Widgets Magazine


Land of Plenty, Land of Poverty

We often think of the United States as the land of plenty, but in fact it’s also the land of poverty. In its first annual report, the Stanford Center on Poverty and Inequality described a “broadly deteriorating poverty and inequality landscape,” with the overall U.S. poverty rate as high as 15 percent and a child poverty rate as high as 21.8 percent.

Why is there so much poverty in the land of plenty? There are two main reasons: The economy isn’t delivering the jobs we need, and workers aren’t receiving the education they need.

Although it’s now six years after the start of the Great Recession, the proportion of 25-54 year olds who are working is still 5 percent lower than it was before the recession. For males without high school degrees, more than 1 in 4 in the prime working age (i.e., 25-54 years old) are not working, a jobless rate far higher than what prevailed before the Great Recession.

These two causes — a jobs disaster and a labor market disaster — are pretty much the full poverty story. We should outlaw the platitude that poverty is just too complicated to figure out and that our only hope is to find some magic bullet that will cure it. The “disease model” of poverty, which treats it like some rare and incurable form of cancer, is an immensely destructive rhetoric on poverty. It’s destructive because it wrongly suggests that we don’t know what causes poverty and that we don’t know how to end it.

The claim that poverty is immutable is typically trumped up with official poverty data showing that, while the amount of poverty has fluctuated up and down as recessions come and go, there hasn’t been any long-term decline over the last four decades in the underlying rate.

This intransigence is sometimes taken as evidence that our government and nongovernment programs to assist the poor simply aren’t working. If these programs were really working, so it’s argued, shouldn’t the poverty rate be declining?

This line of argument is disingenuous: The fact of the matter is that our safety net, in both its government and nongovernment forms, is delivering real relief. The Center on Poverty and Inequality has recently released a new measure of poverty in California that allows us to document the safety net’s work. If we imagined a California without food stamps (i.e., CalFresh), tax credits (e.g., EITC), or a cash assistance program (i.e., CalWORKs), child poverty would be approximately 12 percentage points higher — raising it from 25 to nearly 37 percent of all children. That’s real and meaningful anti-poverty work.

This result is obscured by conventional poverty indices, like the official poverty measure, that do not take noncash benefits into account. If a measure of poverty doesn’t factor in the anti-poverty work of government programs, then it will perforce create the impression that government programs do no anti-poverty work. The California Poverty Measure, by contrast, factors in the effects of noncash benefits and thus allows us to calculate the effects of those benefits in reducing poverty.

What is, then, to be done? In the short run, it’s just more of the same: We have no choice but to maintain and strengthen the safety net. Unless and until a decision is made to take on poverty at its source, we have to continue to support those who can’t get jobs or can’t get the type of jobs that keep them out of poverty. This programmatic work, undertaken by the quiet heroes of our country, is all-important.

But our commitment to reducing poverty ought not to stop there. As we mark the 50th anniversary of the War on Poverty, the national debate has focused relentlessly on the legitimacy of safety net benefits, a debate that has distracted us from asking whether the country should fix the economic and labor market institutions that cause poverty and lead to a need for the safety net in the first place.

How might a no-holds-barred attack on poverty look? The first step is to solve the employment problem. There are many ways to do so: We could provide guaranteed government jobs of last resort; we could ramp up demand for existing products via another round of stimulus; or we could incentivize job creation in the private sector. It doesn’t matter how we do it or which political party proposes it. It just matters that we get the job done. There’s of course no free lunch: Although all approaches to solving the employment program have downsides, the key question is whether those downsides come close to the costs of continuing to run a high-poverty country. It is unimaginable that they do.

The second step is to solve the labor market problem by eliminating the mismatch between the skills offered by workers and the skills demanded by employers. Because there are far more poorly educated workers than there are jobs for them, such workers experience disproportionate unemployment, underemployment and poverty.

We can reduce the size of this reserve army of undereducated workers by providing quality preschool, primary school and secondary school experiences to poor children. If poor children had full and equal access to the type of early training that makes a quality college education possible, we could ramp up the college graduation rate, lower the number of workers chasing after low-skill jobs, and raise their wages to boot. Although everyone talks about school quality, the school reform movement needs to be refocused on school equality in the most aggressive way possible. We need to mean it. Here again, we know what to do and how to do it, but we’re seemingly satisfied with narrow-gauge reform that doesn’t get us close to realizing the country’s commitment to equality of opportunity.

The simple upshot: The sources of poverty are well-known, and the reforms needed to eliminate it are straightforward. If we nonetheless decide against taking on poverty, we can’t any longer pretend that it’s because we don’t know how.

