Nearly half of working age Mississippians are not in formal employment – and they aren’t actively looking for employment either. 

At the same time, paradoxically, there are a record number of jobs available.  According to the US Bureau of Labor Statistics, in October last year there were 80,000 unfilled jobs across the state.

Some have suggested that we hire more career counsellors in high schools.  I am certain that career counsellors do a wonderful job, but if that is the only policy solution, I suspect labor force participation will remain low.

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Others talk about more opportunity.  With 80,000 job vacancies right here, right now, it seems to me that there are opportunities to work all around us.  The issue is why some folk aren’t taking the opportunities that are there. 

If we are going to increase workforce participation, we need to ask difficult questions about welfare, and the disincentives welfare creates against work.

Mississippi has a population of 2.95 million.  Approximately one in five (19 percent) live below the poverty line (calculated as the minimum income needed to get by with the bare essentials.)

How the myriad of assistance programs impacts the half a million plus people below the poverty line matters, and needs to be properly understood if we are to improve workforce participation.

Welfare programs can have unintended consequences, and one of them is the creation of so-called ‘benefit cliffs’.  A benefit cliff is what happens when someone loses benefits if their income increases, but the benefits they lose outweigh the additional income gained.

If your income rose above $1,215 a month, you could lose the right to claim Supplemental Nutrition Assistance Program (SNAP).  When your income per person goes over $19,392 a year, you may no longer qualify for Medicaid (although the ‘cliff’ cut-off is not always as abrupt as is sometimes supposed).

Take into account the different benefit cliffs, and you potentially have a powerful range of disincentives.

Even if someone were to be marginally better off by holding down a 35 hour a week job, than they would be by living on assistance programs, the investment in time and effort they would need to make might make them feel it was not worth it. 

Some have suggested that benefits do not create a problem of ‘cliffs’, but of straight forward dependency.  They point out, for example, that those on food stamps are not those hovering on the edge of the labor market, but full-time welfare dependents.