Employing the poor

I think most people reading this will agree that one of the most virtuous things a society should strive for is to provide meaningful, sustainable incomes to the largest number of people.

Most people should agree that it is truly a great thing to see the poor or middle class lift themselves up through honest employment, especially from dead-end situations that provide little hope.

So, we should probably agree that government policies should be aimed 1)providing the most amount of jobs and opportunity 2)helping the poor and middle class attain jobs that allow class mobility and 3)concentrating on economic self-actualization (it is better to teach a man how to fish than to give him free fish).

So, what is the single most important way to promote these policies? Economic growth. There are no two ways about it: the economies that grow the fastest are also the ones that provide the most job growth, the most mobility and the most opportunities for economic self-actualization.

Check out this podcast on Planet Money (one of the many great things you can listen to on NPR, by the way). A sociologist named Katherine Newman followed 300 people who worked at fast food in Harlem in the 1990s. After eight years, she checked out what had happened in their lives. She divided the results into three broad categories based on how much they advanced and were able to rise out of poverty. About a third advanced pretty well, a third advanced slightly and a third stayed stagnant or declined economicly.

What was the primary determining factor in their success? The overall growth of the economy. Yes, individual factors like initiative and education were important. But the thing that really allowed them to advance was the booming economy of the 1990s that really did cause most boats to rise.

The economic growth of the 1980s, the 1990s and (some) of the last decade has stopped in the last three years. Newman has a real fear for the poor in this generation.

I’m worried about what’s going to happen to the children of these people. Because they are coming into an economy that is very unfavorable. And if you start there, and it takes a long, long time for the economy to pick up, you could be scarred by a labor market like that. … In a persistently bad economy, you can hit a point where it’s almost irretrievable, and even when the economy recovers, you’re too damaged.

Newman’s point, and I think this is crucial, is that a persistently bad economy like we have had recently damages an entire generation, and the damage is most severe to the very poor. It is the poorest people who suffer the most when an economy doesn’t grow, when new jobs are not created and when there is little opportunity for economic mobility.

What do the economic figures show?

This graph is extremely instructive. You really need to click on the attached if you are at all interested in resolving poverty in the United States, but in case you don’t want to, let me summarize it for you.

First, take a look at this graph, which shows economic growth from 1970 to the present.

What do the charts show us? First, there was a severe recession in the late 1970s, which caused the poverty rate to rise. The economy boomed starting in 1983, and the poverty rate declined. The (relatively) small recession in the early 1990s caused the poverty rate to go up. The 1990s boom caused the poverty rate to decline. The 2001 recession caused a small uptick in poverty, which then declined until 2007-2008, when it started to soar.

The data could not be clearer: poverty declines during periods of high economic growth and increases when the economy goes into recession or stagnates.

What does this mean for economic policy and the poor? We should adopt pro-growth policies because such policies help the poor most of all. What do the periods of economic growth all have in common? There are two common threads: either lower tax rates (instituted by Reagan or Bush) or lower spending (instituted by Clinton and the Republican Congress).

Current policies, higher tax rates set to take effect in 2011 and higher spending, will not cause greater economic growth. Capital is sitting on the sidelines awaiting a resolution to the issue of the higher tax rates, which Congress has not yet addressed. The economy is not growing because companies are not investing because the tax issue has not been resolved. This explains our current economic malaise.

Unfortunately, this economic malaise has real effects for real people, including the poor who are being left on the sidelines during the current slowdown. There is one solution: economic growth, and the policies that have been proven to bring economic growth. I hope we learn our lesson.

This entry was posted in General by Geoff B.. Bookmark the permalink.

About Geoff B.

Geoff B has had three main careers. Some of them have overlapped. After attending Stanford University (class of 1985), he worked in journalism for several years until about 1992, when he took up his second career in telecommunications sales. In 1995, he took up his favorite and third career as father. Soon thereafter, Heavenly Father hit him over the head with a two-by-four (wielded by the Holy Ghost) and he woke up from a long sleep. Since then, he's been learning a lot about the Gospel. He still has a lot to learn. Geoff's held several Church callings: young men's president, high priest group leader, member of the bishopric, stake director of public affairs, media specialist for church public affairs, high councilman. He tries his best in his callings but usually falls short. Geoff has five children and lives in Colorado.

14 thoughts on “Employing the poor

  1. I have had a couple of friends make comments about this post on my Facebook page. I will post them here:

    FRIEND #1:
    I was enjoying the article until the end:

    “What do the periods of economic growth all have in common? There are two common threads: either lower tax rates (instituted by Reagan or Bush) or lower spending (instituted by Clinton and the …Republican Congress).”

