This approach could also be used for SSDI applicants. Applicants denied because they are deemed to have a sufficiently high RFC to take a job elsewhere could be given a lump sum, say 70 percent of two years’ worth of benefits, if they successfully pursue and obtain a job outside their local area. AEI’s Michael Strain proposes a similar idea, relocation subsidies. His plan would give long-term unemployed people in areas with poor labor markets a subsidy that covers most of the cost of moving for work. For those without enough assets to make up the difference, he proposes offering a low-interest loan with generous repayment schedules so asset-poor people can afford to move.
The federal tax code could also be reformed to encourage less-affluent people to move. A refundable credit for moving expenses could be offered in addition to the current deduction. For people without much taxable income, the refundable credit offers them much more money than the traditional deduction. Making it refundable also lets them get money back. Alternatively, one could allow these people to “carry forward” unused credits to apply against future years’ tax liabilities, much as corporations are allowed carry forward losses or unused tax benefits.
The same principles can be applied to losses low-income households might incur upon selling their home. Perhaps they can be given a refundable credit of a certain percentage of their loss if they also move from a job desert to a job garden. Alternatively, they can be given a deduction for the full amount of the loss, plus closing costs incurred in the sale, that can be carried forward to apply against future income from the new job. Either way, these measures would significantly lower the value an existing home might have for a low-asset, low-income household and encourage them to take a risk and move.
These measures would likely be sufficient to encourage some people to move, but the toughest cases face another financial barrier: the difficulty in taking benefits with them. Medicaid, Section 8 housing vouchers, food stamps (SNAP), and a host of other income-support programs are awarded by states even though the programs are wholly or partially funded by the federal government. All of these benefits either require approval of a government agency to move (Section 8) or reapplication for benefits (SNAP) in the person’s new state of residence. In some cases, such as WIC or Section 8, the amount of benefits available in a certain area is capped. If that amount has already been expended or committed, new applicants are placed on waiting lists to receive benefits once money is available. The mere chance that a single mother, for example, might lose her Women, Infants and Children (WIC) assistance or Section 8 voucher is a strong disincentive for her to move.
Medicaid, the most important federal benefit for many low-income families, is a particularly strong barrier to relocation. Medicaid recipients must close out their existing Medicaid account before they are permitted to apply for a new account in their new state. Furthermore, state benefits and eligibility requirements differ significantly across the states. The job garden of Texas, for example, covers fewer services and has much tighter eligibility standards than do most of the states in the Northeast and Midwest.
State and local involvement in and administration of these programs are too ingrained to change, but the federal government might encourage mobility by adopting a version of the Medicaid expansion scheme from the Affordable Care Act. The ACA promised to pay 100 percent of the cost of new enrollees for three years in states that expanded their Medicaid programs to include all people living in households at 138 percent of below of the federal poverty line. The federal government could make a similar promise: it could pay 100 percent of the costs of federally supported but state-awarded benefit programs for up to two years if that person moves to a new state with a vibrant job market to search for work.
Under this plan, the person would be eligible for this guarantee if they registered with the state’s UI office (although they may not be eligible for UI benefits, depending on their recent work history) and complied with all the job search and job-acceptance requirements applicable to that state’s UI population. They would not have to reapply for these benefits until they had been continuously employed at least 20 hours a week for three months. If they obtain that work and remain eligible for some benefits under the new state’s guidelines, the federal 100 percent payment promise would vanish and the normal state funding formula for the benefit in question would apply.
One could argue it is simply cruel to incentivize people to move from places where they may have rich networks of friends and family. One could contend that building systems of these sorts, especially a viable national jobs database, is beyond the scope of federal government competency. One could say that the “all carrots, no sticks” approach proposed herein is too lenient toward program recipients. One could argue that some of the incentives would cost too much or encourage people who really need such assistance to game the system so they qualify.
All of the objections have their merit, but they must be weighed against the simple fact that low-skilled Americans do not move to job-rich environments due to economic pressure. There is a long line of research that shows this, but a recent study by Brian Cadena of the University of Colorado, Boulder, and Brian Kovak of Carnegie Mellon University shows it quite starkly. They found that while native-born Americans with at least some college education moved when jobs disappeared, native-born Americans with only a high-school degree or less did not. According to their paper, “a 10 percentage point decline in local employment from 2006 to 2010 led to a 4.6 percentage point relative decline in the local population, compared with no measurable supply response among less-skilled (high school degree or less) natives.” (Emphasis added). They found nearly identical results when looking at changes in local-level employment in 2000-2006, a period which also included a period of employment loss followed by employment gains.
Tellingly, Cadena and Kovak found that low-skilled Mexican-born workers did move in response to local labor-market downturns. Less-skilled Mexican men, for example, “responded even more strongly than highly skilled natives, with a 10 percentage point larger employment decline driving a 5.7 percentage point decline in population.” While they theorized there were many reasons Mexican-born low-skilled workers were much more economically mobile than similarly skilled men, two potential explanations stand out.
First, “they are less likely to be eligible for Unemployment Insurance (UI) and other social safety net programs,” in part because “[m]ore than half of Mexican-born immigrants are in the US without authorization” and thus are ineligible for these programs. Second, Mexican workers tend to move to communities with significant Mexican-born communities. The authors say these “networks provide information about local labor market conditions and lower moving costs, thereby increasing the probability that a move across labor markets will result in a favorable employment outcome.” Information and incentives drive Mexican-born immigration, while the lack of those two factors keeps similarly skilled native-born people in place, on public assistance and away from the real opportunities American free enterprise creates.
Either political party can make these reforms a priority, but there are particular political factors at play for Republicans. Most Republicans recognize that the party suffers from a long-standing empathy gap. A recent poll found that Americans were five times as likely to say Republicans were not compassionate as those who say it is, as columnist Tim Montgomerie has noted. Indeed, Republican presidential candidate Mitt Romney lost to President Obama by a massive sixty-three-point margin among those Americans who said the most important characteristic for a President is that he “cares about people like me.”
So far, most Republicans efforts to address this perception have done so by offering ideas about helping the poor rise out of poverty. But their solutions tend to be either warmed-over Republican rhetoric (cutting entitlements and taxes will help the economy, which will help the poor) or process-based reforms like Ryan’s and Rubio’s idea for block grants. Not only will the latter proposal likely unintentionally keep people trapped in job deserts, it is also likely to be perceived by benefit recipients as uncompassionate because it takes away a concrete benefit they value, replacing it with only the promise that states will enact programs they value as much.
A twenty-first-century Homestead Act addresses the GOP’s empathy gap. By offering carrots rather than sticks, it shows that Republicans are not heartless ogres whose main purpose is to take things away from needy people. By offering subsidies for moving without providing “pay-fors” up front, it shows that Republicans value people’s lives over other people’s money (while likely saving lots of money in the long term). Most importantly, it shows that the modern GOP is in sync with its roots and with the eternal American ideal that democratic government ought to offer those who need it a hand up in life.