How can the richest nation on Earth have so much poverty? It isn’t a new question. “The enormous increase in productive power which has marked the present century,” the social reformer Henry George complained in his 1879 bestseller, “Progress and Poverty,” “has no tendency to extirpate poverty.”
George’s riddle resurfaces in two new books by eminent American sociologists: “The Poverty Paradox” by Washington University’s Mark Robert Rank and “Poverty, by America” by Princeton’s Matthew Desmond. Like George, both authors start from the premise that industrial capitalism generates more than enough profit to eliminate poverty. So why doesn’t it? Because, Rank argues, we don’t understand poverty’s causes. Desmond takes a darker view: because we’re complicit in poverty’s creation.
The Bible tells us that the poor are always with us. But devout resignation can’t explain why the United States, with the world’s largest economy (gross domestic product: $26.15 trillion) should house more poverty than many much poorer countries. In 2021, the Organization for Economic Cooperation and Development ranked 37 member nations by poverty rate. Costa Rica had the highest rate, followed by Bulgaria, but way up there at No. 10 was the United States. Our poverty rate was (according to this measure) about 15 percent, about the same as that of Estonia — even though Estonia’s economy is roughly one-thousandth the size of ours. Shame on us.
For many decades the prevailing framework for examining poverty was what the anthropologist Oscar Lewis, in a 1959 study of five Mexican families, called “the culture of poverty.” Experts focused on changing behaviors believed to trap people in poverty: single parenthood, welfare dependence and so on. President Bill Clinton’s 1996 welfare law, which put a five-year limit on cash payments to low-income families, was based on the culture-of-poverty paradigm. Behave responsibly, and you won’t be poor.
We should all strive to behave more responsibly, but to Rank and Desmond, culture-of-poverty thinking is at best incomplete. Turn poor folks into homo economicus and they’re still likely to stay poor, because the tools necessary for advancement are nowhere in sight. Rank calls it “structural vulnerability,” by which he means weak economic incentives and bad political decision-making. Desmond is more blunt. The rest of us, he writes, “live as unwitting enemies of the poor,” trying hard not to notice that “some lives are made small so that others may grow.”
Desmond derives his bleaker view from the fieldwork he conducted for his first book, “Evicted,” an account of eight families struggling to find housing in Milwaukee’s poorest neighborhoods. “Evicted” was so gripping a narrative that it won the 2017 Pulitzer Prize for general nonfiction. At the end of the book, a single character escapes: Scott, a former nurse and fentanyl addict. Scott gets clean and — heavily subsidized by the county and a local nonprofit — he’s able to move into a decent neighborhood. Yes, Scott’s odds were better than the others’ because he grew up middle class and White. But on closing this harrowing book, I held tight to this tiny sliver of redemption. At least somebody got out.
In “Poverty, by America,” Desmond tells the rest of the story. Scott stayed sober for several years, but eventually he relapsed and, still in his 40s, died alone in a hotel room. Another character from “Evicted,” a warmhearted African American security guard nicknamed Woo, “never did drugs and drank only on rare occasions.” In his new book, Desmond tells us that Woo “stepped on a nail one day … ignored the injury, because he couldn’t afford to pay it any mind, and lost his lower leg.” Scott and Woo didn’t fail society; society failed them. They lost the game, Desmond argues, because the game is rigged.
Start with a job market that’s unable to secure poor people the necessities of life. Wages have been rising briskly lately, but that’s a blip that’s already begun to recede. The long-term trend is wage stagnation. Between 1973 and 2021, median full-time income for male workers rose a mere 4.3 percent after inflation. Even today, wages aren’t rising as fast as inflation.
Part of that story is the economy’s long-term displacement of full-time jobs that pay well with part-time jobs that pay poorly. A 2019 Cornell Law School study found that the proportion of low-wage/low-hours jobs increased from 52.7 percent of nonsupervisory positions in 1990 to 63 percent over the following two decades. Rank likens the job market to a game of musical chairs with 10 players and eight chairs. Even if all 10 have the necessary discipline and skills, two players will lose.
