their own screens.

That man and other shelter residents can have smartphones courtesy of a government program called Lifeline. The Federal Communications Commission (FCC) implemented the Lifeline program in 1984 to help low-income households with what was deemed an essential service: phone access. It originally covered a small portion of low-income residents’ landline phone bills. But, over time, the program ballooned, with greater benefits for an ever-increasing number of people—now, many low-income people qualify for free smart phones with free or very cheap service plans, complete with unlimited talk and text and free data. The government imposes a tax on phone companies to pay for the program. The phone companies then pass the expense off to their customers via the Universal Service Fund, an additional charge on every conventional customer’s phone bill.

That night, I spoke with two other residents interested in joining the Forge, Watered Gardens’ long-term men’s program. I encouraged them to join—what could be better for these men than a program that promoted virtue, work, and self-sufficiency? But both expressed trepidation, which I pressed them on: Why choose the path of chronic homelessness over the path out of poverty? Both men cited the same reason: “I couldn’t give up my cell phone.” Participants in the Forge program are asked to give up their phone for six months to enable a distraction-free environment.

That evening at the shelter, I kept thinking: unintended consequences. On the surface, Lifeline seems to be a good and even necessary program. What could be wrong with providing low-income citizens with means to call about job opportunities, schedule doctor appointments, and stay connected to family?  But the insidious problem lies in the risk of addiction and its concomitant issues.

Phone addiction is not limited to the poor. A 2015 study in the Journal of Behavioral Addictions discovered a significant correlation between the extent of smart phone use and depression among university students. However, the negative effects appear to accrue disproportionately to those at the bottom of the socioeconomic scale. Other studies link heavy phone usage with anxiety, depression, and social isolation, maladies which already disproportionately affect the poor. Robert Putnam, in his ground-breaking book Bowling Alone, indicates that social isolation is especially harmful to the economically disadvantaged; conversely, strong social connections, particularly outside an impoverished person’s socioeconomic tier, are invaluable in their potential to leverage him or her out of poverty. Indeed, the poor have the most acute need for the benefits afforded by a variety of real social connections, including better work opportunities, a sense of community and belonging, and an improved outlook on life—and significant evidence shows smartphones inhibit our ability to make these vital connections.  Is it compassionate to provide a device that’s strongly linked with depression and social isolation to a group that’s particularly vulnerable to those afflictions?

Such research, and experience, indicates that free cell phones harm the homeless more than help them. If Lifeline is going to spend over 20 billion dollars in less than 20 years on subsidized phone service to the poor, perhaps the burden of proof that the program is both necessary and effective is on them. If they can deliver service to 7.5 million people, surely they can afford to run a small randomized controlled trial to determine whether the program is a line pulling people out of poverty or an anchor dragging them beneath the waves.

The Lifeline program is a sobering reminder of what seasoned poverty fighters know well: well-intended interventions don’t always have the hoped-for result. That which was intended to release the poor from unemployment and isolation may be fostering them. The devices’ ensnaring effect was evident: mastered by their phones, the homeless residents were like automatons, drifting through days, lulled into missing a vibrant and opportunity-filled life, victimized by unexamined good intentions and their unintended consequences.

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Where Did All the Poor People Go?

 


Nathan Mayo
Director of Member Services

 

 

“We normally see 30 to 40 clients a day,” said the manager of a Joplin, Missouri food pantry. “Since the pandemic, we’ve seen a sharp decrease in number of clients, sometimes as few as four a day.”

This is not what I expected to hear when I visited this food pantry to learn about their programs. But their experience is not an anomaly. From my conversations with other poverty-fighting organizations in southwest Missouri, some report a 50% or greater decrease in clients, which is particularly puzzling given that national unemployment rate has vaulted over 11%.

Many of these missing clients are chronically poor and suffer from a host of other hardships such as mental health problems, social isolation, abusive relationships, limited education, and financial illiteracy. Compassionate nonprofit staff and volunteers draw clients in by meeting their immediate needs and then engage them about their deeper issues. They leverage relationship and accountability to gradually move people from vicious cycles to virtuous ones. This development is tough, but the results are well worth the effort. So where did these clients go?

