The Abolition of Poverty

In Economic Planning, Economics, European Politics, Financial Crisis, Full Employment, Living Wage, Poverty, Public Policy, Public Works, Social Democracy, Social Policy, Welfare State on August 13, 2009 at 2:34 pm

Introduction:

As of the most recent publication by the Census, 38 million Americans lived in poverty in 2007 or 13%. Since then, this number has certainly increased. Although new national statistics are still to come for 2008 and 2009, we do know that the recession has pushed California’s poverty rate up to 17%. Given past recessions’ effects on the national poverty rate, it’s not unlikely that the poverty rate in 2008 and 2009 will rise to 14 or 15%, wiping out all progress made in the 1990s.

Unsurprisingly, given how the rest of his presidency turned out, the Bush legacy on poverty will be one of a decade of lost progress, with poverty rising by five million even before the most recent economic downturn.  Given the further damage caused by the “Great Recession,” the question now becomes what President Obama’s legacy on poverty will be.

Between health care, climate change, the Employee Free Choice Act, and immigration reform, there’s enough on the political agenda at the moment to easily last us into 2010. Poverty is unlikely to make onto this list, especially given how quickly it fell off the political agenda after the (now in hindsight somewhat fortunate) departure of John Edwards from the Democratic primaries in 2009. However, I would argue that in terms of constructing a post-midterm or 2012 re-election agenda, I think poverty should merit a high place on Obama’s agenda, both in terms of ensuring that the recovery continues and in terms of making good on his campaign’s promise of historic change.

If poverty does get on Obama’s agenda, it’s highly likely (given what we know about his transition team and the Administration’s staffing) that the approach Obama would take to ending poverty will follow the Center for American Progress’ “Half in Ten” proposals.

However, I would argue that if we go beyond the CAP’s model, we could very well make the abolition of poverty part of the Obama agenda.

CAP’s Model:

If you look at the 12 proposals CAP sets out in the link above (raise and index minimum wage, expand EITC and the Child Tax Credit, EFCA, child care expansion, housing vouchers, Youth Opportunity Grants, Pell Grants, reentry services for prisoners, UI reform, modernizing TANF/food stamps, financial services reform, and expanding the Saver’s Credit), several things jump out at you.

  1. CAP generally relies on expanding existing programs, like EITC and other programs, that redirect resources to the poor, or fixing programs, like UI and TANF, that are supposed to.
  2. CAP generally follows along the lines of academic, expert, and liberal/Democratic party consensus – none of these items are particularly controversial. You can especially see the popularity of EITC as a non-controversial means of redistributing income downwards, and a strong emphasis on helping children (especially through education), focusing on the working poor, and using tax rebates and incentives.
  3. With the notable exceptions of the minimum wage and EFCA, virtually all of these reforms deal with poverty outside of the labor market, either before entry (childrens’ programs and education) or after (ameliorative or redistributive benefits like UI or EITC).

While quite promising in many regards, CAP’s model for combating poverty does have a few major weaknesses. First, because most of their proposals are pre/post-market, there’s little that’s done to deal with the question of whether the economy is producing enough living wage jobs (whereas we know that the number of poverty-wage jobs increased by 4.7 million (to 22% of all jobs) between 2002 and 2006). Second, very little here is directed at the non-working poor, which is especially problematic when the major source of increases in poverty in the near future is going to be poverty as a result of unemployment. (We know, for example, that in 2007, of 7.6 million families in poverty, there were 5.6 million families with no full-time, year-round working member, and 3 million with no working member period).  Third, far too many of these proposed solutions are targeted, rather than universal – and we know historically that “programs for poor people become poor programs,” easy to demonize, stigmatize, and defund, whereas programs that include poor people, the working class, and the middle class are generally more politically secure, better funded, and more generous in their benefits.

By way of contrast, John Edward’s model for abolishing poverty within thirty years, while largely following the same lines as the CAP model, did break from it in one imporant characteristic – it included the creation of one million temporary jobs, to reach the unemployed poor.

Abolishing Poverty:

Which brings us to the role that jobs policy should play in abolishing poverty.Whereas the CAP’s model largely focuses on the roughly 9 million working poor, we know from Census data that there are 11.3 million non-working poor people between the ages of 18-64 (i.e, excluding children and retirement age seniors in poverty). Those poor people make up roughly half the unemployed, a huge pool of poor people who can be lifted out of poverty with the single step of providing them a job that earns more than poverty wages.