    This is just wayyy too simplistic.

    During the Clinton years, I think its pretty obvious that the boom years came because of the massive and unprecedented technological innovations that happened in the 1990s. Although at the time, keeping a hold on spending was exactly the right thing to do since the economy was already booming, further spending (or further tax cuts) would have pushed a hot economy even hotter. By the way, that boom in the 1990′s turned into a bubble if you remember.

    Bush’s tax cuts in the 2000′s had some minor impact on a recovery that also turned into a massive bubble (even a bigger more devastating one) in real estate. But I think the massive real estate bubble (and all of the speculation built on top of that bubble) had more to do with it.

    Regarding Reagan:

    I found this article by Bruce Bartlett that explains the Reagan economic recovery:

    http://old.nationalreview.com/nrof_bartlett/bartlett200406140846.asp

    Tax cuts were a factor, but the real reason for the recovery was the monetary policy implemented by Paul Volcker who was the chairman of the Federal Reserve at the time to reverse some of the damage done in the 1970′s.

    You obviously need taxes and the tax rates need to be set at intelligent levels. Being dogmatic about tax cuts (and spending cuts) is one of the reasons I have a huge problem with the ideology of the Republican party at this time.

    FRIEND #2
    The economic growth of the last decade has stopped in the last three years. What happened three years ago? Well Congress raised the minimum wages in 2006. It’s worth noting that places with the highest taxes most regulations and highest minimum wages.

    http://online.wsj.com/article/SB10001424052748704761004575096150953378366.html?mod=WSJ_Opinion_AboveLEFTTop

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  3. Bill, I agree with both of the comments from your friends. My description of the economic polices in the 1980s, 1990s and 2000s is way too simplistic. I didn’t want to get off track from my primary point, which is that it is the pursuit of economic growth, not equality, that is likely to help the poor the most. So, I will stand on that point and agree with commenters who want to criticize my (admittedly simplistic) description of the economic policies of the last three decades.

    It is also true that the minimum wage overwhelmingly hurts the poor.

  4. Agreed, Geoff. Economic growth is essential, but I would also add sound welfare policies for the impoverished. Benjamin Franklin said:

    “I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

    We have a sister in our Ward who refuses to obtain employment because she would lose her government assistance. Each month her state-issued debit card is refilled with $900 for groceries for herself and 2 kids. My family of 4 doesn’t spend more than $400/mo on groceries! On top of that, she also obtains housing and living assistance from the government.

    What incentive is there to get out of poverty when it’s so easy to stay there?

  5. Jeremy, agreed. It is worth pointing out that the Church made it very clear in the 1930s that one of their greatest fears were that the Saints would avoid working because of government welfare.

    I am all for temporary assistance from private sources. Long-term government assistance often does more harm than good.

  6. As with Mr. Stebbing’s Facebook friend #1, I too “was enjoying the article until the end.” While I decidedly agree that helping the poor is paramount in importance for the country, I don’t quite agree with the reasoning behind what you’ve said, Geoff. A few problems with your argument, from the top of my head:

    1) Continual positive economic growth is impossible. There is simply no realistic method to ensure that positive economic growth will be in place for an entire nation over a sustained period of time. The main reason for this is simple: Greed. No matter how perfect an economic plan, there will always be greedy, soulless individuals or groups that will steal everything they can get their hands on. As long as these abuses are allowed to occur unchecked, we will continue to have the same type of problems that caused our current economic downturn (eg: the insane house lending fiasco). Thus the reason for a set of sane and reasonable economic regulations. Regulations that you are arguing against, Geoff. Simply put, the massive deregulation of corporations that occurred during Bush’s eight years, those now promoted by the GOP, and the frightening anti-government extremism from the Tea Party will cause an severe division between the rich and the poor, and our nation will suffer horribly because of it.

    2) As was mentioned by Stebbing’s Facebook friend #1, your argument is “wayyy too simplistic.” However you do later say in response, “the pursuit of economic growth, not equality, that is likely to help the poor the most.” I will not discount that at all. You are right, for the most part. But given my point above, we can’t rely only upon such a vague and indeterminate possibility alone to help those who are at the bottom of the income bracket. To rely solely upon a non-sustainable positive economic growth as a means of eliminating poverty is to ignore the many other reasons poverty exists. Even when America was booming economically, there were far, far too many people still in poverty.

