How Family Poverty Works

Shawn Fremstad has a report at CAP, titled "Partnered But Poor," debunking the idea that marriage is a cure-all to poverty. The report mostly draws from analysis of the 2013 Current Population Survey done by the GAO (which you can find here). The main takeaway of the report is that:

People living in single-parent families are much more likely to have low incomes and experience economic hardships than those living in both married and unmarried partnered families with children. At the same time, however, the vast majority of people in low-income families with children are in families headed by married or unmarried partners, as are most people in families with children that receive means-tested benefits. This fact flies in the face of claims that marriage is a panacea for poverty.

The report is a helpful corrective to certain marriage reductionist types, but it doesn't fully articulate how simple family poverty really is. The weird discussion of marriage in poverty circles is bad for a number of reasons, but chief among them is that it mystifies the very straightforward mechanics of how family structure affects family poverty.

The Two Rules of Low Family Poverty

Families are made up of two kinds of people: those who work (earners) and those who do not work (dependents). If you're aiming to keep your risk of family poverty as low as possible, then you need to do two things:

  1. Maximize the number of earners.
  2. Minimize the number of dependents.

People who talk about marriage reducing poverty are really indirectly gesturing towards Rule One, which doesn't actually have anything specifically to do with marriage. That is, the marriage people vaguely have in mind that marriage will take a family from one earners to two earners, and thus reduce its risk of poverty.

The reason this marriage point mystifies things is that, obviously, it's not true that marrying someone necessarily adds a second earner to the family. You may be marrying a disabled person, a student, a retired person, someone caring for others, or someone who is or will become unemployed. In that case, marriage doesn't add an earner to the family. It adds a dependent to the family. Adding a dependent to the family violates Rule Two and thus actually increases your risk of poverty. Likewise, it's not true that you need to marry someone to add an earner to your family as there are other ways to do that. Thus, marriage is neither necessary nor sufficient to take advantage of Rule One.

The other reason marriage talks confuses things is that, though it gestures towards Rule One, it doesn't actually take Rule One to its logical end. Going from a one-earner family to a two-earner family will reduce your risk of poverty. But so will going from a two-earner family to a three-earner family. So will going from a three-earner family to a four-earner family. And so on. Rule One doesn't say "have two earners." It says maximize your number of earners. If your poverty strategy is focused on Rule One, then plural marriage or just generally living in big compounds is the way to go.

The two rules of low family poverty can be derived through basic abstract reasoning. Every earner you add to your family brings in more market income. If you have fewer dependents, you have a smaller number of people to stretch your market income across. Beyond this reasoning, the two rules are also backed up with empirical evidence. I presented some of that evidence in a November post from last year that focused on the number of earners families have (click here). For today's post, I produced the following graphs focused on the number of dependents families have.

Here is the market poverty rates of one-earner families based on family size:

Here is the same graph but for two-earner families:

This same basic pattern holds for three-earner families, four-earner families, and so on. All else equal, more dependents means a higher risk of family poverty. All else equal, more earners means a lower risk of family poverty.

Managing the Dependent Burden

Although the anti-poverty strategy for individual families is very clear—add earners and shed dependents—this is not exactly an anti-poverty strategy for society. We simply do have dependents in this world. Some people get disabled and can't work. Some people get too old to work. Some people get laid off. Some are in college and some are kids. Hoarding earners and avoiding dependents ensures your family has a low poverty risk, but it doesn't reduce poverty overall. It just puts the burden of producing for society's dependents on someone else.

In 2014, 160 million people were working (earners) and 156 million people were not (dependents). This means that the entire society (or the American family, if you will) has an employment rate of 50.7% and a dependency rate of 49.3%, so defined. Individual families also have their own employment and dependency rates and, as you'd expect, those rates are closely related to poverty.

Almost all of the nation's family poverty is found in families with employment rates that are lower than the country's overall employment rate (50.7%). Families where 50% or less of the members are working (75.9 million families) have a market poverty rate of 44.9%. Families where more than 50% of the members are working (64.7 million families) have a market poverty rate of 7.7%. More generally, you can see from the scatterplot that families with high dependent burdens (those on the left side of the graph) have lots of poverty while families with low dependent burdens (those on the right side of the graph) have very little poverty.

Similarly, if we look at average family income as a percent of the poverty line by family employment rate, we see a fairly clear trend: families with higher employment rates have higher incomes as a percent of their poverty line than families with lower employment rates. Put another way: families with higher dependent burdens have less income as a percent of their poverty line than families with lower dependent burdens.

For society (as opposed to individuals), the major "family poverty" problem is that the overall dependent burden is shouldered in an unequal manner across families. Some families have very few dependents and tons of earners, and therefore very little poverty and high per-person family incomes. Others have tons of dependents and very few earners, and, therefore, lots of poverty and low per-person family incomes.

The right-wing "family poverty" types implicitly argue (though in mystifying ways) for dealing with the unequally shared dependent burden by redistributing earners and dependents across families. More concretely, the idea is that we can even out the dependent burden in society by moving earners from families with employment rates over 50.7% into families with employment rates below 50.7% (or, inversely, moving dependents from families with dependency rates above 49.3% to families with dependency rates below 49.3%). This is not always supposed to be accomplished by literally moving a single individual from one family to another, but also by combining multiple families (some with high employment rates, others with low employment rates) into single families.

The main trouble with this strategy (which again is only discussed in very clouded mystifying ways) is that nobody knows how to successfully socially engineer people to reconfigure themselves into families that more evenly share the dependent burden. What's more, the level of reconfiguration that would be necessary to make a serious dent in poverty is truly unimaginable.

So what's to be done, then? Well, the left-wing approach is to say society as a whole should shoulder the dependent burden, or, at least, shoulder a large part of it. Through the wonders of taxation and welfare expenditure, we can draw from all earners and provide for all dependents. Unlike the social engineering schemes of the right-wing, this approach does not try to equalize family dependent burdens by shifting people across families. Instead, it allows people to form into the families of their choice and equalizes family dependent burdens by transferring income (relative to the market distribution) from families with low dependent burdens to families with high dependent burdens. In some welfare states, the mechanics of this are even explicitly recognized, such as in Austria, which provides its litany of child benefits through the wonderfully named Family Burden Equalisation Fund.