• July 24, 2014

4 Myths About Poverty

Four Myths About Poverty 2

Ashley Gilbertson, VII Network

A man sorts 
through garbage 
in New York City.

The 50th anniversary of the War on Poverty brought with it the usual spate of tie-in books, scholarly conferences, and political debate. As the dust settles on the anniversary, the country’s continuing conversation about poverty hasn’t advanced much, largely because the event became an occasion to recirculate old and deeply problematic myths.

The old myths were trotted out despite some important new books that should have worked to dispel them. Most notably, Martha J. Bailey and Sheldon Danziger have recently released Legacies of the War on Poverty (Russell Sage Foundation, 2013), arguably the definitive analysis of what worked and what didn’t, how our most cherished poverty-fighting institutions had their roots in that war, and why the expansive goals set out by President Johnson may yet be met. Likewise, Sasha Abramsky's The American Way of Poverty (Nation Books, 2013) is another fact-rich treatment of the peculiar features of U.S. poverty, a book that nicely tells it like it is.

But these books, important though they are, don’t provide fundamentally new recipes for fighting poverty. To be fair, Legacies is more about evaluating where we stand than about developing a way out, while The American Way is healthily realistic about what’s politically feasible at the moment, and thus settles for an agenda that, for the most part, puts existing policies on steroids rather than considering fundamental reform.

If we’re serious about winning a second War on Poverty, however, we need to shake off the shackles of the seemingly realistic. The first step in doing so is to lay bare some common myths about what can be done.

Myth No. 1: Poverty is immutable.
If one had to identify the single most vexing myth about poverty, most scholars would likely point to the oft-repeated claim that nothing can be done because, no matter what programs the country has thrown at the problem, the poverty rate remains intransigently high. As Senator Marco Rubio, a Florida Republican, put it, "After 50 years, isn’t it time to declare big government’s war on poverty a failure?" This type of claim is typically trumped up with official poverty data showing that, while the amount of poverty has fluctuated as recessions come and go, there hasn’t been any long-term decline in the underlying rate over the last four decades. If government programs were really working, so it is argued, shouldn’t that rate be dropping?

That line of argument is disingenuous because it’s now well established that the safety net is delivering real relief. The Stanford Center on Poverty and Inequality, which I direct, recently released a report that shows that the safety net provides about one-third of the income support that low-income households need to reach 150 percent of the poverty line. The safety net, for all its flaws and imperfections, is doing real antipoverty work.

This work is obscured when one uses the official poverty measure to examine trends. The official poverty measure simply ignores those noncash benefits, like the Earned Income Tax Credit, that have been shown to be so crucial in fighting poverty. If a measure of poverty doesn’t count the antipoverty work of our most important government programs, then it will perforce create the impression that government programs do no antipoverty work.

For those uninterested in waging a second War on Poverty, the claim that poverty is immutable is brilliant strategy, as it forces progressives back on their heels, grudgingly fighting a rearguard action in defense of the safety net. We can’t start a conversation about fundamental reform when all of our energy is focused on trying to prevent the poverty disaster that would be brought about by dismantling our safety net.

Myth No. 2: Poverty is the natural outcome of a competitive economy.
The 50th anniversary of the War on Poverty also brought out the Pollyannaish story that our economy is so perfectly competitive that any tinkering would be ill-advised.

This myth has as its starting point the commonplace observation that the United States runs a high-poverty economy. The official poverty measure, for example, comes in at 15 percent for the full population (in 2012) and at 21.8 percent for children. The U.S. economy is a spectacular poverty-generating machine.

The myth is in the conventional explanation of such high rates. It's typically taken for granted that poverty is just a byproduct of running a competitive and deregulated economy. If we really want less poverty, the argument goes, we have no choice but to opt for European-style market regulations and taxes that have the unfortunate side effect of strangling productivity and reducing output.

It follows that poverty is immutable only insofar as we remain true to the high church of competition. If we’re willing to sacrifice our commitment to high competition, as have the Europeans, we could in fact make some headway against poverty.