Professor David Grusky is the director of the Stanford Center on Poverty and Inequality. Contact him at grusky@stanford.edu

  • Kathleen

    Send Obama to Iran for peace like Nixon went to China in ’72, then impeach Obama, vote out everyone but Rand Paul and Justin Amash in congress, bring Snowden home as a hero, and get the Gov. the hell out of everything especially education, healthcare & civil liberties. Pass a balanced budget act, end the fed and the printing of fraudulent money that only goes to the banks, allow each country including and especially US, the good old U.S. of A. to have borders and sovereignty and FOLLOW THE CONSTITUTION. That would solve the poverty and “inequality” problem because at the end of the day, you CAN’T solve the inequality and all the poverty no matter how much money you and the government wish to throw at the problem! You, the fed and the Federal Gov. have MADE those problems worse!

  • great piece!

    Great piece!

    I have no expertise in this field, but I wonder if the following idea has any merit.

    In addition to having “guaranteed government jobs of last resort”, perhaps the government could provide incentives to businesses of every size to run apprenticeship programs. For example, the government could help a business pay the apprentice’s salary until the apprentice has reached full competence in the specialty. Then the government program would reward the business for completing the training processes. The combination of subsidy for training, rewards for completion, and an increasing population of graduates of this program I think might create a virtuous cycle of specific and agile skills training that would boost our economy.

  • Talia

    Before you can assess the success or failure of a program you must first understand the mission. Then, with the objectives of the mission in mind, one can measure success or failure.

    If you set the bar low enough or modify the mission, then anything can look like a success. Conversely, everything fails if standards are sufficiently high.

    Thomas Sowell discusses those ideas, in relation to the war on poverty, in Fact-Free Liberals.

    Since this year will mark the 50th anniversary of the “war on poverty,” we can expect many comments and commemorations of this landmark legislation in the development of the American welfare state.

    The actual signing of the “war on poverty” legislation took place in August 1964, so the 50th anniversary is some months away. But there have already been statements in the media and in politics proclaiming that this vast and costly array of anti-poverty programs “worked.”

    The real question is: What did the “war on poverty” set out to do — and how well did it do it, if at all?

    Both President John F. Kennedy, who launched the proposal for a “war on poverty” and his successor, Lyndon B. Johnson, who guided the legislation through Congress and then signed it into law, were very explicit as to what the “war on poverty” was intended to accomplish.

    President Kennedy said, “We must find ways of returning far more of our dependent people to independence.”

    The same theme was repeated endlessly by President Johnson. The purpose of the “war on poverty,” he said, was to make “taxpayers out of taxeaters.” Its slogan was “Give a hand up, not a handout.” When Lyndon Johnson signed the landmark legislation into law, he declared: “The days of the dole in our country are numbered.”

    Now, 50 years and trillions of dollars later, it is painfully clear that there is more dependency than ever.

    Ironically, dependency on government to raise people above the poverty line had been going down for years before the “war on poverty” began. The hard facts showed that the number of people who lived below the official poverty line had been declining since 1960, and was only half of what it had been in 1950.

    On the more fundamental question of dependency, the facts were even clearer. The proportion of people whose earnings put them below the poverty level — without counting government benefits — declined by about one-third from 1950 to 1965.

    All this was happening before the “war on poverty” went into effect — and all these trends reversed after it went into effect.

    By any reasonable measurement of war on poverty mission statements made by presidents Kennedy and Johnson, the war on poverty was a miserable failure.

  • anonymous

    Nice work, I laud your objective. I think it’s worth noting a few facts if you’re looking for solutions:

    * Despite the increases in stimulus and safety net payments such as food stamps, the poverty rate has increased over the last 8 years. Not surprising, as fewer are employed now than then. As you point out, it’s all about jobs.
    * Texas and Wisconsin are two of the few states that have created many jobs. Both intentionally moved away from state regulations, and became more pro-business. While that sounds bad to some, the people living in those states benefited.
    * Education improvements in high-poverty areas have proven difficult. Charter schools have worked in many of these areas, but the existing school system tends to fight against letting them expand. Blame it on cronyism or teachers unions or just plain resistance to change, but fixing this should be a priority.

  • deserthackberry

    I have 3 science/technology degrees, in Biochemistry, Computer Science, and Cytotechnology,

    With the Biochemistry degree, I was making around $9/hour, with no paid overtime. It was getting hard to find an apartment I could afford, so I started taking Computer Science classes at the university where I worked.

    When I got my CS degree in 1997, I was making $39K, more than double what I made as a research tech. Oddly, as jobs were offshored and “guest” workers were imported in the decade between the Y2K bubble and the recession, pay soared, so I had quite a bit saved when the recession hit, and I was laid off TWICE in the first 5 months of 2009.

    I decided to go back to lab science, but on the better paid clinical side, where even the techs with high school diplomas make more than I had with a Biochem degree. Cytotechnology sounded good, and supposedly there was a shortage of workers because many were near retirement age, blah, blah, blah. Not only was that no longer true, the FDA was on track to approve an alternative to the Pap test that will probably put most cytotechs out of work within the next few years.

    It doesn’t matter what skills you have or how much education you have. Business puts a huge effort in to finding ways to make those skills or education obsolete, or import workers, or export jobs, to keep the labor pool flooded, wages low, and workers desperate. THAT’S the problem that needs to be addressed.