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Earned income tax credit presented in Utah as solution to rising income inequality

SALT LAKE CITY — Rising inequality between the top wage earners in the country and the working poor is a growing issue for economic policy analysts and something governments have attempted to tackle for years.

Michael Strain, a scholar with the American Enterprise Institute, told a room full of Utah economists Thursday that it's a "complicated issue" the public doesn't really know much about.

"There is a general sense in the United States that people are being left behind and that the economy is working for a tiny group of people and it's not working well for more people," he said, adding that the sense may or may not be valid, but "what really matters is how people are feeling."

The Utah economy, measured by job growth, ranks third in the nation. Still, more than 58,000 Utahns remain unemployed and tens of thousands of other working-age adults are working low-paying jobs, as they struggle to find gainful employment.

Strain, who spoke during the University of Utah Kem C. Gardner Policy Institute's inaugural Newsmaker Breakfast at the Thomas S. Monson Center, doesn't think inequality, which exists no matter what the status of the economy, would be an issue if every class was "doing OK."

But in the last nearly a decade, he said, incomes have become stagnant, wage growth has slowed and top wage earners are earning even more.

The labor market, Strain said, is being reshaped by technology and robotics, as well as globalization, and companies are moving facilities overseas to avoid paying higher wages and to save money. Both are having "massive" effects on the economy, he said, including putting downward pressure on low-paying jobs as middle-class jobs are being eliminated.

"I don't think we can stop globalization," he said, adding that local and national leaders should look to mitigate the damage that has been done by companies leaving the U.S., without destroying the good things happening in the economy.

"Education is the key," Strain said. "We need, at all levels, when we educate our youngest children, to make sure we equip people with the skills relevant to the 21st century … that people are graduating high school ready and able to work."

Technically skilled jobs, he said, need more attention as an option to a traditional four-year degree.

Substantially raising the minimum wage, Strain said, would cause problems, even eliminating jobs in the U.S., though the effects of such a policy move cannot be estimated because it is completely unprecedented. Instead, Strain, who spent much of Wednesday talking with Utah lawmakers about the earned income tax credit, said policymakers should look to other initiatives.

The federal government offers an earned income tax credit, essentially a refundable tax credit for low-income working Americans, that was initially introduced in 1975, but has expanded in the years since. At least 26 states offer a similar program, helping the working poor even more.

Strain calls it "the most effective anti-poverty tool that we have at the federal level right now," helping millions of workers out of poverty every year.

He said the policy does two things — supplementing the earnings of low-wage earners as well as incentivizing them to enter the workforce in the first place.

"People are earning their way out of poverty themselves," Strain said. The one downfall, he said, is that it costs money.

Raising the minimum wage, however, doesn't cost state or federal governments money.

If eliminating poverty is a common social goal, as Strain believes it should be, he said "all of society needs to help pay for it, not just the employers of minimum wage workers."

Natalie Gochnour, director at the institute, said Thursday's discussion was intended to "get people talking" about issues that face policymakers. Strain, she said, helped explain how automation and globalization is affecting working families and "what we need to do as a state to lift the working poor."

Future Newsmaker events will include a legislative preview and a discussion regarding gas prices, among other "timely topics," Gochnour said.

"At the institute we research and we compile data, and our policymakers have told me that they've seen the research and data, that they want us to convene people, bring them together to share perspective, teach and have an open dialogue with the community," she said.

For more information about the Kem C. Gardner Institute, visit


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