Poverty, Inequality And Public Policy Research

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The Impact of Time Deficit and Scarcity of Cognitive Capacity on the Time-Spending among the
Working Poor, and Public Policy
Yiwan Ye
Instructor: Professor Sarah K. Burch
Poverty, Inequality and Public Policy
University of Iowa
October 8, 2013

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The Impact of Time Deficit and Scarcity of Cognitive Capacity on the Time-Spending among the Working Poor, and Public Policy
Introduction:
Money is not enough. Despite working poor needs income for household production to sustain the physical and mental well-being of the family members, studies suggest that working poor has insufficient time for family activities that are crucial to attain a bare-bones standard of living (Zacharias 2011; Kalenkoski et. al. 2010; Vickery
1977). Summaries and discussions of anti-poverty policies are extensively reviewed from monetary and employment perspective, and the non-monetary aspects of poverty are usually neglected in policy making discussion (Danziger and Haveman 2001; Kalenkoski et. al. 2010; Harvey and Mukhopadhyay 2007). The effects of time deficit and scarcity of mental capacity can be as consequential as the effects of income-based scarcity have on time spending behaviors of the working poor. In short, time deficit is defined as
“the deficiency of hours of income-generating activity1 in relation to available time”, whereas the scarcity of cognitive capacity is the limits of attention or cognitive loads in relation to available mental resources (Zacharias 2011; Mullainathan and Shafir 2013).
This study endeavor to examine how working poor allocates their time and mental resources to works, family production, and alternative financial activities from the time-deficit and cognitive approaches. Understanding the effect of time deprivation on time-spending behavior of the working poor has a societal and economic significance in revealing the causation of poverty, and could possibly provide specific policy solutions. In order to comprehend these relationships from an empirical aspect, this paper includes both economical and psychological approaches to

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Income-generating activities includes wage-based work and “own-account work” (Zacharias 2).

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investigate the following inquiries: What are some salient causes of poverty of working poor? How time deficit and cognitive loads/bandwidth tax influence allocation of leisure time among the working poor? How School Ready Fund (SRF) can potentially reduce the time deficits or cognitive load among the working poor households?
Part I.
Economic Situation:
According to the United States Census Bureau, working poor households are people who are employed full-time or part time, but fell under official poverty threshold or are unable to achieve basic economic security 2 . However, many public subsidy programs such as the State
Children’s Health Insurance Program (SCHIP), free and reduced school meals, and the Earned
Income Tax Credit (EITC) are eligible for households whose income are twice the poverty threshold (Lim 2013). Since households with income twice the threshold and lower still fail to sustain some basic financial needs, the program eligibility for households with income well above the official poverty threshold has indicated that the threshold is noticeably insufficient for a working poor household to maintain minimum living standard (18). According to the Economic
Policy Institute, working poor should include households with income level below 240% below the official poverty threshold on average (EPI 2007).3 After a dramatic shift in the U.S. labor market structure in the last decade, the number of working poor has been increased by 6.2% from
2000 to 2011 (BLS 2013; Lim 20)4. Total number of working poor in 20115 is now more than 10.3

