12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page i OLD ASSUMPTIONS, NEW REALITIES 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page ii The Russell Sage Foundation The Russell Sage Foundation, one of the oldest of America’s general purpose foundations, was established in 1907 by Mrs. Margaret Olivia Sage for “the improvement of social and living conditions in the United States.” The Foundation seeks to fulfill this mandate by fos- tering the development and dissemination of knowledge about the country’s political, social, and economic problems. While the Foundation endeavors to assure the accuracy and objec- tivity of each book it publishes, the conclusions and interpretations in Russell Sage Foundation publications are those of the authors and not of the Foundation, its Trustees, or its staff. Publication by Russell Sage, therefore, does not imply Foundation endorsement. BOARD OF TRUSTEES Mary C. Waters, Chair Kenneth D. Brody Kathleen Hall Jamieson Shelley E. Taylor W. Bowman Cutter, III Lawrence F. Katz Richard H. Thaler Robert E. Denham, Esq. Melvin J. Konner Eric Wanner John A. Ferejohn Sara S. McLanahan Larry V. Hedges Nancy Rosenblum Library of Congress Cataloging-in-Publication Data Old assumptions, new realities : economic security for working families in the 21st century / Robert D. Plotnick ... [et al.]. p. cm. Includes bibliographical references and index. ISBN 978-0-87154-677-7 (alk. paper) 1. Working poor—United States. 2. Social security—United States. 3. United States—Social policy—21st century. I. Plotnick, Robert D. HD4901.O56 2010 331.5'4—dc22 2010025153 Copyright © 2011 by Russell Sage Foundation. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval sys- tem, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Reproduction by the United States Government in whole or in part is permitted for any purpose. The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials. ANSI Z39.48-1992. Text design by Suzanne Nichols. RUSSELL SAGE FOUNDATION 112 East 64th Street, New York, New York 10065 10 9 8 7 6 5 4 3 2 1 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page iii OLD ASSUMPTIONS, NEW REALITIES ECONOMIC SECURITY FOR WORKING FAMILIES IN THE 21ST CENTURY ROBERT D. PLOTNICK MARCIA K. MEYERS JENNIFER ROMICH STEVEN RATHGEB SMITH EDITORS A West Coast Poverty Center Volume RUSSELL SAGE FOUNDATION • NEW YORK 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page iv 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page v CONTENTS Contributors vii Acknowledgments ix Preface xi Chapter 1 Old Assumptions, New Realities 1 Marcia K. Meyers, Robert D. Plotnick, and Jennifer Romich Part I Policies to Increase Economic Security in the Twenty-First Century 29 Chapter 2 Working Families at Risk: Understanding and Confronting the New Economic Insecurity 31 Jacob S. Hacker Chapter 3 Workforce Development and Public Policy: Addressing New Realities in Low-Skill Labor Markets 71 Michael A. Stoll Chapter 4 Creating Opportunity at the Bottom: The Role of Skill Development and Firm-Level Policies in Improving Outcomes for Low-Wage Employees 103 Paul Osterman Chapter 5 Asset-Based Policies and Financial Services: Toward Fairness and Inclusion 125 Michael Sherraden 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page vi vi Contents Chapter 6 Ensuring That Americans Can Succeed at Home and at Work in a Global Economy 150 Jody Heymann and Alison Earle Part II The New Realities of Delivering Safety-Net Programs 185 Chapter 7 Nonprofit Helping Hands for the Working Poor: New Realities and Challenges for Today’s Safety Net 187 Scott W. Allard Chapter 8 Reconstituting the Safety Net: New Principles and Design Elements to Better Support Low-Income Workers 214 Jodi R. Sandfort Index 243 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page vii CONTRIBUTORS MARCIA K. MEYERS is professor of social work and public affairs and associate dean for academic affairs at the School of Social Work, University of Washington, and director of the university’s West Coast Poverty Center. ROBERT D. PLOTNICK is professor of public affairs at the Evans School of Public Affairs and affiliate of the West Coast Poverty Center at the University of Washington. JENNIFER ROMICH is associate professor of social work and associate director of the West Coast Poverty Center at the University of Washington. STEVEN RATHGEB SMITH is professor of public policy and the Waldemur A. Nielsen Chair in Philanthropy at the Georgetown University. SCOTT W. ALLARD is associate professor at the School of Social Service Administration at the University of Chicago. ALISON EARLE is principal research scientist at the Institute for Urban Health Research at Northeastern University and co-director of the Project on Global Working Families. JACOB S. HACKER is Stanley B. Resor Professor of Political Science and resident fellow at Yale University’s Institution for Social and Policy Studies. 