The nonprofit leaders shared with me the answer that I should have known already. I have personally received two large boxes of free food to my home, dropped off by a neighbor, who got them from a distribution center. My wife and I explained to her that while we appreciated the gesture, we were not in any financial need.

My neighbor insisted that she had to get rid of it. She likely received the food from the U.S. Department of Agriculture’s $19 billion COVID response program which purchases and distributes food for free through private foodbanks and also provides crop price support. This program was implemented in addition to the other means-tested food security programs that America already pays $68 billion a year to operate. Typical SNAP benefits (food stamps) have also temporarily increased by 40%. Add to these programs stimulus checks and expanded unemployment benefits— which are currently so generous that 68% of Americans are receiving more income from unemployment benefits than they ever were when they were employed.

While development-oriented nonprofits witness a decrease in clients, some nonprofits and churches have chosen to adjust to the truckloads of perishable USDA-supplied food by giving it out with no questions. It is now common practice to distribute food to people in their vehicles with no interaction to determine whether they need the food or whether they have deeper needs. At least some of that food ends up with people like me, who did not need it at all. 

Some of it does end up with the chronically poor, it is often to their detriment as it draws them away from food banks with case workers who know them and can challenge them. Anonymously walking up to a truck is easier than answering questions about your GED classes or alcohol dependency. Some pantries see an increase in demand because they have gone to extreme lengths to unload the gargantuan piles of USDA food. Other charities who remain focused on ensuring that food is going to the right people, and that the non-food needs of the chronically poor are addressed are watching their ample stock of cans collect dust.

That is where the poor people went. Indiscriminate assistance has diverted many of them away from holistic, development-oriented nonprofits and enticed them instead with help that fails to incorporate any element of challenge. This geyser of well-intended but poorly-directed aid has real consequences. Among those who work with the chronically poor, stories abound of financially illiterate people spending pandemic relief benefits on down payments for vehicles they will not be able to afford in a few months. One student who entered a local long-term rehab program admitted that his stimulus check had inspired a spending spree and a relapse of alcoholism. Indiscriminate relief is crowding out true development. The poor suffer in the end, and we can do better.

This harm is not a necessary side effect of pandemic relief. There are numerous ways to provide focused aid that will not sever the chronically poor from their social sector allies. For economic stimulation, payroll tax holidays are better tailored than stimulus checks, because they encourage work and do not result in windfalls to people with limited ability to use that windfall wisely. For unemployment benefits, standard benefits are already targeted to allow people ample time to find a new job, while giving them motivation to be serious about that hunt.

Massive food distribution is simply unnecessary. We already have both public and private food assistance programs for the poor with visibly unused capacity. Furthermore, if the government did not buy up excess produce, prices would likely fall in line with the rest of the falling world food prices, such that the average American family could save $20 to $80 a month on food costs, and fewer of them would be food insecure in the first place.

There are millions of Americans who struggled with poverty before the pandemic and who will struggle with it after it ends. Unfortunately, our national fervor to “do something” is undermining the efforts of skillful nonprofits dedicated to the long-term success of impoverished Americans. Those Americans need more than a handout; they need to know someone who cares.

 

Nathan Mayo is Director of Member Services for True Charity Initiative. This article was originally published in the Washington Examiner on August 6, 2020. For an example of an alternative method employed by Watered Gardens Ministries, a True Charity-certified organization, visit this link.

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Why Should Government Mandate What We Can Do Ourselves?

 


James Whitford
Executive Director

 

Versions of this article were also published by The Federalist and The Joplin Globe.

Face masks are “all we’ve got right now to fight this virus, and it is up to each one of us to do our part,” Kansas Gov. Laura Kelly told reporters last week. Kelly signed an executive order last Thursday requiring all Kansans to wear masks when in public spaces. The best Kelly’s got, though, might not be best for every Kansan.