2

Official poverty threshold in2012 is 18,284 for three people family unit (USCB).
240% is an estimation for a typical family with children. This study uses the official definition of absolute poverty, because most of the following statistics are measured with official poverty threshold.
4
27.1% of working poor works part-time in 2010 after the recession, compared to 14.8% in 2000 (Lim 20). See also
2011 and 2001 Current Population Survey (CPS) and Annual Social and Economic Supplement (ASEC).
5
2011 annual report from U.S. Bureau of Labor Statistics is published in April 2013.
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million, which comprises around 7 percent of total labor force (BLS 2013). The increasing number of working poor has exerted a new threat on societal stability, and become a new burden on policy makers’ effort against the poverty.
Scholars have different explanations about the causations of poverty. Some argue that the poverty among working poor in the United States is caused by individualistic or merit based factors
(Kim 1998). Other scholars suggest that the poverty is triggered by structural circumstance, that is intricate and beyond working poor’s personal control (65). Despite of these disputes, a 2012 Pew
Research survey suggests that Americans’ opinion with respect to poverty has gradually shift from attributing to cultural causes (sluggish, lack of work ethic, etc.) to structural causes (economic and educational opportunities, and social mobility) (Cohn 2013; Cozzarelli et. al. 2001). Research reveals that most American people endorse external causes more than internal ones 6 . From economic perspective, poverty among working poor is structurally influenced via three economic factors: inadequate full-time employment, low wages, and educational inequality (Lim 18; Breen and Jonsson7 2005). Firms failed to provide adequate full-time year round employment for the working poor, thus many working poor households result in working as part-time involuntarily8.
The low wages exacerbate the working poor by diminishing their effort to solve poverty by work more hours or work in multiple jobs (Kim 1998:76; Lim 2013). The average hourly wage among the working poor is around $10, which is 23% below the median hourly wage among all workers
(Lim 2013). Last but not least, the educational inequality hinders the working poor to develop their human capital for upward mobility (Breen and Jonsson 2005; Turner 2011).

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Social Trend in the 2012 Pew Research.
Breen and Jonsson (2005) elicits the positive correlation between education and/or occupation and income. It also states that the prevailing educational inequalities are more costly for a disadvantaged and more profitable for someone privileged.
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Approximately 20% of working poor households are unwillingly employed as part time (USDL).
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Giving the assumption that poverty is mainly instigated by external factors, this study is interested in how working poor households make individual decisions that can help them to move out of poverty besides receiving government assistants. Studies suggest alternative financial activities or AFA (early and higher education, skill training and job searching) play a key role in increasing upward mobility for the working poor (Roberts et al. 2013; BDEL 2007; Krusell et al.
2000; Pease and Martin 1997). Middle class jobs usually are granted to individuals with postsecondary education, thus households with lower education attainments tend to cluster in lowpaying or part-time jobs (Roberts et al. 3; Lim 2013:21). Turner’s study on the returns to higher education provide evidences that levels of degree and credits hours is positive associated with higher quarterly earnings returns, and low credits hours provide little or negative income return 9.
Since supply and wages for skilled workers have been increase dramatically, skill training become a consequential and pragmatic tool for working poor to increase labor market competitiveness
(Krusell et al. 2000). For job searching study, Pease and Martin’ study indicates that a mismatch between jobs vacancies for the poor and jobs offered to the poor. Therefore, working poor requires ample time for job search and job search training to surge their likelihood of employment/reemployment (Pease and Martin 1997; Moynihan et al. 2003). As a result, AFA becomes a strategic factor affecting the financial security of working poor family (Roberts et al.
2013:4).
However, the time available for alternative financial activities is vulnerable to both the deficit of time and lack of cognitive motivation to engage in AFA. In the part II, the time deficit study will discuss how work time and household production time influence potential time available

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This is statistics in Colorado. With estimate significant of 0.01, BA and AAS degree increase earnings by $2,500 and $2,270, while certificate and short-term certificate increase earnings by $788 and $464.

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for AFA; the scarcity of cognitive capacity study will provide perspective on how cognitive load from work effect individual’s motivation of AFA. My study wants to account for the amount of time available for work and leisure, thus it excludes personal care time, such as sleeping, eating, shower, etc. (Harvey and Mukhopadhyay 2007:65). Resting from the estimation from Vickery and
Harvey’s study, the total time left for leisure activities is 94.5 hours per week for an individual
(BLS 2013)10. The leisure time (TL) is the total time available beside income generating activities, and any other non-working time crucial for sustaining certain level of standard of living
(Williamson 2014). It comprises time for household production (TH) and time for alternative financial activities (TF). Household production are both housework and recreational type of activities that intend to maintain or enhance leisure satisfaction. Examples include cooking, lawn mowing, taking care of children, exercising, camping, etc. (Zacharias 2011:2). Leisure satisfaction is quality of the leisure time, a subjective evaluation of how a person satisfied the time when he/she is not at work. Alternative financial activities as define before are activities that intend to enhance the financial well-being of household in the future (Education, Skill training and job search). Real life examples include taking classes in community college, learning how to fix a car, go to job interview, etc. Therefore, the time surplus/deficit equation for the hypothesis testing would be TP=
Tw + TL = Tw + TH + TF11.

