How Big Government Policies Are Hurting the Poor

Scholars at the Heritage Foundation, a free-market think tank, have unveiled more than two-dozen intrusive, costly and unnecessary government policies that are hurting the poor and the most vulnerable.

The findings come as the poverty rate in the United States continues to rise, or remains unchanged, among minority children, and economic uneasiness persists even as the unemployment rate is declining and the stock market is booming.

Countering the prevailing wisdom that more government policies are a sign of a generous and caring society, a team of Heritage researchers posit that government regulations and burdensome laws are actually preventing the poor from getting ahead. The findings include “numerous policies that create artificial and unnecessary obstacles for the poor when it comes to obtaining the jobs that could lift them out of poverty.”

government regulations and burdensome laws are actually preventing the poor from getting ahead.

Among the state and federal policies that are inhibiting low-income Americans to enter, or prosper in the workforce include the increase in occupational licensing, which are typically state regulations that require licenses to work in certain industries.

In 16 states, cosmetology licenses require nearly 2,100 hours of training on top of fees and taxes. These regulations are particularly burdensome on the poor. “Hair braiding is an occupation that has few startup costs…. making it easier for the poor to undertake,” the study notes.

In 16 states, cosmetology licenses require nearly 2,100 hours of training on top of fees and taxes. These regulations are particularly burdensome on the poor. “Hair braiding is an occupation that has few startup costs…. making it easier for the poor to undertake”

For example, Washington, D.C. became one of the first major cities requiring childcare workers to have college degrees. In practical terms this will prevent a large number of individuals from joining the workforce because of this new requirement. Shoshana Weissmann recently took to these pages to write: “Child-care workers must now take time — possibly time they would normally spend working and earning money — to earn these degrees.”

Thankfully a number of policymakers are stepping up in the wake of increased occupational licensing requirements, including Governor Doug Ducey (R-Ariz.), who recently overruled the state’s cosmetology board in order to allow a young man give out free haircuts to the homeless population in Phoenix.

But there are other types of regulations that may be less obvious to the general public, and yet have an equally corrosive effect on low-income Americans.

Take sugar subsidies, for example. By limiting the supply of sugar sold in the United States, federal policy is distorting the market and helping to pass on a hidden tax on consumers. Again, policies like this hurt the poor the most because the upper middle class and the wealthy are able to absorb higher costs for groceries than the poor.

By limiting the supply of sugar sold in the United States, federal policy is distorting the market and helping to pass on a hidden tax on consumers.

“The lowest-income households spend a greater share of their after-tax income on food (33.0 percent) than other households, including the highest income households (8.7 percent),” explain the experts.

Also among these hidden consumption taxes include “soda taxes” that are gaining support in some parts of the country as a way of discouraging sugary soft drink consumption. But here, too, research finds that the poor are hit the hardest and individuals will generally find a way to indulge even with government regulations.

The Heritage study is sure to find detractors, particularly when arguing against raising the minimum wage in order to bridge the socioeconomic divide. But according to the scholars, minimum wage hikes are job killers. They point to projections that estimate that minimum wage increases in New York and California will result in the loss of hundreds of thousands of jobs, especially entry-level positions that let younger workers and immigrants gain valuable work experience to move up the socioeconomic ladder.

Report co-author Darren Bakst, a research fellow in agricultural policy at Heritage, said he is feeling optimistic that the new Republican administration and the GOP-controlled Congress will consider repealing some of these unnecessary laws, but added that many of the regulations hampering the poor are at the state and local level.

“The rise in occupational licensing means that states can play a major role in helping the poor,” Bakst told Opportunity Lives.

The complete report can be found here.

Israel Ortega is a Senior Writer for Opportunity Lives. You can follow him on Twitter: @IzzyOrtega.