Who is Struggling in Oregon’s Economy, Why, and What We Can Do about It

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Hundreds of thousands of Oregonians work each week but still live in poverty. Tens of thousands of other Oregonians can’t work – so they are often stuck in poverty too. The best way to lower Oregon’s hunger and poverty rate and improve lives for kids and families is to make sure that everyone that is working, and can work, has a job that allows them to support themselves and their family. Our proposals in this series have focused on just that: making work pay.

When you focus poverty reduction plans on the people that can’t work, or you assume that people are trying not to work, you end up with goals that won’t address our underlying problems. When you focus on making work pay for the people that can and want to work, it’s easier to develop solutions for Oregon’s economy. This difference in focus between those that can work and those that can’t is the source for the differences in policy recommendations from our Better Oregon Plan and the Oregon Business Plan’s Path to Prosperity report. Another difference is the scope of policy recommendations: the Oregon Business Plan focuses on interventions for individuals and pilot programs, our approach attempts population level solutions under the assumption that we need to find policies that will help every Oregonian. While programs for individuals can provide a boost to some people living in poverty, they won’t change the underlying conditions that are keeping Oregon families struggling.

In today’s post, we discuss the differences between population level and pilot project approaches, and why large-scale population level change is the most efficient and effective way to improve Oregon’s economy and help working people.

Many people are still living in poverty even though they work hard

Path to Prosperity highlights two groups of people who use safety net programs: “adults who can’t work, as well as the elderly and those with severe physical and mental disabilities”; and “larger populations who may be capable of work in the short run but cannot find it.” (p. 13) The sad truth is that there is a third group of families in poverty – hundreds of thousands of adults in Oregon who are working but still need public assistance. In fact, among the 494,707 Oregon adults receiving food assistance benefits in January 2014, about 195,000 (39%) worked the previous year, with many working multiple jobs. However, those workers averaged only 910 hours of work at $12.36/hour, not nearly enough to support a family. (Oregon Health Authority/Department of Human Services, 2014 High Poverty Hotspots Report and supplemental data)

The real challenge is that people are working full time or more than full time, but they are not earning enough to make ends meet. The companies that pay these low wages should be more responsible for the community burden they create – but they’re not. Right now, not only are these hard working Oregonians underpaid, our Oregon taxes must subsidize these low wage workers while major out-of-state companies profit. For instance, Wal-Mart reported $16 billion in profits last year, while receiving an estimated $6.2 billion in taxpayer subsidies for their low wage employees. Nationally, public assistance to fast food workers costs $7 billion a year. This is a vicious cycle. When low-wage workers must turn to the community to help, that creates a burden on social services. With great need and limited resources, important programs are starved. That hurts the entire community because with fewer state resources for core state services, class sizes get bigger, tuition skyrockets, families lose health care, and much more.

The best way to end the cycle is to make sure working Oregonians are paid enough to support their families. When budgets are tight and families have trouble meeting basic costs for food, clothes and housing, there’s little left to spend on anything else. When working families earn more, they spend more in their communities, putting more people to work and strengthening the economy. Recently, Standard and Poor’s reported that income inequality related to stagnant wages is limiting economic growth.

Identifying and fixing underlying causes of poverty in Oregon will have a greater long-term impact than targeting intensive aid efforts at Oregon’s poorest families. A population level approach is in contrast to the individualized approaches discussed by Path to Prosperity and others which focus on the differences between individual people living in poverty.. Their analysis is based on the notion that “Reducing poverty starts by untangling the different groups of people in poverty and addressing the needs of each.”(p.3) Unfortunately, the one by one approach just can’t help enough people to make a difference for all of Oregon’s economy.

Though poverty affects communities differently, the root causes of poverty are consistent across the state.

• U.S. based companies have moved millions of middle-wage American jobs to foreign countries where labor is cheaper and regulations to protect worker safety and the environment are not as strong. Between 1999 and 2009, U.S.-based multinational companies cut their U.S. labor force by 2.9 million people while creating 2.4 million jobs in other countries.

• While millions of good jobs were outsourced, many of the new jobs created since the recession hit pay only low wages or are part-time only. Most Oregonians have seen their wages decline over time; between 2002 and 2013 real wages decreased for over half of Oregon’s workers. In addition, since the recession hit in 2008 a greater share of workers have been unable to find full-time work. About one quarter of the part-time workers in Oregon were part-time for economic reasons, meaning the workers wanted to work more hours, but they were not made available by their employer. 