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See also the 2011 American Time Use Survey Summary from the Bureau of Labor Statistics for current update.
TP is total productive time excluding personal care time. That is 24 hours minus sleeping, eating, etc., if measure in days. Tw is total time for work (full-time, part-time or other income generating activities).
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Part II.
Competing Perspectives:
Even though time deficit and cognitive capacity approaches take the deprivation of time into account, their theoretical background are fundamentally different, if not conflicting. However, the two approaches lead to similar hypothesis - poverty results in having insufficient time for AFA among working poor households. The time deficit explanation is based on current economic theories, including the consumption-leisure tradeoff theorem, and concepts from time poverty theory by Zacharias (2011). As for scarcity approach, the literatures based heavily on psychological studies by Mullainathan and Shafir (2013), and Klein and Boals (2001), including the discussions of cognitive stress, cognitive load, tunneling, and bandwidth tax etc.
Time Deficit Theory
Consumption-leisure tradeoff theorem is the consumer’s preference for the consumption combination of both good and services (Baranano et al. 2013). This study examines household preference for time-spending consumption between working time and time for AFA. In a oneperiod model of budget constraint, work and leisure hours can be consider both consumer goods
(Baranano et al. 2013). Leisure time is necessary for household production and human capital development (HCD), but leisure time is usually in conflict with work hours12 (Williamson 2013,
Vickery 1977). When people choose to work more, they generally have less time for leisure. An investigation on the opportunity cost for work and leisure time will help us to understand the tradeoff between work time and leisure time (Williamson 2013). For example, a person can only choose between go to a concert or see a movie. If that person chooses to go to concert, the movie

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TP= Tw + TL = Tw + TH + TF. More work time results in less leisure time.

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becomes the opportunity cost for concert. Low wages indicates low opportunity cost for working hours, because for giving up one additional work hour, poor people gain one hour of leisure time at a very little cost compare to average Americans13 (Lim 2013; Williamson 2013). Therefore, the opportunity cost of leisure time is relatively high - for one additional leisure hour poor people forgo, they gain only $10 on average. Since the opportunity cost of work time is smaller than the opportunity cost of leisure time, the household have to relinquish a large amount of leisure time to earn enough income (Huffman 2010; Williams 2013). With the same amount of wages, working poor cannot move out of poverty by working more, because the additional income usually does not exceed the extra cost of inevitable amount of home production (Zacharias 2011:5; Vickery
1977; Harvey and Mukhopadhyay 2007).
Depending on the level of household satisfaction goal, working poor households have the options to work more or work less than the middle class households. In the first situation, if a working poor family is striving to attain an income goal, the income effect prompts more time spend on work to meet the monthly budget, such as food, rent, and healthcare (Kalenkoski et al.
2010). As a result, working poor households are trammeled by vast amount of work hours, hence they simply don 't have enough time to engage in AFA. For example, a working poor mother spent
9 hours at workplace, 9 hours on personal care (sleep, eat, bathroom), 1 hours on transportation, 5 hours on home production (cook, child care, clean), thus she would have only no discretionary hour for AFA and other activities to improve the family’s well-being14. It will be impossible for her to participate in AFA, because all other hours are forgone. When her basic desires for AFA

13
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Around $10 according to Lim (2013).
The time constrain is 24 hrs. 9+9+1+5=24 hours, thus this hypothetical mother has no free time.

