One Graph for Understanding the Poverty Problem

The battle over poverty policy is largely about the battle over how to initially frame the poverty problem. I take issue with the way the poverty problem is usually framed by most think tanks and policy writers. Sometimes this is because the framing is just inaccurate or misleading (as with Brookings' preferred framing). Other times, it is because the framing quietly excludes from consideration policy options that are at odds with the author's political economic preferences (as when cutting poverty through welfare is completely ignored).

Although I often criticize how others frame the poverty problem, I don't do as much work directly explaining how I think it should be framed instead. So let's do that here.

Life Status Over Time

If I had to pick a single graphic to frame a poverty discussion, it would be this one (click for larger version):

In the graph, I have tallied up what people are doing at each age group. From age 0-14, everyone is simply categorized as being a child. This is because the Census data does not ask labor market questions for people in this age range. From age 15 to 18, you can see the vast majority of people are purely students (those who are both employed and going to school show up as employed). From age 18 to 25, the proportion of people who are solely students shrinks each year until it shrivels to almost nothing.

From around age 25 to 55, employment is in full swing. In that same age range, you have some unemployed people (those looking for work but not finding it), especially in the younger ages. You also have a good chunk of carers (those not working because they are taking care of family). Lastly, there are people who are not working because they are disabled, and their numbers swell the older in the age group you go.

Around age 55, the retirements begin and just keep on coming year after year, until basically everyone is retired in their late 70s.

Poverty Problem

Despite not being a graph specifically about poverty, this tells you the vast majority of what you need to know about the poverty problem.

Under laissez-faire capitalist institutions, only the red Employed bloc and non-employed capital owners (aka rentiers) receive any income. Employed people, provided they are fully employed and not encumbered by dependents, are almost never in poverty. This is because even the minimum wage is enough to keep a single adult out of poverty (based on the official poverty line).

But to eliminate poverty, everyone on the graph has to receive an adequate level of income, not just the Employed. The problem of poverty, then, is the problem of getting income to everyone who is not Employed (aka dependents). Dependents make up the vast majority of poor people in the country. And the Employed poor largely get that way because they are living with (and supporting) dependents.

Understood this way, the problem of poverty can essentially be broken down into six subproblems: how do you plan to get income to 1) children, 2) students, 3) caregivers, 4) the unemployed, 5) the disabled, and 6) the retired/elderly? The countries that have answered these six subproblems with "a big welfare state handing out transfer incomes to these groups" have done the best at keeping overall poverty and inequality low. Given that track record and the fact that I am a non-ideological person who just follows the facts and reports on what works, that is what I usually argue that the US should do.