My View: Indiana policies hurt middle-class growth
November 15, 2012
By: Derek Thomas
At the Indiana Institute for Working Families — a nonprofit and nonpartisan policy institute — we are increasingly concerned about the growing number of Hoosiers in poverty. Our work centers on data-driven research to promote policies that help Hoosiers achieve and maintain economic self-sufficiency — the ability to care for their families without government support.
Our most recent report, “The Cliff Effect: One Step Forward, Two Steps Back,” examines specific policy designs in Indiana that are instead acting as a barrier toward economic mobility. This phenomenon occurs when even a 50-cent increase in hourly wages leads to the complete termination of a benefit.
For example, in Marion County, a single mother of two children who earns a raise from $15 per hour to $15.50 immediately loses nearly $8,500 in child care subsidies, a significant amount of her annual resources. The choice now becomes whether to remain working or stay home with the children. With child care costs in Indiana ranking as the 10th highest in the nation as a percentage of income, the latter is often the most economical. Tens of thousands of Hoosier families are facing similar decisions.
Indiana could end this barrier to work by reforming our system so that a parent in that situation would retain some work supports, such as child care benefits, until that parent could support his or her household independently. More efficient programs would provide a smoother, more gradual transition and provide the most basic incentive for hard work — a raise that increases net resources. Freeing up access to quality child care will also provide a large number of parents or guardians an immediate avenue to the workforce.