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(utility level) can’t be fulfilled within the time constrain (24 hours per day), she confronts time deficit (Antonopoulos et al. 2012; Kalenkoski et al. 2010).
In the second situation, the low wages may incur substitution effect on time-spending behaviors – more leisure time and less work time. For example, the substitution effect of low wages is that person then decides to get a part time job and stay at home, when a person perceives that spending 10 hours at work and earning $8 per house is not satisfying. Hamermesh and Lee (2007) suggests that working poor households spend less time on work than higher income household on average. Nevertheless, less work time does not make working poor time rich (Vickery 1977). With low income, working poor households not only become more dependent on welfare, but also they need to spend longer time on home productions – buy groceries with food stamp, cooking, transportation, childcare, etc. (Harvey and Mukhopadhyay 2007). The additional time is devoted to getting welfare and home production instead of human capital development (Vickery 1977; BLS
2013). In general, the second type of time spending behavior usually does not meet working poor’s budget constraints. Therefore, working poor households need to make difficult tradeoff between work time and leisure time. They can choose to work a lot, but the prolong work hours will leave them little time to improve their situation due to time deprivation; they can choose to work part time or become unemployed, but they will not able to afford home production and AFA due to financial deprivation (Williamson 2013).
Scarcity of Cognitive Capacity
A psychological approach to understanding time deficit is to examine how time constraint effects individual’s cognitive capacity. Not only time is a scare resource, our cognitive resources is also finite (Mullainathan 2004). Despite the available leisure time, the deficit of mental capacity or bandwidth inhibits our ability to work efficiently on tasks that are mental demanding, such as

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alternative financial activities (Spears 2010; Mullainathan 2004; Hamermesh and Lee 2007).
Spears (2010) uses qualitative approach to measure how individuals experience mental stress when pressured by time constrains, and the study elicits that the time deficit increases individual stress level. Surprisingly, studies found no significant correlation between household income and time stress (Kalenkoski et al. 2010; Hamermesh and Lee 2007). The high income households actually experience more stress than other households even if they have same working hours (Hamermesh and Lee 2007). Therefore, according to Kalenkoski et al., and Hammerers and Lee, time stress per se is not a statistically valid determinant in explaining time-spending behaviors. Nevertheless, several cognitive literatures have shown the negative correlations between stress (time stress and work stress) and cognitive capacity (Klein and Boals 2001; Loizate and Migraciones 2006;
Kalenkoski et al 2010). According to Klein and Boals (2001), the more people devote their mental effort on stressful task, the more their working memory capacity shrinks, and thus cognitive stress level is an important indicator of bandwidth.
In addition to stress, Mullainathan and Shafir (2004; 2013) conduct extensive cognitive studies that suggest mental capacity/bandwidth can be reduced/taxed via tunneling mechanism. By definition, focusing is a positive mechanism: “scarcity focuses on what seems, at that moment, to matter most,” whereas tunneling has negative effect on bandwidth (Mullainathan and Shafir
2013:29). Tunneling suggest people would neglect important things such as AFA when they dedicate most of their attention on demanding tasks (Mullainathan and Shafir 2013) The shortage of material demands, and time deprivation can both lead to tunneling (Kalenkoski et al. 2010;
Mullainathan and Shafir 2013). As a result, the tunneling reduce cognitive capacity (Mullainathan
2004).

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Poverty exerts both direct and indirect cognitive loads on poor people; cognitive loads from work, home production and other mental activities constantly drain our available mental resources
(Mullainathan and Shafir 2013). Unlike stress, the aspect of cognitive load refers to the cognitive capacity that is allocated to accommodate the demands imposed by the task (Sweller et al., 2011).
In other words, an enormous amount of cognitive load is added to the bandwidth during the tunneling process, thus mental capacity for making effective time-spending decision is hindered
(Mullainathan 2004; Mullainathan and Shafir 2013). Current research also finds that cognitive loads from poverty also inhibits cognitive function (Mani et al. 2013). As the working poor suffers income shortage and make difficult financial tradeoff, the bandwidth is preoccupied by these stressful events (Mani et al. 2013; Mullainathan 2004). Due to limit cognitive capacity, these preoccupations leave little cognitive room for making effective time-spending decision, especially for long-run goals such as human capital development and other AFA (Mani et al. 2013;
Mullainathan 2004). For example, working poor parents fail to save money for education, because they have to use the money for curing diabetics 15 . Therefore, the immediate pressure from imperative financial demand sets a huge barrier to attain higher education, skill training, and financial management (Mullainathan 2004). In addition, poverty makes economic decisionmaking more consuming for poorer people, thus poor working are more likely to make bad economic decisions due to low cognitive control (Spears 2010).
The cognitive loads not only taxes individuals’ motivation to spend time in education, but it also impairs their ability in making other important financial decisions, such as applying for federal work assistance (Madrian and Dennis 2001). Heavy cognitive load, poor cognitive function,