Thus, if we were to combine a robust Job Insurance system and Swedish-style labor market programs to attack unemployment-based poverty with the CAP’s results, we could have an even greater impact on poverty than we would if we restricted ourselves to the CAP’s model.

In their report, the CAP notes that, of the 12 proposals that are actually capable of being modelled, the four (minimum wage, EITC, child tax credit, and child care subsidies – note all directed at the working poor) that the Urban Institute could model produced a 26% drop in poverty – bringing the poverty rate down to 9.1%, the lowest recorded level in American history. If we were to combine this with the creation of 4 million public jobs through Job Insurance (setting aside the harder to quantify impacts of the labor market reforms, and keeping in mind an average household size of 2.59 persons), we would add a further 28% drop in poverty – bringing the poverty rate down to 5.7%, not only the lowest on record, but also putting the U.S’s poverty rate on the level of E.U countries like France or Austria.

And from there, the less quantifiable effects of the CAP’s recommendations and labor market policies, as well as an emerging recovery (knock on wood), would begin to eat away at the remaining 5.7%.

Not only would this work a tremendous amount of good for the United States, by combining low(er) unemployment, low(er) poverty, and high(er) growth, but it would also begin to create a social model that the U.S could export to the world.

Freedom From Want, Here And Everywhere:

While I will address this topic more fully later this week, I do want to say a few words about how a jobs-centered approach to fighting poverty would benefit both developed and developing nations. In general, a jobs-centered approach would be beneficial to redirecting the currently rather gauzy and unfocused discussion about poverty in the developed and developing world from one about the “alienation” or “dislocation” of specific subsections of the population (in the developed world, especially in Europe) and about the distribution of resources from the Global North to the Global South, to a more concrete debate over levels of unemployment, wages, and living standards.

In the developed world, a jobs-centered approach would especially help in dealing with the major shortcoming of the European social welfare state – namely, high levels of unemployment, especially among the young and immigrant populations. While European states have historically been much better (at least in the last thirty years) at reducing levels of economic inequality and poverty through generous welfare state programs (especially unemployment benefits), they have not been able as well to deal with problems of poverty emerging through high and chronic unemployment. Adding a jobs program, as Sweden did from the 1930s through the early 1990s, would give Europe the best of both world – low poverty and low unemployment.

The developing world presents a more complex problem. Given huge problems of epidemic disease, access to water and food, and so forth, it might be fair to say that talking about unemployment-related poverty is largely a problem of the developed countries. However, it’s no accident that many of the countries with the highest levels of poverty also have the largest unemployment rates – Zimbabwe has a 68% poverty rate but it also has a 90% unemployment rate; two-thirds of the population of Haiti lives in poverty and, not coincidentally, two-thirds of the Haitian workforce is unemployed. Bringing people off the unemployment lines and back into work not only benefits the worker, but also their entire family.

But above all, we must remember that ending poverty is not a question of feeling or believing in the right things, or even doing those things that make us feel good. Ending poverty is a matter of doing the hard work of ordinary politics.

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  1. A very nice post. Could you provide some additional resources on how Sweden’s job program worked (while it worked)? Was it a WPA-style program (since it was started around the same time) or did they do something different?

  2. Sure. Check out the post titled “Industrial/Labor Market Policy – Think Swedish.” It lays it all out. Basically, it was sort of like a WPA, but with independent funding, and locally administered to fit a national full employment budget.

  3. […] establishing a system of job insurance, and linking job insurance to a broader effort to combine low unemployment with low poverty, I believe that we can restore the United States as a social model that could allow us to once […]

  4. […] begin with, although I did say that programs to abolish poverty and end economic inequality were not sufficient of themselves,  it is the case that they will make […]

  5. […] redistributing resources to the lesser-off, there will still be a need for additional measures to reduce poverty and reduce inequality – the good news is that combining these efforts will make the combined impact […]

  6. […] following the 1960s) for a living. GMI extends state support to all, and in this light envisions the abolition of poverty and the end of dependence on wage labor through a simple redistribution of […]

  7. […] already discussed, establishing a jobs insurance program that paid a modest but living wage would radically reduce poverty (for example, a 4-million-strong program could reduce poverty by 28%) by reducing the ranks of the […]

  8. […] the value of people’s labor is recaptured and redistributed back to them. While it’s fairly common among progressive policy wonks to argue that the EITC should be expanded into what is effectively a Guaranteed Annual Wage (as […]

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