Why is poverty so widespread in a country as wealthy as the USA? Why don’t the poor just get better jobs? Have government programs encouraged laziness? Do we need better incentives to get people off the public dole? Or are people trapped in a system they are powerless to escape?
I’m not an economist or expert. But I’ve been following the topic for a few years now, and I’ve come to a few conclusions. Hear me out, and then let me know what you think!
People Don’t Stay Poor Because It’s Easy
Every now and then, a well-meaning friend will post a meme or an article describing the dangers of government supporting the poor. Poor people are social parasites, getting free food, free housing, free college, and free healthcare, all at the expense of their hardworking, more responsible counterparts! It’s not uncommon for someone to chime in with some corroborating anecdote. I know someone like that—living off the government and begging for handouts, but you notice she’s got a cell phone, eats good food, wears nice clothes, drives a nice car, and keep having kids. These people clearly don’t know what it really means to be poor [insert comparison made to a Third World country or the Great Depression], and certainly not how to practice frugality. At the very least, if they had any self-control whatsoever, they wouldn’t have all those kids! But this is what we get when the government offers handouts to anyone who doesn’t have the gumption to make it on their own. It’s just too good of a deal for these freeloaders to pass up!
A whole framework of blame is difficult to take apart piece by piece. But a couple of thoughts are important to keep in mind.
- The government doesn’t just give free money to anyone who doesn’t want to work. While the rules vary from state to state, generally speaking, getting assistance is contingent on things like being functionally broke (say no more than $2,000-ish in assets), having a net income at or below the current poverty level for the size of your household, and either having a job, actively seeking employment, being a caregiver (in certain situations), or being disabled. And you can’t just say you fit the qualifications; you have to be able to prove it. In some states, you must also pass a drug test in order to qualify.
- Disability is particularly difficult to qualify for. Conventional wisdom says that getting approved for benefits typically requires the assistance of a lawyer, who of course gets a cut for their services. There are plenty of conditions which could hinder you from getting a good job, but that are not considered severe enough to qualify for disability.
- Higher education is often a requirement to get a better job. But going to college on the government dime comes with high expectations. If your grades, attendance, or class completion rates are not up to standards, you could very easily end up with a nasty debt and nothing to show for it. Scraping by with barely passing grades won’t cut it; you have to be a good student. Hardly the image depicted in these memes.
- Cell phones and cars may be luxury items in certain places and circumstances, but try getting a job without some mode of transportation or contact number. Also, loan companies can be pretty fussy about helping you buy an older, less expensive car. Understandably, they want to make sure the vehicle has a decent chance of outliving the loan. In short, the line between luxury and necessity is not always where it seems to be at first glance.
- Perhaps frugality IS a lost art. But the occasional special meal or nice second-hand outfit is not terribly expensive compared to non-negotiables like housing, utilities, and transportation. You may not even be allowed to keep your kids if you don’t maintain a certain basic standard of living, determined by the government.
- Speaking of kids, they are a natural part of life: one of the most basic elements of being human—dare I say, a part of God’s expressed plan for mankind. The idea that they are a luxury item is a relatively new one, promoted by Planned Parenthood and other organizations that may or may not draw a line between preventing pregnancy and providing abortions—between assisting those in needs and promoting eugenics. Do we really want to be part of a movement that either despises life at its most vulnerable or discourages the poor from something as basic as a normal marriage? Ironically, it has also been observed that many assistance programs effectively penalize those who are married (or at least allow loopholes for those in relationships outside of marriage), due to how household status and benefits are calculated.
In reality, nobody lives a life of ease at the expense of the government. People get government assistance because they need it in order to survive. They may be surviving at a higher standard of living than their counterparts in Uganda or Haiti, but they could still be precariously close to going bankrupt, living on the streets, suffering from a preventable (and potentially contagious) disease, losing their kids, or ending up in jail because they can’t pay a fine.
Poverty Hurts Everyone—Not Just the Poor
A common theme among these anti-poverty memes is the role of government. Typically, the assumption seems to be that the less we help the poor, the better… unless you’re a politician. If only the government would stop encouraging these behaviors with so many support programs, we wouldn’t have this problem! If you want to get rid of animal pests, you quit feeding them. How hard is that to figure out? But of course, we are stuck with this horrible blight on our economy because all these freeloaders keep voting for the politicians who support them, and politicians only care about getting votes.