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Poor population is most prone to diabetics due to unhealthy diet. For more information, see Levine, James.
Poverty and Obesity in the U.S. Diabetes. Vol. 60. No. 11. Nov. 2011.

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and cognitive control are all possible factors that can perpetuate poor time-spending decision among working poor. To conclude the scarcity approach, the testing hypothesis would be the following: an increase in cognitive load is likely to decrease the number of hours in AFA. However, perhaps an experimental study is need to examine the correlation among the scarcity of bandwidth and time for alternative financial activities, with respect to changes in economic mobility.
Part III.
Policy Solution:
This study investigates one of the children education funds - the state of Iowa designed
School Ready Fund (SRF). The purpose of the SRF is to “enhance current efforts to provide family support services and parent education programs for families with children” (ECI 2012). The mission for SRF is to provide high-quality early education and health service to all Iowa’s children so that they can be successful in the future (ECI 2012). SRF was established in 1999 with initial fund of $5.2 million (French 2012). However, since 2007 when the funding reach its peak at $38.4 million, the grants has reduced to 57% of its peak over the years while the amount of business tax credit is has been escalating in Iowa (2012). As a part of early care and education fund, SRF are eligible for children from zero to five throughout Iowa (ECI 2012). The income threshold for SRF eligibility is under 185% of the federal poverty level, which is less than $43,475 per year for a four persons household (ECI 2012; USCB 2013). ECI includes services such as family support, parental education, preschool support for low income families, and other essential early health and education services (French 2012:2).
Many poor people are poor, not because they don 't work, but because they lack human capital resources, and equal economic and educational opportunities (Kim 1998; Breen and

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Jonsson 2005). Therefore, the reason this paper chooses SRF policy to solve time-deficit and cognitive scarcity problems is because education (both early and higher education) is the key to increase social mobility and solve poverty issue in the long run (Breen and Jonsson 2005; Turner
2011; Roberts et al. 2013; Krusell et al. 2000; Pease and Martin 1997). A hypothetical single parent household with an average hourly wage of $10 and two children in Iowa16 will have an estimated
$19K annual income (NCCP 2011). However, to achieve this income level, this household would lose benefits 17 such as TANF, and LIHEAP (Low Income Home Energy Assistance Program)
(NCCP 2011). Even if this family receives all the government supports, the family will have less than $5000 saving for AFA, for emergency, and for recreation. In reality, the situation is worse.
Applications for federal/states assistance programs are extremely time consuming, and most
basic financial supports are not automatically opt-in (Madrian and Dennis 2001).
Noticing the situation that most working poor has severe time constrains and limited bandwidth for demanding tasks, this paper predicts most of these low income households do not have the time and cognitive capacity to invest their savings in AFA (Kalenkoski et al. 2010;
Mullainathan 2004; Madrian and Dennis 2001). Also due to the tunneling mechanism, the cognitive capacity of working poor parents is preoccupied with financial and time deprivation, thus these parents tend to neglect the child care or only provide the minimum level of care
(Mullainathan and Shafir 2013; Klein and Boals 2001). Hypothetically, an effective HCD program can provide adequate time and cognitive resources for working poor to engage in AFA. Therefore, the most important thing the government can do to enhance economic opportunity is to invest in

16
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Data is an estimation in Des Moines area 2008.
See Graph A and B.

