The Weird and The Wacky Meet

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Poverty Solutions

                 In 2001, 32.59 million Americans were under the official poverty line, which doesn’t include the other 30-35 million who are genuinely poor but aren’t counted in the official tally.  Poverty is a serious problem in America, but not one that has to exist.  Other countries have shown that a viable safety net can be provided for their citizens without resorting to socialism or communism.

                 The United States’ poverty rate is the highest in the industrialized world.  This poverty isn’t spread across the board equally, but is instead concentrated among racial minorities, women, children, the elderly, and those living in certain areas.  While only 7.8% of non-Hispanic whites are poor, the rate is 22.7% for African Americans, 21.4% for Latinos, and 10.2% for Asian Americans.  A full two thirds of impoverished adults are women, as are 16.3% of those under 18, and 18% under 6.  Among those over 75, a tenth of men poor, as are a fifth of women.  Poverty is more prevalent in central cities and four rural regions: the Mississippi Delta, the Rio Grande border with Mexico, the Native American reservations in the southwest and plains, and Appalachia.

                 During the economic boom of the mid-90’s, the misnamed Personal Responsibility and Work Opportunity Act was signed into law, taking away much of the safety net for the poor.  It put limits on how long people could get help, decentralized benefits so that states could apply even stricter limitations, and capped the amount of money to prevent raises even for inflation, population growth or cost of living.  With the economic crash of 2001, many of those who had left the ranks of poverty and gained solid jobs found themselves laid off due to lack of seniority and experience, but this time with nothing to catch them on the way down.  As a result, the very poorest, whose income is below even half the poverty rate, have become still poorer.

                 Things are not looking better.  The current administration has increased defense spending while lowering taxes, leaving a huge deficit that has been partially filled by cutting social programs further.  Ostensibly, private charities would fill this gap, but this has not turned out to be the case.  Whereas the government is capable of spending consistently, charity is a luxury.  Gifts to charity drop when the economy is down, such as in the recession year of 2002.  Moreover, charities are not a direct replacement because they’re often religious, which threatens separation of church and state.

                 America is not the only industrialized nation that has to deal with poverty.  Since the end of the Cold War, the question hasn’t been whether or not to deal with it using communism or capitalism, but rather, what type of capitalism?  Until the passage of the Personal Responsibility and Work Opportunity Act, which Clinton described as “the end of welfare as we know it”, the options considered in the US were all varieties of “welfare capitalism”, which tried to satisfy the needs of the free market while cushioning the blow to those caught up in its cycles and lack of full employment.

                 According to the Australian Financial Review, “the United States stands alone at one pole, with a welfare system confined to a rather patchy 'safety net' and a largely unregulated labor market.”  Other English-speaking countries are more generous, but still have restricted welfare systems compared to industrialized nations in general.  As it stands, most developed countries have some sort of welfare, although with different types and classifications.

                 One multi-national study compared the US, Germany and the Netherlands, and found that the Netherlands did best at “maximising equality and minimising poverty.”  This “detailed and sophisticated” study was performed by philosopher Robert Goodin, political scientist, Bruce Heady, labour market researcher Ruud Muffels and statistician Henk-Jan Dirven.  Or GHMD for short.

                 Having the Netherlands place first in the criteria of social democracy came as no surprise.  But the Netherlands also outperformed the US on the “key liberal criterion of maximising income growth.”  In other words, the real way to increase profits is to aim for equality.

                 The Netherlands also beat Germany in minimizing family breakdown.  GHMD took for granted that the United States is a liberal society where high rates of family breakdown are to be expected.  In other words, having a free market does not correlate with family values, because there are higher rates of broken families.

                 The GHMD study also tried to analyze whether the same people were poor over the course of a decade or whether their poverty was a temporary state.  When defining poverty as having a disposable income less than 50% of the national median, it was found that 6% of Dutch households are poor.  But, when the income is averaged over a decade, the rate falls to 1%.

                 The poverty rate in the US by the same standard is 18% of households.  When averaged over a decade, the number of households only drops to 13%.  This means that, contrary to the myth of upward mobility that comprises the "American Dream", in comparison to the Netherlands, poverty in America is less a situation that a person goes through and recovers from than it is a way of life.

                 Almost nobody in the Netherlands experiences a decade of consistent poverty, while 3% of Germans and 10% of Americans are consistently poor.  As might be expected, this constant poverty also effects education and other aspects of life.

                 Because the US is considered the richest country in the world, it’s possible that the standard of living for poor Americans is still higher than for Europeans living above the poverty line.  To compensate for this, Purchasing Power Parity, which measures the cost of a representative basket of goods and services in each country, is taken into consideration.  Using a different measure of absolute poverty, based on having purchasing power equivalent to less than $11 a day, a UN report estimates that 13.6% of the US families were poor in the mid-90's, compared to 7.3% and 7.1% for Germany and the Netherlands, respectively.  Australia placed 14th out of 17 OCED countries in the Human Poverty Index with 17.6 % of families falling below the $11 per day level.