Aside from the dubious claims that the poor vote only for politicians who promise handouts, what these memes don’t take into account is the fact that poverty hurts everyone. Think about this. What happens when the poor go bankrupt? Lose their home? Catch a communicable disease? What happens when they end up in jail? Or when their kids end up in foster care? What happens to the next generation when they grow up without a stable home and family? Every one of these “personal” crises ultimately cost society as a whole.
To suggest, therefore, that the only reason the government supports these programs is in order to get votes is to ignore real problems that affect everyone. Programs that keep the poor more or less afloat are cheaper, in the long run, than programs to rescue them from circumstances far more dire.
But they could at least work hard like everybody else and get a better job! Of course they can’t expect to start out as managers. But that’s how the system works. You save your money, work your way up the ladder, and eventually you have a healthy middle-class income. Unemployment rates aren’t even all that high right now. Surely there is no excuse for anyone to live in chronic poverty. We’re just giving people the wrong incentives!
I’ll address these concerns in the next two sections.
Means-Based Welfare Discourages Incremental Improvements
Suppose you are a currently making $2,000/month before taxes. In addition to your income from whatever job(s) you have, you get $200/month in food stamps, and your family healthcare needs are covered by Medicaid. Now suppose you get a better job or a nice raise, and start making $2,500/month. You go home rejoicing that, finally, things are looking up! Unfortunately, this pushes you right over the limit for assistance. Gone are the food stamps, and you have to go to another form of health insurance, with a regular monthly payment and a hefty deductible. Your tax rate also goes up, so you bring home less of what you make. Oh, and maybe your new position requires new clothes (employees often have to pay for their own uniforms), more expensive transportation, or some other up-front investment on your part. All of a sudden, the extra money has completely evaporated! You were literally more financially stable BEFORE you got the better job.
Though these numbers are made up, they illustrate what many people in the grip of poverty face. Sooner or later, an incremental improvement in income is going to hurt, rather than help, them.
But suppose you anticipate this, and start scrimping and pinching pennies so as to have a rainy day fund before you take the plunge. Or maybe you just want to save up for a car, so as to avoid exorbitant financing rates. Smart move, right? Well, you have to be careful about doing this, too. If you have too much in your bank account at the next evaluation, you could lose your benefits on that basis as well!
Long story short, you may not like being on government assistance, but you may have to do what you can to survive. There’s simply no point quixotically refusing assistance, only to end up on the streets or going bankrupt.
The Poor Do Not Control Poverty Rates
It’s true that unemployment is not what it was ten years ago. But “having a job” and “not being in need of assistance” are two very different things. Indeed, a good portion of the jobs currently available are barely enough to support a single adult, let alone a family. Let’s take a look at some stats to get an idea of just how many jobs do NOT provide a living wage.
Take the $15/hour threshold that many suggest should be the new minimum wage. One source shows that 42.4% of workers make less than $15/hour. It is unclear how many of these jobs are full time, but even at 40 hours/week, that’s less than $30,000 per year before taxes. At 35 hours/week (still considered full-time work) the worker gets less than $27,300/year. Where I live, a single person with no significant debt could probably survive pretty comfortably on this amount. But rural Indiana isn’t exactly known for its high cost of living. And for a couple with three kids, even $27,300 is below the federal poverty threshold.
Of course, “less than $15/hour” goes all the way down to minimum wage, and everything in between. According to one Pew Research article “about 20.6 million people (or 30% of all hourly, non-self-employed workers 18 and older) are ‘near-minimum-wage’ workers.” So out of that 42.4% making less than $15 above, only about 12.4% make significantly more than minimum wage. There aren’t too many folks who can survive on $7.25/hour without assistance. Even with two incomes, it’s going to be tough.
Finally, in terms of a job being enough to pay the bills, one must also consider that many of these jobs aren’t even full time work. Since many benefits are tied to being a full-time worker, this means that part-time workers are less likely to get paid sick time, let alone health insurance through their employer. The ratio of part-time to full-time jobs has, thankfully, improved over the last several years, but part-time work still accounts of a big chunk of available jobs. And while working two part-time jobs seems like it ought to be doable, many such jobs also require a level of flexibility that is difficult to achieve while holding another job. And you don’t get benefits or overtime by virtue of working two 30-hour-per-week jobs.