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public educational program for children, which is also the reason why this paper choose child care assistances as an anti-poverty solution (Lynch 2007).
To ensure economic development among the poor, federal and states governments provide other anti-poor assistant strategies, including human capital development (HCD), cash assistances, in-kind services, and labor market regulations. Cash assistances include programs such as Earn
Income Tax Credit and TANF Cash Assistance. In-kind services include child care, Food Stamp, etc. Labor market regulations are laws that help protect labor’s rights such as ensuring minimum wages. However, among all the available programs, human capital development is usually overlooked (French 2012). Research finds that the single parent households are most vulnerable to live under the poverty rate; statistic shows that over 74% of working families with income below the needs are single parents with children (BDEL 2007; French et al. 2012). For parents preoccupied with work and home production, current state government only enacted a few policies on child development (ECI 2012; French 2012). Even though all AFA are consequential for HCD, investment in early child education has most prolonged and significant effect on improving one’s human capital.
Research shows that 85 percent of intellect, and skills are developed by age of five, and children with proposed early education assistance tend to have good mental health and low high school drop-out rate among working poor households (BDEL 2007; Lynch 2007; French 2012).
Investments in early child education program impose substantial influence on children success as educated student, productive workforce, and responsible citizens in the long run (Lynch 2007;
French 2012; Grunnewald 2012). The combination of all early child education programs, including
SRF, Early Childhood Fund, Voluntary Preschool Program, and other First 2,000 Days programs, are proven to yield numerous positive societal results (French 2012). Children with SRF not only

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received better test scores and have higher graduation rate during and after kindergarten, but also have more developed social and emotional skills on early age, and are less likely to commit crime or use drug (ECI 2012; Grunnewald; 2012). These programs also have high cost-benefit efficiency: high-quality and well-funded early child programs in Iowa will generate an estimation $526 million return for government, and a $550 million return for individuals in 2050 - one dollar invested on a child today will generate four to nine dollars in return on average (Lynch 2007;
Zedlewski et al. 2010; CDC 2013).
Part IV:
Proposal of How to Move Forward:
Despite the School Ready Fund is an effective and efficient program, there are a few limitations with current SRF policy – lack of government funding, loss of child care at low hourly wages, and low participation rate (French 2012; IPP 2011). As a result I propose at least three changes in SRF – increase the funding for SRF, expand the income eligibility, and adopt an automatic opt-in policy.
Iowa’s child care and early education system is one of the most underfunded system in the
United States. Even though Iowa has the second highest rate of mother (single parent) in the fulltime workforce, Iowa ranks 45th in eligibility for child care assistance and in support of parents and pre-school children education (IPP 2011). Less than 2% of the entire policy spending is specifically invested in early learning and pre-school (French 2012). Beside the existed early childhood programs are insufficiently funded, the trend of investment on early child care and education is still decreasing due to the government budget cut (French 2012). As mentioned in part three, Iowa has gradually increased the funding for business tax credit for conducting research,

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while the funding on early child assistances including SRF, early childhood fund, and voluntary preschool fund, are diminishing over the years (French 2012).
The second weakness is that the child care subsidy can be easily deprived when the single parents pay increases to $12 per hour (IPP 2011). Since child care assistances, including SRF, are crucial government resources and a large expense, the loss of child care subsidy will create a huge economic cliff18 for working poor households with children (IPP 2011; NCCP 2011). If the pay rate for a single parent in Des Moines, Iowa increases from $10 per hour to $12 per hour, the parent will earn an estimate of $4,160 extra income in a year (IPP 2011). However, at the same time, that household will suffer more than $6,000 decrease in the actual annual net resources due to the loss of child care subsidy and LIHEAP (NCCP 2011). Another drawback actually exists in numerous government policies- not all households are qualified for SRF (Madrian and Dennis 2001). For example, the Supplemental Nutrition Assistance Program (SNAP) is the most important antihunger program in the United States, but not all eligible participants receive the benefits (CBPP
2012).The number of households receiving the assistance is shrinking, while the number of working poor is still increasing (FRAC 2013; BLS 2013). Even though all eligible SNAP households are live under relative poverty threshold, 19 about 12% of these individuals fail to receive benefits (CBPP 2012). Possible reasons for not receiving SNAP are that they don 't have enough time, or don 't want to perceive themselves as failures (Mullainathan 2004; Mani et al.
2013). Therefore, the actual family resources for working poor can be overestimated, hence leaving these household even fewer time for AFA (NCCP 2011).