                 The GHMD study was done in 1994 and 1995, before the welfare reform acts, which I’ve talked about extensively before, so the numbers since this study was released, have only gotten worse.

So, what does all this mean to the average working poor person in the US?  Barbara Ehrenreich's book, Nickel and Dimed: On (Not) Getting By In America, found the author spending two years living on a minimum wage income in different American cities.  Ehrenreich worked 50 hour weeks at jobs that included waitressing, nursing-home care and retail sales, and a stint as a maid.

                 The biggest problem with surviving on minimum wage is finding a way to pay rent, because jobs for the poor are often in close proximity to where the rich live.  In some places, a half-size trailer could be rented for $625 a month, leaving the author to say that “'trailer trash' had become an aspiration.”  She found that her single co-workers took to living in trucks and sharing off-season motel rooms to deal with high rents.

                 Health care was a major issue because US workers rely mostly on their employers for insurance, but minimum wage jobs provide little or nothing in the way of benefits.  This forces people without insurance to put off getting care until it becomes bad enough to go to an emergency room, at which point outcomes are poor and the total cost is higher than if there had been preventive treatment.  It’s also important to note that Medicaid is not often available to the working poor.

                 In the article from Australian Financial Review, the author notes that, while the minimum wage is comparable in Australia, rent is not as cripplingly high and Australians have public hospitals and pharmaceutical benefits, unlike their working poor counterparts in the US.  The author concludes that while being poor in Australia is not as bad as being poor in the US, that there are still obstacles to overcome in eliminating poverty.

                 Randy Albelda and Chris Tilly argue that other countries are better at lifting families out of poverty because of superior tax policies and programs, in an excerpt from their book entitled, “What’s Wrong with Current Poverty Policies?”

                 The first point is that poverty in the US has persisted at a high rate and has even grown during some periods in the last twenty years.  They claim that efforts to fight poverty have been half-hearted at best, and run by misguided notions and theories, so it should come as no surprise that the US has an ongoing poverty problem.  Moreover, this problem is especially bad for single mothers.

                 If you look at the two graphs I’ve provided, you’ll see a couple of things.  The first is that the US poverty rate is extremely high when compared to other countries.  The second graph shows what percentages of families are lifted out of poverty in other countries due to their taxation systems.  Note that, not only is the US ineffective at getting people above the poverty line, but it even allows more to drop below.

                 As reported in a 2002 Guardian article entitled, “Widening Welfare:  Means Testing The Better Off is Fair” it was reported that Great Britain is moving towards a welfare system like Australia, where means tests are used to make sure that well-off individuals don’t take assistance that they don’t need.  In other words, they want the people with the greatest need to receive the greatest amount of assistance.

                 Britain hopes to insure that “people will receive support for bringing up children, reaching old age, or suffering a disability.”  The author feels that this is what a government seeking a fairer society should be doing.

                 The new programs should help 6 million more families, by streamlining current support systems.  Also, £2.7 billion pounds are being allocated to extend eligibility to all families earning up to two and a half times average income.   Working families without children can also benefit through tax credits.

                 The new system deals with both the fact that families need a safety net and goal of making work pay.  It tries to integrate different elements of child support into a single benefit.  Most importantly, it tries to eliminate some of the stigma associated with unemployment benefits by being inclusive and providing an across-the-board assessment.  It also aims to make it easier for people to move back into work by allowing those with low-paying jobs to remain eligible for benefits.

                 The bottom line is very clear.  Families will, on average, be £1,200 pounds a year better off than in 1997, and the poorest fifth will be £2,400 pounds better off.  To put a human face on this, 1.5 million children will be lifted out of poverty.

                 What I found most interesting about this article is that the changes are not seen as enough.  For England, they are a step forward, but the country has the goal of eliminating child poverty by 2020.   It amazes me as an American that, where we taken poverty among children as a given, the British see it as a curable problem and even have a concrete target date by which they intend to cure it.

                 Poverty among children reaches across the liberal/conservative divide, because even if you believe that certain people are less deserving of wealth and really ought to be poor, the same cannot be applied to their children.  Moreover, the example of other nations shows that the current level of poverty is not inevitable under capitalism, so long as we structure our taxes and transfers to narrow the income gap and produce a more equitable society.

Copyright 2004

 

Works Cited

 

Eitzen, D. Stanley, and Maxine Baca Zinn. Solutions to Social Problems: Lessons from Other Societies. 3rd ed. : Allyn & Bacon, 2002.

by Amanda Evans

Date: 11/16/04