The Problem With Work-Focused Poverty Initiatives

The Brookings/AEI "bipartisan consensus" on reducing poverty is now officially out. The report focuses on three things: education, marriage, and work. Earlier this week I wrote a post attacking the education component of the consensus titled "Why Education Does Not Fix Poverty." In today's post, I offer a similar attack on the work component of the plan.

1. Rehearsing the Work Poverty Argument

The argument about how increasing work reduces poverty is pretty basic. If poor people worked more, then they would have higher market incomes, and if they had higher market incomes, their risk (and depth) of poverty would be lower.

On its face, there is nothing logically problematic about this formulation. The argument is simply a work-specific permutation of the broader point that if poor people had more money, they'd be less poor. The problems come in when we actually try to apply this observation to reality and determine how many poor people can realistically work more.

2. Most Poor People Can't Work More

As I discussed last month, no matter which common poverty measure you use (official, supplemental, relative-per-capita, relative-equivalized), you find that 60-65% of poor people are either childen, elderly, disabled, or students (a group I call the CEDS bloc). Carers and those who faced a spell of involuntarily unemployment during the year make up another 20% of poor people. So, all together, the CEDS bloc plus carers and those who faced a spell of involuntarily unemployment make up around 80-85% of the poor in any given year. The remaining poor either are fully employed (meaning they worked 50+ weeks) or fall into my residual "Other" category.

The Fully Employed are already working all they can. So the work plan doesn't really help them. For the CEDS bloc, more work is not a particularly realistic, smart, or moral idea. So that leaves only the involuntarily unemployed, carers, and other.

For the involuntarily unemployed, their lack of work is, by definition, not their fault: they didn't lay themselves off; they want work but can't find it. Very few poor people find themselves involuntarily unemployed for an entire year. These are mostly people who just found themselves out of a job for a few months and who fell into poverty because of their loss of earnings. Dynamic capitalist economies constantly unemploy people as firms fail and industries rise and fall. Certainly macroeconomic policies aimed at ensuring we have a tighter labor market can reduce the amount of involuntary unemployment as well as the duration of unemployment. And that's something we absolutely must pursue. But unemployment will always be with us. Better unemployment benefits are an anti-poverty must.

For poor carers, the story is more complicated. These are people who were voluntarily out of the labor force for some or all of the year because they were taking care of home/family. It's unclear what Brookings/AEI thinks about people who do this kind of unpaid care work. The consensus position typically seems to be that rich people who drop out of the labor force to care for family are really great but poor people who do so are really bad. In either case, if your goal is to flush more carers into the labor market, the way you do that is by providing public child/disabled/elder care facilities or benefits, something Brookings/AEI doesn't seem particularly interested in doing. Short of that, you could try to increase the payoff to working some, but for poor carers in particular, it's always a struggle to make work worth it when going to work means incurring huge child/disabled/elder care costs.

Finally, there is the Other group. This group is a residual grab bag and so it's hard to pin down one specific thing to do for them. A good chunk of these people are those who claim to be retired, but are not yet 65. Retiring into poverty before you are retirement age is not an ideal thing to do, but people have their reasons, and more importantly for the discussion here, it's not clear you can activate these people into the labor market. For those not in the poor early-retirement camp, what to do is even less clear. Generally, aggressive Active Labor Market Policies (public employment services, in-work subsidies, training) is the best you can hope for, something Brookings/AEI also spends basically no time on. In any event, Other is a very small percentage of poor people.

In short, 60-65% of poor people (the CEDS bloc) are immediately disqualified from the work focus and another 10-15% (the Fully Employed) are already doing all they can. Involuntarily unemployed people can be helped somewhat by tighter labor markets, but unemployment is also just an unavoidable feature of the capitalist system. Carers will need to be assured that public care benefits can handle their care needs while they work, something Brookings/AEI doesn't advocate. And then Other is a small sliver where activation strategies are just not exactly clear. Given this reality of who the poor are, the exhortation to work is simply not going to get you very far.

3. How About the Welfare State Instead?

In one important respect, Brookings and AEI are right: most poor people do not work or maybe only work a limited amount. But in another important respect, they are wrong: you aren't going to be able to activate all that many poor people into working more for the reasons outlined above. In these circumstances, the actually effective anti-poverty approach is the welfare state. Providing adequate transfer incomes for children, elderly, disabled, students, carers, and the unemployed is the more serious anti-poverty solution here. And, not surprisingly, this is what the lowest poverty countries in the world do.

The Brookings/AEI consensus presumably avoids reaching the obvious pro-welfare conclusion because they believe it is inconsistent with their three stated guiding values: Opportunity, Responsibility, and Security. But these are bad values that are being weaponized to exclude good anti-poverty policy. If you really want to cut poverty to the bone, what you should do is replace those three values with the value of Equality, and come out for the welfare state.