Why more jobs and degrees won’t reduce poverty
You can’t beat poverty by helping people get better jobs, or more schooling. We already ran that experiment, and it didn’t work.
The last few decades saw a huge influx of women into the job market, a reformed welfare system aimed at promoting work, and a tripling in the number of college grads. Yet, through all that time, the US poverty rate barely budged.
How can this be? What perverse illogic could keep poor families from the benefits of rising education and more plentiful paychecks?
There are a host of different reasons, but together they reflect one overarching lesson: Work and poverty aren’t as intimately connected as we tend to assume. Poverty hunts at the margins of economic life, disproportionately afflicting those who either cannot or should not work in the first place: children, the elderly, those with disabilities.
Scan the globe, and you find that countries with low levels of poverty have something more than just good jobs and well-educated workers — they have lots of income redistribution, including the kinds of government welfare programs long shunned by the United States.
Big economic changes, no change in poverty
Flash back to the early 1970s, and the American workforce looked very different than it does today. For starters, there were fewer women. Only half of working-age women had jobs in that era, compared with 90 percent of working-age men. Also, college grads were scarce, making up just over 10 percent of US adults.
On both counts, change has come quickly and dramatically. Millions of women have since entered the workforce, and the number of college grads has nearly tripled.
And yet, despite all these new workers and new skills, poverty has proved remarkably durable. For 40 years, the official poverty rate in the United States has bounced between 11 percent and 15 percent, with no exception and no discernible trend.
This is no statistical fluke, and it’s certainly not because we’ve been raising the bar on what constitutes being poor. A family of four earning $30,000 (pre-tax) is considered too deep-pocketed to count as impoverished. The cutoff is $24,339.
Stagnant wage growth is one reason poverty continues to afflict so many Americans. Low- and middle-income workers haven’t seen meaningful pay increases in a generation, which makes it tragically easy to have a job and still live below the poverty line. This is true even for college grads, who are much more likely to be living in poverty than they were back in the 1970s.
Perhaps more important, though: Lots of poor people are too far removed from the job market to be lifted by programs that encourage work. More than half of them are kids, students, seniors, and people with disabilities. Another big chunk are full-time caretakers, whose entry into the workforce would be balanced by the need for high-cost child or elder care.
Forget jobs; other countries fight poverty with money
Across much of Western Europe, the poverty rate for working-age people is 40 to 50 percent lower than what you find in the United States. With child poverty, the gap is even bigger. In Denmark and Finland, less than one in 20 children lives in poverty; here, it’s one in five.
But here’s the thing few people realize: These stark differences between US and EU poverty, they’re all about taxes, redistribution, and government programs. Which is to say that the number of jobs, the availability of college degrees, even the strength of worker-defending unions are all secondary. Economic conditions don’t make the difference; welfare does.
How do we know? The nonpartisan Organization for Economic Co-operation and Development actually calculates what working-age poverty rates would look like if you ignored taxes and government spending programs.
Market poverty, as it’s called, looks just at the effect of jobs and paychecks. Turns out that on this measure, the United States is in line with famously low-poverty countries like Norway, Germany, Denmark, and Canada — and we look even better than the United Kingdom and France.
Everything changes, however, after accounting for the effect of welfare and transfer programs: things like pensions, housing subsidies, child-care support. Include those, and the real poverty rate for working-age citizens across Europe drops from around 20 percent to well under 10 percent. Meanwhile, the United States drops less than half that amount — a reflection of our slighter social spending.
Jobs and education are good, but . . .
None of this is meant to suggest that we should stop helping people build skills and find work. Education makes workers more productive, which is the only real path to long-term growth. Plus, the more workers, the more goods produced and services provided.
It’s also possible to argue that for all its flaws, the current US system still beats the old welfare-era system, because it’s better for families in poverty to have low-paying jobs than to get government checks. Particularly if you think work brings meaning and dignity to our lives.
But there does seem to be a limit to this approach. The idea that we can cut food stamps, add work requirements to Medicaid, and somehow reduce poverty by encouraging more people to enter the workforce — as some Republican lawmakers are currently suggesting — well, that flies in the face of global experience and 40 years of US social experimentation.
When it comes to fighting poverty, we may have hit a wall. But as with so many policy issues — including health care and electoral reforms — the main reason the United States can’t move forward is that it eschews the solutions global peers already have developed and tested.