Welfare Work Requirements Won’t Help Puerto Rico’s Shattered Labor Market



Puerto Rico Governor Ricardo Rosselló speaks in San Juan

In his annual State of the Commonwealth speech this month, Puerto Rico Governor Ricardo Rosselló announced a highly anticipated and in many ways conventionally conservative package of policy proposals to address the island’s ongoing economic and energy crises: privatizing the island’s battered energy grid, cutting corporate and individual taxes, and reforming the education system through charter schools and educational vouchers. Tucked away near the end of the governor’s speech and overshadowed by such front-page proposals was a call to enact work requirements for welfare recipients on the island.

“It’s important that we protect and strengthen programs for the most vulnerable,” said Rosselló. ”Likewise, we must incentivize those that can work to find dignified work and insert themselves in the economy.”

Puerto Rico’s unemployment rate was almost 11 percent in January. The commonwealth’s labor participation rate has recovered slightly from a record low of roughly 39 percent in October, but still ranks among the lowest in the world. In this context, pushing welfare beneficiaries to re-enter a labor market in which non-welfare recipients can’t find work looks positively perverse. The requirements can only be understood as a capitulation to the demands of the seven-member federal oversight board tasked with guiding the island through its fiscal crisis.

Fundamentally, the proposal fails to take into account the dearth of jobs on the island after a decade of recession and two devastating hurricanes. Since 2006, when tax breaks that had brought manufacturers to the island expired, hundreds of thousands of jobs have disappeared from Puerto Rico.

Included in Rosselló’s policy rollout was a reduction in the number of executive-branch agencies from 188 to 35 in attempt to make government less expensive. Roughly a quarter of Puerto Rico’s workers are employed by governments and agencies that could face the ax or funding cuts. Rosselló  has said that if a welfare recipient cannot find employment, they will be able to do community work, volunteer, or work at a nonprofit organizations.

“Given how weak the labor market is on the island, one concern with imposing the work requirement is whether there would be enough jobs to cover the increase in the number of people looking for work,” says Marie Mora, economics professor at the University of Texas Rio Grande Valley. “This might lead to even more net out migration from the island, which has already hit a record high.”

As further incentive to work, Rosselló also pledged to work to extend the Earned Income Tax Credit (EITC) to working Puerto Ricans. For that, he will first need the support of President Trump and Congress—the very same Congress that excluded Puerto Rican residents from a new $2,000 child tax credit in the Republican tax overhaul. Mora supports the idea of incorporating an EITC in the island’s tax structure, but worries that such incentives won’t be nearly as effective if not paired with an increase in the supply of jobs, particularly jobs matching worker skill sets.

As well, the governor’s plan seems to reveal an unfamiliarity with the actual composition of Puerto Rico’s welfare rolls. The governor estimated this month that between 50 and 60 percent of the more than 1.2 million Puerto Ricans currently receiving benefits from the island’s nutritional welfare program Programa de Asistencia Nutricional, or PAN, could be required to work in order to receive assistance.

Yet according to recent figures from Puerto Rico’s Department of Family Affairs obtained by San Juan newspaper El Vocero, the number of Puerto Ricans that would fit within the parameters of even the most general of working requirements (adults between 18 and 64 years old, currently unemployed, and without any impediment restricting them from working) comes out to only approximately 340,000. That’s 28 percent of the total number of PAN recipients. Rosselló’s own parameters would be even more specific, only requiring to work able-bodied persons between 19 and 45 years of age and excluding anyone with impediments and those who might be unable to work because of the number of dependents.

According to a forthcoming analysis of PAN recipients done by Baruch College sociologist Héctor Cordero Guzmán, as recently as April 2016, 35 percent of women and 45 percent of men on the rolls described themselves as “currently looking for work”, while 14 percent of PAN recipients said they were already employed. That was before the destruction caused by Hurricanes Maria and Irma.

“To stand up in a collapsed economy and blame the people receiving benefits from PAN. ... It’s using the folks that are the victims of the labor market collapse as a political ploy” says Cordero Guzmán. “One thing is to ask [PAN] recipients to go out to look for work in a growing economy. Another thing is to ask recipients to do that after a hurricane ... in an economy that has been bleeding jobs for the last 12 years.”

Rosselló has publicly stated that austerity isn’t the answer to Puerto Rico’s crisis, yet it would be difficult to dress up the large cuts to government spending in his plan as anything else. Many of the proposals will likely viewed as a step in the right direction by the federal oversight board, created by Congress last year, which will consider the governor’s ideas on March 30. Rosselló has in the past pushed back (without much success) against demands from the unelected board to impose furloughs and make drastic cut to pensions, healthcare, and education spending. The board itself has recently come under fire for alleged wasteful spending of its own.

“Puerto Rico has been and still is an experiment for these sort of conservative policies,” says Cordero Guzmán.

Weakened labor protections, sweetheart tax rates for corporations, an upcoming privatization bonanza, and now welfare requirements: Take Puerto Rico out of the equation and you’re left with a policy wishlist that would leave Republican state legislatures across the country watering at the mouth. The island, unfortunately, can do little to rebel against its current status as a lab for trickle-down reforms and austerity politics.

As things stand, there will be some who will win big from the commonwealth’s hard times (private investors and debt-holding hedge funds come to mind), but it certainly won’t be the Puerto Rican people. 

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

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