In conclusion, a huge chunk of the population can only bust through the poverty threshold by either working ridiculously long hours, or having two incomes, or both. If they have children, this means farming their kids out to daycare, which in turn means they have to earn more money to pay all their bills. (There are other options, of course. If the parents work opposite shifts, they can watch their own kids, although they may get very little time to build a healthy relationship with each other. And if they live near family or other willing helpers, or qualify for some kind of assistance, the costs can be lowered… but that doesn’t solve the “social parasite” problem.)
Now, microeconomics tells us that any one of these people could work extra hard, maybe get a degree or develop some new skill, and eventually get a better job. But macroeconomics tells us that, for a better job to open up, someone else must die, retire, get fired, or quit. As a general rule, for any person who goes UP the ladder, someone else must go DOWN.
Of course there are ways this can be shifted through businesses creating more jobs, or making lousy jobs into better jobs, and so forth. Some people can bust out of the cycle by successfully creating their own business–but that generally requires some kind of starting capital, and success rates are notoriously low. In short, real shifts in the number of good jobs are not something the average person in poverty has the slightest control over.
This is why giving the poor better “incentives” to get off the government dole is NOT going to solve this problem!
So What Can We Do to Get People out of Poverty?
First, let’s stop treating poverty like a moral failure. Most of the poor are working very hard to provide essential services for society. They provide food service, hospitality, and answer telephones. They are cashiers, nurse’s aides, and janitors. Some of them work in local government, keeping your taxes low, and some even serve in our military. Don’t want to pay more for these services? Then have the grace not to complain when the government subsidizes these industries in the form of welfare!
But we must do more than merely acknowledge that we need these people and that we benefit from their hardship. We must do more than turn them into working beggars. Justice demands that we ensure people get a fair day’s pay for a fair day’s work.
Again, I’m not an economic expert. But there are ideas that could help. Let’s take a look at a few of them.
One popular-but-controversial option is to raise minimum wage. This, at least in theory, reduces the amount the government has to spend on welfare. Thus, it seems like it could lower taxes (although as long as we are operating on a deficit anyway, I’m not so sure). But it does put a considerable burden on the businesses and institutions that can’t actually afford to pay higher wages—which could lead to fewer total jobs as owners and managers either fight to stay afloat or go under. And it eliminates lower paying options even for basic entry-level positions ideal for those who are just learning the ropes and don’t even need to support themselves yet, let alone a family. Ultimately, it’s bound to lead to a higher cost of living for everyone, as higher costs of production eventually get passed on to consumers. It’s only a matter of time until $15/hour in the dollars of the future is no better than $8/hour in today’s dollars.
Perhaps one way to mitigate some of these issues would be to generally raise minimum wage, but permit any given company to have a certain percentage of designated “entry level” positions or employees at any given time. This would allow for some jobs to still exist at lower wages, but not to the extent that they do today.
Yet another option might be for the government to incentivize smaller ratios between the highest and lowest paying jobs within a company. In this system, CEOs would make less, while line workers would make more. But how much real difference would it make? Would companies struggle to find talent for top positions? Would they find loopholes in the form of more disparate benefits? Are CEOs really the problem, or is it shareholders?
Or perhaps the government could simply subsidize certain types of industries with tax breaks and credits for paying higher wages, so that workers could receive fair compensation without overburdening companies, raising prices, or bearing the brunt of the stigma of “living off of handouts.” Of course, that assumes, perhaps naively, that such subsidies would in fact be passed along to workers. It also leaves open the question of who would decide which industries would be subsidized, and on what basis.
Another option that has been gaining momentum is a UBI (Universal Basic Income) or Citizen’s Dividend. This is an amount the government would simply pay to everybody, regardless of need. In theory, this would cut out a lot of the overhead needed to determine who is or isn’t eligible for other assistance programs, which it would most likely replace. It would allow businesses to continue to pay people what they can afford, while giving individuals more choice in what kind of job to work (or whether to have one parent stay home with the children in lieu of sending them to daycare). Hopefully, it would help to alleviate the animosity from those who don’t get assistance towards those who do. But for those whose greatest concern is that government assistance promotes lazy habits, it is anathema. There are also concerns about how it would be funded. And finally, it is unclear what other unintended consequences could result.
We may not have all the answers yet. But we must recognize that no government program is making it easy to be poor. We must acknowledge that poverty is as harmful for society collectively as it is for poor people individually. We must stop blaming the poor for a lack of sufficient jobs, and we must stop penalizing them for planning ahead and getting better jobs. Most of all, we must get serious about ensuring that anyone willing to work can support themselves and their families.