The poor worry about their jobs, the rich worry about retirement

Usually, when economists think about how to improve the lives of people, they rely on introspection and theoretical assumptions. But there’s a simpler, alternate approach to figuring out what kind of policies people want and need: just ask them.

The Federal Reserve Board does this every year, in its Report on the Economic Well-Being of US Households. Last year’s report just came out and it has much to tell us about what kind of things the US government could do to improve people’s lives.

The report analyses open-ended surveys in which Americans discussed their economic worries in their own terms. Responses were categorised and broken down by income group.

For lower-income Americans, holding down a job and being able to pay this month’s bills loomed as the largest concerns. For those in the upper-income ranks, retirement security mattered the most. And for middle-income families, health care was the biggest problem.

These findings should give policymakers a road map for how to improve Americans’ lives at every income class. They should also guide economists’ research efforts. Each level of American society has its own needs, and the government should be thinking about how to help everyone at once.

Poor and working-class people have the simplest needs – basically, they need more money. Fortunately, economists have spent a lot of time thinking about how to get poor people more money and there are at least four approaches worthy of attention.

The first of these is the earned income tax credit (EITC), which pays poor people to work. Despite worries it would end up as a subsidy to employers, the EITC is a proven poverty fighter. Some leaders are already suggesting it be expanded substantially.

The second programme is a federal job guarantee, or work provision programme. A version of this was tried successfully during the Great Depression in the 1930s and Kevin Hassett, who has been nominated to head the president’s Council of Economic Advisers, has advocated trying it again. It could have the added effect of giving poor people a greater sense of dignity.

The third approach is a higher minimum wage. Many economists worry that rising minimum wages hurt employment of poor people but the bulk of the evidence hasn’t borne this out.

The fourth idea for giving Americans more money is the simplest – a universal basic income. This is an unproven programme, but many experiments are under way and enthusiasm among its promoters is high.

These programmes are not mutually exclusive. There’s no reason a higher EITC can’t exist alongside a jobs programme, a higher minimum wage and even a basic income. Those who want to put money in the pockets of America’s poor and working class shouldn’t waste too much time fighting over which approach is the best.

For middle-income Americans, the Fed’s report shows that health is the biggest worry. Unexpected medical expenses are an ever-present threat and staggeringly high healthcare prices mean medical bills take a much bigger bite out of the middle class than in other countries.

The Affordable Care Act helped but in the end, the best approach is probably a single-payer health system or public option. Extending Medicare or Medicaid to cover all Americans is the simplest and most proven solution to the excess cost problem and the insecurity problem.

Finally, higher-earning Americans shouldn’t be neglected. Retirement is their main worry.

Government can’t do much in the long run to prop up stock and housing prices, but there’s one big way that retirement security could be improved – lower fees on retirement accounts. Even fees that seem small can drain a large percentages of one’s life savings. Mandatory annual dollar invoicing would be a great step towards showing savers exactly how much they’re forking over every year and thus pushing the industry to charge less for all sorts of money management services.

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