    I’ll be the first to say that churches, donations, fund-drives and face-to-face charity should be the first line of defense against poverty. These methods should not be discounted; they are very important. But it is also in the best interest of both the states and the federal government to help lift people out of poverty. There are many reasons for this, but the most basic are these:

    a) A more educated nation is a more prosperous nation. And so subsidizing education in some form for those who can’t afford it is actually in the nation’s best interest over the long term. And education has become much more critical in our more global society.

    b) The poverty of the citizenry directly affects how a country can affect it’s future. You said it yourself, Geoff: “a persistently bad economy like we have had recently damages an entire generation, and the damage is most severe to the very poor.”

    c) Poverty begets violence, crime and ignorance. Much more money is saved by the government when it is spent upon anti-poverty measures than by spending on prisons and other incredibly overburdened crime-prevention measures. Refusing to reduce poverty with federal money, and then paying out the nose for crime prevention is like making sure you close the barn door after your horse ran away. It is way too late at that point.

    d) Poverty also removes a great deal of power from women. It has been proven again and again in impoverished nations that when women are given education, opportunities and more control over their lives, the country almost always increase and sustain economic development. From Wikipedia, “When given more rights and opportunities women begin to receive more education, thus increasing the overall human capital of the country; when given more influence women seem to act more responsibly in helping people in the family or village.”

    Now with all of this said, I will have to agree with Jeremy who said, “What incentive is there to get out of poverty when it’s so easy to stay there?” Our current form of government assistance is severely outdated, poorly implemented and abused by far too many. I will never support repealing welfare or any other social program that assists the poor because of the reasons I gave above. But I will emphatically support a reworking or better regulation on these programs that will lead people out of poverty instead of trapping them into it. But of course that idea isn’t “politically expedient” at the moment because of the massive division between political ideologies. And so what we are left with is a terrible choice for either a broken system, or a disastrous plan of repealing one of the hopes of recovering our nation’s future.

  7. James, for some reason your comments with lots of links get caught in our spam filter. Just so you know why they don’t immediately appear.

  8. Good stuff, Goeff. It may be debatable what policies led to what growth at precisely what time. But there is no question (IMO) that economic growth should be the top priority of anyone who wants to help the poor. In which case those who care the most for the poor should be the most pro-business, because it’s business, not government, that causes growth.

  9. Agellius, as I say, stay tuned. More to come on that issue in the days ahead. Go vote if you already haven’t done so.

    Any liberals who are reading this, I hear the election has been moved to Nov. 9 this year. Please go vote on that date.

  10. Still, I find this a useful area of discussion.

    We currently know from economic studies that if the top 1% of a country gets 9% to 15% of the income, the country does well. At 20% or so things get unstable. At 50% the country goes into collapse. At 5% it stagnates.

    But, overall, we also know that the chance to work really makes a huge difference.

  11. Economic growth is important, but the part of your thesis that says that fostering such is how we improve income and employment for the poor is myopic.

    I remember reading David Shipler’s The Working Poor several years ago, in which he tried to make a case for progressive policies by telling stories of the down and out in our society, but only ended up reinforcing the obvious truth that most all of his subjects had made the same three mistakes, which were the causes of their poverty.

    It’s a practical guarantee that, regardless of economic conditions, people will never suffer long term poverty if they 1) finish high school, 2) don’t break the law, and 3) marry before having children. A society that wants to improve living conditions for everyone would emphasize those three things first and foremost.

  12. Huston, I agree that on an individual basis the data clear shows that those three factors greatly improve your chances of not being poor. However, our society focuses a tremendous amount on these three issues, or, more accurately, focuses on the first two and gives lip service to the last one.

    Every politician in the world says kids should “stay in school” and of course not break the law. But there is very little politicians can do to push people to actually make these obviously wise decisions.

    Let me put it to you this way: the institutions that are most successful at helping the poor make these three wise decisions are religious institutions. Yet Bush’s faith-based charity policies were roundly hated by liberals. So, the likelihood that we are going to get actual policies that make a difference in these three areas is pretty slim.

    But politicians can actually do something to promote “economic growth first and foremost” policies. You look at economic history and you adopt the policies that have worked in the past to promote economic growth. This is exactly what happened in the 1980s and 1990s, and the policies worked.

  13. I would also note that the most important factor in wealth (vs. avoiding poverty) is not education or hard work, it is social connections.

    E.g. your most important factor if you want to get into medical school? Having a parent who is already an M.D.

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