Combating Youth Poverty
A short while ago, I wrote that structural problems within capitalist institutions are responsible for the great majority of poverty. You can tell this is true, I argued, because poverty shows up year after year in similar predictable patterns that are associated with such things as old age, disability, young adulthood, children, unemployment, and so on.
This is not a novel theory of course. Scholars have been pointing this out for as long as industrial capitalism has been with us. For instance, I.M. Rubinow noted in 1934 that "accident, illness, old age, loss of a job ... are the four horsemen that ride roughshod over lives and fortunes of millions of wage workers of every modern industrial community."
This observation is just as true now as it was in Rubinow's age. In 2013, the elderly market poverty rate was 45.3%. Transfers, primarily Social Security, pushed it down to 9.5%. Also in 2013, the 18-64 disabled market poverty rate was 49.3%. Transfers, primarily Social Security Disability Insurance and Supplemental Security Income, pushed it down to 21.4%. Illness, or more specificially the inability to foot the bill for health care, is the leading cause of personal bankruptcy.
In addition to these more obvious structural problems (old age, disability, unemployment, health care), I've also pointed out that the way capitalist institutions distribute income across the life cycle also creates certain predictable poverty trends.
Adults at age 25 (the first year of the prime working age range) have a poverty rate that is 94% higher than adults at age 64 (the last year of the prime working age range). And this trend where older workers have lower poverty than younger workers holds almost entirely across the working age lifecycle:
In a related phenomenon 1-year-old children have poverty rates that are 40% higher than 15-year-old children:
In both cases, similar mechanics are at play. Younger workers are not as progressed in their careers as older workers and therefore have much lower incomes. This is why the 25-64 graph looks like it does. Children obviously don't work, but their parents do, and younger children have younger parents while older children have older parents.
In response to my particular lifecycle point, Noah Smith wrote an article at Bloomberg that contains a great number of different points. I think those points deserve addressing and so I will do so in order below.
But the poverty that comes with youth and disappears with age is neither permanent nor unpredictable. So it doesn’t really require government intervention to alleviate, because people can alleviate it themselves. Simply borrow money when you’re young and poor -- for example, by taking out student loans or car loans -- and pay it back when you're middle-aged and comfortable. If poverty is a predictable function of age, then lenders will lend to you, and both they and you know that you will probably be able to pay it back. Problem solved.
It's simply not true that young, poor workers can access a great deal of unsecured credit. His example of student loans makes this point pretty clearly. Despite the fact that students are in a position to pay loans back most of the time, the private student loan market never really did get off the ground, even after it was made nearly impossible to discharge the debts in bankruptcy. As Susan Dynarski notes, the inability to provide student financing is a kind of market failure, which is precisely why the government steps in to either guarantee them or finance them outright.
In a Twitter conversation about his article, Smith also indicated that he doesn't think that poverty that goes away as you age is a problem period (unlike what he calls "chronic" poverty). People have different values, and so you can't objectively prove it is or isn't a problem. But having very tight and inadequate resources over a certain period of time is stressful and can take a negative toll on your relationships. It also contributes to a host of destructive behaviors. Moreover, impoverishing workers right at the age where family formation is the most common is damaging to marriage and children. And, even if you don't care about young adults, surely we should not be OK with young children (and children more generally) being impoverished just because the great majority of them won't be impoverished as middle aged adults.
Despite somewhat dismissing young adult poverty as a non-problem, Smith does give an idea for how to help ease their financial pain:
To relieve the burden on our young people, the U.S. will need to address the mountain of student-loan debt—not just the cost of college, but the debt overhang crushing the millennials. That is a problem, since the government owns a huge amount—more than $1 trillion—of the student debt outstanding. If we write down some student debt, or make it easier to expunge in bankruptcy, that could put a hole in U.S. government finances.
This is simply not the best way to go about helping to ease young adult poverty. For starters, less than half of families below the age of 35 even carry student debt. Additionally, many of the poor youths are those who never attended college and therefore have no student debt. Finally, As it currently stands, poor adults with student debts generally have no obligation to pay any student debt payments so long as they sign up for an income-based repayment plan. Forgiving some of their debts (along with non-poor student debtors one presumes) may help their cash flow down the line by eliminating future payment obligations when or if their incomes turn up, but that specifically fails to provide them extra resources while they are poor.
Some better ways to improve the plight of young adults are:
- Low-income supplements. When implemented well, these will disproportionately pump up the incomes of the young simply because those incomes are disproportionately low. This could take the form of wage supplements like the EITC (but better implemented) or even general means-tested allowances like Finland's general housing allowance (which functions very similarly to a negative income tax).
- Child benefits. Young adults are often raising children, which is one of the reasons their poverty is higher (another person to care for increases income needs). Providing universal child benefits will go a long way towards helping this problem. This would include 1) maternity/paternity/parental leave, 2) child care benefits, 3) child benefits (i.e. monthly per-child cash payments).
- Youth allowance. In Australia (and only Australia), they have a youth allowance system for young adults aged 16-24. It's somewhat complicated, but the basic thrust is that young people in college, in apprenticeships, in jobs, or looking for jobs receive cash benefits. More generally, I think this category of benefit could be put in the context of a broader benefit regime that helps young people transition from childhood to work. Unemployment is very high and incomes are very low among people aged 16-24. A regime that helps all of those people on their pathway to a career makes a lot of sense: college for those who go, funding for vocational training and apprenticeships for those who want to go that path, wage supplements for those who want to start working immediately, and so on.
If one were trying to craft a young adult benefit policy to smooth the poverty and financial difficulties so many young adults face, this is a far more sensible route than some student debt forgiveness.
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