The Poverty Capitalism Creates

Yesterday, I shared this graph of a breakdown of the offically poor over time:

To see how I made this and how I defined each category, read yesterday's post. In addition to this graph, I want to share three others I made from the same dataset.

First, you can see above that the non-student, non-disabled, non-working adult poor make up around 11% to 16% of the poor each year. This is a pretty small percentage. Here is a breakdown of just those people:

Here, Caring people are defined as those who said they did not work at all last year because they were "taking care of home/family." Unemployed people are those who said they did not work at all last year because they could not find any work. Rest is the residual (everyone else).

What's interesting here, to me, is that carers make up the majority of this population. Whatever your politics on these people are, this is an important thing to note for policy purposes. What it means is that the majority of these poor non-working adults do not intend to work and have an affirmative caring reason for doing so. If you believe the survey, this means that if you want to flush these people out into the labor force, you've got to change the payoff calculation (either by subsidizing child care or making work pay way more or both).

If you believe that it's fine for some people to just do caring labor (as social conservatives believe for every woman who is not a poor woman), then this means the non-work obsession is extremely overblown.

Second, I broke down the working poor to take note of those who faced spells of involuntary unemployment during the year and those who faced involuntary part-time work during the year. Here is the result.

Even in good years, around 70% of the working poor (i.e. people who worked some during the year) faced a layoff or a spell of joblessness where they were looking for work. This makes sense of course. The workers hit with unemployment, especially long spells of it, in a given year see their annual income collapse, pushing at least some of them into episodic poverty.

Finally, I combined the working poor that faced a spell of involuntary unemployment with the small sliver of people who faced an entire year of involuntary unemployment to create this graph:

To reiterate, here "Unemployed" refers both to the small number of people who were involuntarily unemployed the entire year and the much larger number of people who were working during the year but faced one or more spells of involuntary unemployment.

As you can see, more than 80% of the officially poor are either children, elderly, disabled, students, or the involuntarily unemployed (while the majority of the remaining officially poor are carers or working people who didn't face an unemployment spell). I bring up these 80%+ because these are the classic categories of people that are considered vulnerable populations in capitalist economies. These are the categories of people that all welfare states target resources to in one form or another, the good ones very heavily.

Capitalism fails families with children because, among other things, 1) adding a child to your family increases your income needs but markets don't respond, and 2) people are at peak fertility when they are at their lowest earning potential in their career. This is why good countries provide such things as per-child cash benefits, child care benefits, universal health care for children, free schools, and paid leave.

Capitalism fails the elderly because the elderly can't work and markets give nothing to those who can't work. Some system of intergenerational transfers, whether facilitated by financial markets (for those who can afford it and are sophisticated enough for them) or by public transfer programs like national pensions (which have proven to be the most successful for lower-earners).

Capitalism fails the disabled (and sick) because the disabled can't work or cannot work as much and markets give nothing or little to such people. Disability insurance transfers are the usual remedy. National health insurance also helps a great deal in this regard.

Capitalism fails students because they are studying for much of their waking time and cannot make much income. This is usually solved with a mix of tuition subsidies, living stipends, and public loans. Public loans don't generally show up as "income" for poverty purposes and so the magnitude of the student poverty rate can often be overstated in countries that rely heavily on that kind of student support.

Finally, capitalism fails the unemployed because they can't find jobs and therefore a market income. All people are vulnerable to layoffs and redundancies. That is what it means to have labor market flexibility and dynamism. To counteract the income drops this entails for those hit by it in a given year, you generally need unemployment insurance.

So, as I've been saying for some time now, capitalism generates predictable patterns of poverty related to its inherent structural defects. The US is not immune to this and faces the same patterns of poverty you see in basically any other capitalist country. The difference is how the US responds to it, or rather doesn't respond to it. This is most evident for children where the US is the absolute worst among developed countries, and has the child poverty statistics to show for it. But it is also evident in matters of degree for every other category of vulnerable populations as well.