The standard-issue economist thus intones that Europeans pay dearly for their comparatively low poverty rate by settling for a much-reduced gross national product. Under the American formula, by contrast, we opt for a highly competitive and regulation-free economy, with the happy result that there are more goods and services for everyone. To be sure, the cost of that choice is a high poverty rate, but in principle we could spend some part of our large national product on a better safety net for the poor.

What's wrong with this story? To begin with, even though we could choose to use our relatively large GNP to build a strong safety net, we haven’t opted to do so. Because our safety net is so underdeveloped, it’s not surprising that most liberals find themselves arguing that the safety net needs to be amped up. This position has, for example, been very ably taken up by Danziger, president of the Russell Sage Foundation and arguably the country’s premier scholar of poverty.

Far from being efficient, our economy and labor market are riddled with bottlenecks that protect the rich from competition and prevent the poor from competing.

And Danziger’s right: We should build a better safety net. But we shouldn’t rule out also reforming the economy and labor-market institutions that are overwhelming our safety net in the first place. These fundamental reforms are left off the table because the U.S. economy is presumed to be finely tuned for competition and efficiency. By tinkering with the economy or the labor market (e.g., increasing the minimum wage), we run the risk, it’s typically claimed, of introducing inefficiencies, reducing total output, and making it even more difficult to afford an enlarged safety net.

This is wrong-headed. The unusually high poverty rate within the United States is a telling signal that, far from being efficient, our economy and labor market are riddled with bottlenecks that protect the rich from competition and prevent the poor from competing. These bottlenecks prevent workers from pursuing the high-payoff jobs. The high unemployment and low wages among poorly educated workers arise, in other words, because there are just too many of them chasing after the few jobs for which they’re qualified.

If our economy were truly competitive, labor would freely flow to where returns are highest, and the substantial disparities in earnings would induce workers to secure the requisite education. That hasn’t happened because children born into disadvantaged families are poorly prepared for college, and, even if they weren’t, they couldn't afford it anyway. The supply of college graduates is also kept artificially low because the best private universities ration their available slots and the best public universities haven’t the funds to expand. Because high-quality college degrees are carefully meted out, the returns on a college degree have remained artificially high. We have become so adjusted to the high prices for college-educated labor that we don’t appreciate the rationing that underlies them.

This failure to provide access to education generates failure in the labor market by bloating the ranks of the poorly educated. If overcrowding at the bottom of the labor market were eased by making education more widely available, the situation of workers would improve because (a) those who secured college degrees would earn more, and (b) those who didn’t take advantage of their newfound educational opportunities would still benefit because some of their former competitors would now be siphoned off.

How to proceed? We can reduce the number of undereducated workers by providing quality schooling to all children from preschool on. Although everyone talks about school quality, we need to focus instead on school equality. And we need to mean it. 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 equal opportunity.

Myth No. 3: Full-employment policy is too costly to consider.
We cannot recalibrate our training system overnight. If opportunities for a college education were indeed equalized, the effect on the labor supply would register only gradually as new generations of poor children increasingly went to college. Should we sit back and wait for the long-term adjustment to take hold? Of course not.

We need to supplement education reform with a short-term jump-start that provides jobs to the existing reserve army of poorly trained labor.

It is troubling in this regard that the number of nonworking poor is on the rise. As of November 2013, the proportion of all 25- to 54-year-olds who held jobs was almost 5 percent lower than it was when the Great Recession started, already some six years ago. In the past, recoveries have not produced substantial employment gains beyond the 60th month after the recession began, a result that suggests that full recovery from the latest recession will not likely occur absent major intervention. It follows that a jump-start is needed.

The claim that poverty is immutable is brilliant strategy, forcing progressives to fight to defend the safety net.

There are many ways to deliver that jump-start and thereby increase jobs. 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 through a larger Earned Income Tax Credit or other types of tax reform. It doesn’t matter how we do it or which political party proposes it. What matters is that we get it done.