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page viii viii Contributors JODY HEYMANN is founding director of the Institute for Health and Social Policy and the Project on Global Working Families and holds a Canada Research Chair in Global Health and Social Policy at McGill University. PAUL OSTERMAN is professor of human resources and management at the Sloan School of Management at Massachusetts Institute of Technology. JODI R. SANDFORT is associate professor and chair of the leadership and management area at the Hubert H. Humphrey School of Public Affairs at the University of Minnesota. MICHAEL SHERRADEN is the Benjamin E. Youngdahl Professor of Social Development at the George Warren Brown School of Social Work at Washington University in St. Louis, and the founder and director of the Center for Social Development at Washington University. MICHAEL A. STOLL is professor and chair of the Department of Public Policy in the School of Public Affairs at the University of California– Los Angeles. 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page ix ACKNOWLEDGMENTS The chapters in Old Assumptions, New Realities were initially presented at a conference co-hosted by the West Coast Poverty Center and the Nancy Bell Evans Center on Nonprofits and Philanthropy at the University of Washington in September 2008. The authors have revised the chapters to reflect comments from conference participants, two anonymous review- ers, and the editors, as well as the economic and policy changes that have taken place since the fall of 2008. The West Coast Poverty Center and the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services sponsored the conference, with additional support from the Russell Sage Foundation and the Seattle Foundation. We would like to acknowl- edge the support and sound advice of David Harrison, Michael Brown, and Caroline Maillard of the Seattle Foundation and Suzanne Nichols, director of publications, and Aixa Cintron-Velez, senior program officer of the Russell Sage Foundation. The West Coast Poverty Center’s program direc- tor Rachel Lodge, program coordinator Denise Novotny, and research assistants Bethanne Barnes and Shannon Harper provided invaluable logis- tical support for the conference and subsequent preparation of this volume. Ms. Harper also developed the figures in chapter 1. The views expressed in this book are those of the chapter authors and should not be construed as representing the official position or policy of any sponsoring institution, agency, or foundation. 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page x 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page xi PREFACE In early 2007, as we began developing the conceptual framework that led to a conference and this volume, housing prices were starting to plunge and there was some foreshadowing of the economic downturn to come. But the economy overall was still growing, and key economic indicators such as employment, the unemployment rate, and stock prices gave little cause for concern. By the 2008 conference and into 2009, public debate had turned to whether the country was facing a recession or a worldwide depression paralleling that of the 1930s, the economic cataclysm that gave rise to the foundation of the U.S. welfare state, the Social Security Act of 1935. As this book goes to press, economic recovery is slowly under way, although unemployment remains high and consumer confidence low relative to much of the past few decades. The federal bailout of General Motors focused attention on the remains and future of the American manufac- turing sector, as unemployed autoworkers compete with other out-of- work Americans for scarce jobs. Consumer spending is still depressed, more Americans than ever before rely on federal assistance to buy food, and many families with jobless workers are struggling to get by. Millions are reeling as housing values have plummeted; many have lost their homes entirely. These circumstances highlight the extent to which citizens’ well- being and the health of the economy as a whole are intertwined. The United States’ demographic, economic, social, and policy realities have changed enormously since Congress enacted the Social Security Act seventy-five years ago. Contemporary realities are often at odds with the old assumptions about economic and social arrangements that motivated passage of the act and subsequent expansions of the American welfare state. This gap between old assumptions and new realities may be a fun- damental reason why current policies have not kept up with the changes 12283-00_FM_rev3.qxd 10/21/10 3:27 PM Page xii xii Preface in the economic and social structure and, as a result, are failing to assure the economic security of many working-age adults and their children.