A 2015 randomized controlled study published in the British Medical Journal evaluated 1607 health care workers throughout 14 hospitals. It revealed the continuous use of cloth masks increased respiratory infection rates, with the type of mask and length of wear as relevant factors. Regardless of the efficacy of masks, however, should a governor or any government authority have the power to cover your mouth?

Government tends to grow during crises, and as Robert Higgs from the Independent Institute points out in his book “Crisis and Leviathan,” that growth begins with an expansion of power. From labor disputes and riots in 1886 that propelled public support for expanded federal power to regulate industry, to the 9/11 tragedy that gave way to the Patriot Act growing the government’s power to surveil Americans, crises have historically served as the perfect matrix for government to swell its power and reach into our personal lives.

The common denominator is public fear. In 1886, it was fear of railroad companies growing too powerful or labor strikes stopping their delivery of supplies. In 2001, it was fear that neighbors might be terrorists. In both cases, fear inspired public opinion that government should step in. Fear might be justified in some circumstances, and perhaps the Wuhan virus pandemic is one of them, but to the extent that fear pries open our hands to let loose of personal freedom, it also subjects those hands to be tied by tyranny.

It’s not just the Kansas governor. Attorney General William Barr recently created a task force to investigate anti-government extremists after certain groups instigated violence following the death of George Floyd.

In Barr’s June 26 memo, he wrote, “The task force will develop detailed information about violent anti-government extremist individuals, networks and movements — and will share that information as appropriate with federal, state and local law enforcement.” He added, “The ultimate goal of the task force will be … to understand these groups well enough that we can stop such violence before it occurs and ultimately eliminate it as a threat.”

A free society cannot flourish without just rule of law, but when the government starts spending resources on investigating “anti-government” American citizens deemed “extremists” to stop crime “before it occurs,” one should at least raise an eyebrow. Fear of riots and radical groups such as Antifa shouldn’t drive our support for government expansion or increased supervision. It might be Antifa today, but it could be you tomorrow.

Consider these words from our own Declaration of Independence: “[W]henever any form of government becomes destructive of [our unalienable rights], it is the right of the people to alter or abolish it.” We’ve entered a dangerous time if speaking those words places you on a government watch-list.

Higgs describes the ratcheting effect of government growth. It starts with a crisis justifying expanded power, which requires resources to exercise it — another upward click in the ratchet of non-retractable government growth. No matter the reassurance or motivational tenor that accompanies the rally cry of “safety,” we should remember that no one feels safe when he’s handcuffed, nor should he, even if only under the threat of such arrest.

Kelly got the second part right, though: “[I]t is up to each one of us to do our part.” It’s not up to President Donald Trump and Dr. Anthony Fauci to do our part in remaining vigilant and informed. It’s not up to Congress to do our part in stimulating our economy. And it’s not up to a governor to ensure we wear masks.

It’s up to each of us to care about others enough to wash our hands, stay home when we’re sick, support those who feel they need to shelter in place, educate people in our circles of influence, and wear masks as a precautionary measure. Government mask enforcement isn’t “all we’ve got right now to fight this virus.”

Consider the greater weapons of conscientiousness, courtesy, kindness, and charity. I choose to fight with those, and I’m not alone. I know volunteers who have delivered meals to the elderly, others who’ve traveled and then responsibly self-quarantined, and many who have gladly worn masks in our mission while preparing meals for the homeless.

Before the government steps in to protect us from each other, let’s exercise real compassion and neighborly concern — and do it ourselves. This love for others won’t just prevent the spread of a virus. It will preserve our liberty.

James and his wife, Marsha, founded Watered Gardens Ministries in Joplin, Missouri, in 2000, now a 105-bed mission working with the homeless and poor. He currently serves as the mission’s executive director. James also founded the True Charity Initiative in 2012 to champion a movement of privately funded effective charity at the most local level.

 

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