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See Graph C.
Relative poverty threshold for a four person Iowan family is $45,703. The relative poverty is measured in 60% of median income (Bruch), thus $76,173 * 60% = $45,703. Source: Burch, Sarah Lecture 2013. US Census 2012. http://www.census.gov/hhes/www/income/data/statemedian/ 19

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As a result this paper suggest the following policy solutions:
1. Increase the funding for SRF and all early childhood development programs that are proven to be effective in the past few years.
2. Expand Child Care Assistance by raising the income eligibility from 145 percent to 200 percent FPL and introduce a more graduated co-payment policy after the eligibility that would allow families to adjust from the loss of free childcare (IPP 2011).
3. A solution to increase participation rate for the SRF is via automatic opt-in policy – qualified Iowan families are automatically enrolled in this programs without addition application.
The first proposal is to increase funding in all early childhood development programs that are proven to be effective in the past few years. Due to the out-of-date, low market value, and significantly underpayments for child care workers20, both the service providers and households became more unlikely to accept the state’s subsidy payment, and hence the working poor households received low quality child care assistance or decided to quit the system (ACF 2013;
French 2012). To ensure the quality and effectiveness of the child care programs, state government should at least stop cutting the funding for child care and early education.
The second solution is to expand the eligibility for working poor as their income increase.
With policy expansion, the damage of more than $6,000 economic cliff will be significantly reduced (NCCP 2011). This adjustment will help ensure working poor households to stay on the breakeven line, so that households would not make difficult financial decision on whether to stay on job or give up the job for these services (IPP 2011). In addition, the expansion in other programs

According to State and territory Profile – Iowa, the average annual wage for child care workers is $18,920, which is also significantly under the official poverty threshold (ACF 2013; BLS 2013, USCB 2013). About 37% of children from working families work at home instead of child center.
20

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will also lighten the damage from lose of child subsidy: a 30% increase in EITC is proven to lift more than 10,500 children out of poverty in Iowa (IPP 2011).
Even if the existing early childhood programs are sufficiently funded, not all of the working poor households will participate in these programs for time deficit and cognitive scarcity reasons
(Antonopoulos et al. 2012; Kalenkoski et al. 2010; Mullainathan and Shafir 2013). For example, two working poor couples who were qualified for a state income tax return program (EITC) failed to fill out the application for this year, because their bandwidths were greatly taxed by the exhaustion from long hours of work and home production. Since they had consumed most of their cognitive energy, they became reluctant to spend hours to apply for this program. They might decide to use the time to relax, or take care of children, rather than spent on the application
(Mullainathan 2004). A solution to ensure high participation rate for the School Ready Fund is via automatic opt-in policy – qualified Iowan families are automatically enrolled in this programs without addition application. According to Madrian and Dennis’s behavioral study (2001), people who are defaulted (automatically enrolled) into anti-poverty programs are more likely to use their benefit compared with non-defaulted groups.
Last but not least, an effective welfare program should not only provide basic human needs to the poor so that they can survive, but also help the poor to move out of the poverty. Education and other AFA is the key to fill the gap between poor and non-poor (Breen and Jonsson 2005;
Lynch 2007). With proper findings and a few policy adjustments, SRF can provide better services in programs such as parental training, children health care, and early education, so that in the long run provide better chance for the children to move of out the poverty.

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Graphs A:

Graph B:

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Graph C21:

21

Source: IPP (2011).

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Administration for Children and Families (ACF). State and Territory Profile – Iowa. U.S.
Department of Health & Human Services. Mar. 2013.
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Brain Development and Early Learning (BDEL). Wisconsin Council on Children and Families.
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PDF. 2012.

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Center on the Development Child (CDC). Five Numbers to Remember About Early Child
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French, Lily. Iowa’s Investment in a Child’s First 2000 Days: Early Child Education:
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