This is where mythology again comes in. It’s long been simply assumed that we can’t get it done because a full-employment policy either costs too much or generates too many side effects. The critics will quickly point to the problems with each one of the possible reforms. And of course there are problems. But although all approaches to solving the employment program have some downsides, the key question is whether those downsides come close to the cost of maintaining our current amount of poverty. This cost comes in the form of poor cognitive and educational outcomes, high teenage pregnancy and child rearing, substantial demands on the safety net, drug and alcohol abuse, crime and incarceration, and compromised mental and physical health and hence productivity.

And that is obviously a very partial list. We all pay the everyday price of running a high-poverty regime even if we’ve grown so accustomed to it that we no longer realize it. It is simply impossible that these costs, however accepted they may be, are less than the cost of full-employment policy.

Myth No. 4: Poverty is complicated.
The causes of poverty are hardly opaque. The main forces at work are 
simple and obvious: The economy isn’t delivering the jobs we need, and workers aren’t receiving the education they need.

However simple and obvious the causes are, poverty is nonetheless treated as some complex matter that will remain with us until hard-working scholars or practitioners discover that elusive magic bullet. This disease model of poverty, which treats it like a rare and incurable form of cancer, is an immensely destructive rhetoric. It wrongly suggests that we don’t know what causes poverty and that we don’t

know how to end it. It leads to an unending cycle of flavor-of-the-day fixes that are band-aid solutions to structural problems that would be better solved at the source.

The key distinction to be made here is between poverty’s upstream sources and its downstream effects. The upstream sources are simple: We have a jobs disaster and a labor-market disaster of epic proportions. The downstream effects are, by contrast, indeed complicated and multifarious. When people issue the platitude that "poverty is complicated," they’re confusing the causes with the effects.

It’s worth pursuing this point with a more protracted upstream-downstream metaphor. Let’s suppose that there’s an upstream lumber mill that pollutes the river running through it with dangerous chemicals that bring about all manner of severe downstream health problems. The downstream population faces burgeoning rates of asthma, cognitive dysfunction, and so on.

How to address this health disaster? The downstream approach entails taking on the problem by hiring (a) epidemiologists to establish a statistical relationship between exposure and health, (b) clinicians to train the affected families in practices to minimize exposure and identify early symptoms, (c) special-education teachers to provide compensatory training to those with cognitive dysfunction, (d) physicians to diagnose and treat those who have been exposed and taken ill, (e) social workers to dispense disability payments and other benefits, and (f) police officers and prison guards to deal with the fraying social fabric.

The downstream approach is indeed complicated and costly. The alternative, of course, is the upstream solution. If we’d rather not hire workers to repair all the harm and remediate all the effects, we always have the far cheaper option of reducing or eliminating the pollution itself.

A contrived example? Hardly. The vast antipoverty apparatus that we’ve built up is not unlike the downstream approach to remediating pollution. We have social scientists teasing out the multifarious effects of poverty; clinicians, social workers, and child-care workers providing compensatory care to poor children; special-education teachers addressing learning disabilities caused by poverty; social workers dispensing payments and benefits to the poor; and police and prison guards regulating and warehousing the poor.

Who are these stupid people, it might be asked, who decided to opt for the downstream approach? We all are. We have fallen prey to myths that blind us to the obvious and make the unreasonable seem reasonable. We live in a country mired in poverty mythology.

This is not to suggest that the system is kept afloat through myths alone. There are also entrenched interests at work. The well-off don't have an incentive to open up high-quality schooling to all and to expose themselves and their children to open competition. I’m hardly immune to such interests myself. Truth be told, I appreciate the outsize returns on my college degrees, and I naturally want my children to enjoy such returns too.

But we also live by principles and commitments that should force me, and everyone else, to play fair. There is nothing more distinctively American than that earnest commitment to principles. At key moments in our history, we’ve been burdened with deep myths about slavery, segregation, and discrimination, yet we ultimately saw through them and recommitted to deeper and more fundamental ideals. We can and should do so again.

David B. Grusky is a professor of sociology at Stanford University and director of the Stanford Center on Poverty and Inequality. His recent books include Occupy the Future (MIT Press, 2013), The New Gilded Age (Stanford University Press, 2012), and Social Stratification (Perseus Books, 2014).

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