• Disinvestments in education mean too many Oregon students are not being adequately prepared to succeed once they leave school. Education funding in Oregon has not kept up with population growth, and recession-related budget cuts hit schools the hardest. Between the 2007-08 and 2013-14 school years, Oregon public schools lost nearly 5,300 full time equivalent (FTE) positions. The biggest cuts were in the classroom: 3,386 FTE teachers and 1,176 FTE instructional assistants, (equivalent to 1 in 9 of those jobs lost).  Oregon is now 49th among the states in student:teacher ratio, which translates to larger class sizes where students don’t learn as well. Oregon also has short school years—between grades 1 and 12 Oregon students receive a full year less instruction than the national average. This puts graduates of Oregon schools at a big disadvantage. While most higher-paying jobs require advanced education, fewer than half of Oregon high school graduates in 2010 went directly to college (compared to the U.S. average of 62.5%).

• Investing in education and putting people back to work costs money. Oregon has not had sufficient resources to make these investments because big corporations are not paying their fair share. This tax avoidance is self-defeating, as investments in education, infrastructure and public services are good for business. Oregon is in last place among the states for business taxes, and would need to raise billions of dollars more each year just to get up to the national average.

Calculations based on Occupational Employment Survey data from the Bureau of Labor Statistics

While the complex challenges of poverty certainly require a multi-faceted approach, population-level interventions are almost always more successful than those that target intensive efforts at high-risk groups. Pilot projects can show small short-term results, but they are often difficult to implement and expensive to maintain. While targeted resource-intensive programs can help some people for a short period of time, scaling up those efforts statewide is costly and unlikely to achieve desired statewide results.

For an example of a resource intensive targeted approach, consider one of the policy options proposed by the Oregon Business Plan: offering financial incentives for schools that graduate a lot of students with technical certificates. Technical training programs are expensive, so incentives would have to be large for schools to break even without diverting funds from other classrooms. Without additional funding few schools would stand to receive any of these incentives, which may end up going to schools that already have successful programs and not the schools in impoverished districts that need the help more. This proposal is not likely to change the number of students that have access to Career Technical Education.

In contrast to a program by program approach, acting on upstream factors has proven successful. For example, in public health over the 20th century, public health interventions have added 25 years to the life expectancy of people born in the United States. Efforts to reduce smoking are a good example. Smoking rates are much higher among people with lower incomes; in fact, higher smoking rates are one of the major drivers of lower life expectancies for low-income individuals. A health promotion strategy that addressed the cessation needs of each low-income smoker would be extremely expensive to implement statewide, and would not actually be the most effective strategy to achieve long-term change. One-on-one interventions cost a lot of money so we can’t afford to deliver many of them, and when the money runs out (which it always does) we won’t be any better off than before since other people will have started smoking in the meantime. Instead of focusing on an intervention for the few worst off, a population-level approach, such as raising tobacco taxes, achieves a greater impact on a larger number of people. Raising tax rates reliably lower consumption among all smokers, but has the biggest effect on low-income smokers. Higher tobacco taxes also discourage kids from starting to smoke, Furthermore, instead of costing money, this approach actually brings in more revenue, which can be used to fund additional programs or offset health care costs.

There are a number of policies that can reduce poverty at the population level that we’ve discussed before – a combination of these approaches can help all working families and will not take years to develop or rely on unstable pilot project funding to implement.

Raise the minimum wage. Minimum wage jobs aren’t just for teenagers—many working adults make the minimum wage or not much more. The erosion of wages in Oregon has hurt our economy and slowed the recovery from the recession. To improve Oregon’s economy for all we need to raise wages. Oregon should start by phasing in a significant minimum wage increase, to bring the minimum wage up to a living wage. As time goes on we should strive to create jobs and set standards that allow families to support themselves.

Invest in education. Oregon needs to make new investments in education and services to ensure the economy grows in the years ahead. A complete economic plan for Oregon needs to include support and resources for high quality childcare, pre-K, kindergarten through grade 12, community college and four-year colleges.

Fix crumbling infrastructure and restore public services. We all benefit from clean air, safe drinking water, goods roads, and bridges that aren’t in danger of collapse. Corporate executives cite strong transportation infrastructure as a key factor in decisions where to locate businesses. Cuts to state services and delayed maintenance of infrastructure threaten Oregon’s economic future. Besides putting people to work in jobs that can’t be outsourced, these investments will set the stage for a robust economy in the years ahead.

Hold corporations accountable when they take advantage of the safety net.  Profitable corporations like Walmart and McDonald’s maintain a part-time, low wage workforce, boosting corporate profits while paying workers so little they must rely on taxpayer-supported safety net programs to get by. We should make the largest employers profiting off low wages pay a fee to offset the costs of safety net services to make sure their employees can provide for their families.

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