The principal government tool to make low-wage work pay better is the earned-income tax credit (EITC). The credit’s expansion over the past four decades, under Democratic and Republican administrations alike, has prompted some conservatives to criticize it as welfare. Desmond agrees, but with a difference: The EITC is a handout not to poor families but to employers that shortchange low-wage workers, knowing that taxpayers will make up the difference. The EITC is good public policy, but it should be accompanied by an hourly wage minimum that rises automatically with inflation. Unfortunately, Congress has refused for 14 years to raise the minimum wage.
Large, rich corporations typically evade accountability for the low wages and generally shabby treatment endured by the working poor by keeping them off their payrolls. Instead, they designate low-wage workers as independent contractors who require neither benefits nor wage minimums; adopt a franchise model that makes low-wage workers the franchisee’s problem; or (most commonly) contract out low-wage work to other businesses and staffing agencies that get the job done more cheaply, never mind how. “OnContracting, a staffing agency, estimates that U.S. tech companies like Google and Apple can save an average of $100,000 each year per job by using their services,” Desmond writes.
“Anyone who has ever struggled with poverty,” James Baldwin wrote in 1960, “knows how extremely expensive it is to be poor.” Baldwin was writing at a time when racially restrictive covenants and other types of housing segregation so limited the geographic areas where African Americans could live that, for example, in Detroit, median rent was higher for Blacks than for Whites.
Racial covenants may be a thing of the past, but charging the poor exorbitant rents is not. In 2019 Desmond published, with Nathan Wilmers of MIT, a study based on census data that looked at the profits landlords earned in various types of neighborhoods. They found, predictably, that landlords made more profit in rich neighborhoods ($250 per apartment) than in middle-class ones ($225 per apartment). But landlords earned their fattest profits in low-income neighborhoods (nearly $300 per apartment). That’s because even though mortgages and property taxes are much lower in poor neighborhoods, the rents charged there are only slightly lower. The difference is pure profit.
Even for the nonpoor, the cost of housing over the past four decades has risen faster than wages. But of course it’s much worse for the poor. Rank writes that to afford the average two-bedroom apartment or house without paying more than 30 percent of your income in rent, you have to earn at least $25.82 per hour. That puts it out of reach for everyone earning below the poverty line, plus many whose incomes put them well above the poverty line. Yes, the two-bedroom home will be cheaper in a poor neighborhood — but again, only slightly so.
How are you and I complicit in this? (That’s assuming, dear reader, you aren’t poor yourself; petit bourgeois doesn’t count.) How are we, in Desmond’s words, “unwitting enemies of the poor”?
Well, more than half of us have money in the stock market. Perhaps you have an individual retirement account or a 401(k). The stocks and mutual funds in these nest eggs are chosen based on their return to the investor. The rule of thumb used to be that a reasonable annualized rate of return (factoring out stock market performance in any given year) was 10 percent. But during the past decade investors became habituated to an annualized rate of return closer to 15 percent. This larger return is made possible, in part, by the brutal labor market efficiencies described above.
Are you prepared to demand that the companies in which you own stock boost wages and employ their own low-wage workers, even at the cost of a smaller return? How about a union? According to one study Desmond cites, an unexpected increase in collectively bargained labor costs will cause an equivalent decline in stock value. But that probably isn’t something you have to worry about, because the proportion of private-sector workers who belong to unions has fallen to 6 percent. Since 2000, the share of national income going to labor has fallen by more than 10 percent. Labor’s loss is your IRA’s gain.
The suppression of wage growth also keeps prices down. We’re living in a golden age of consumerism. “We can now, with a few clicks, summon rides and groceries and Chinese takeout and a handyman, all at cut rates,” Desmond writes. Granted, lower prices also benefit the poor. But not as wage earners.
Government benefits like the EITC and food stamps are available to the poor, of course. Indeed, the War on Poverty declared by Lyndon Johnson in 1964 was in many respects a success. Thanks to its programs, the poverty rate fell 27 percentage points for Blacks and 24 points for Latinos between 1970 and 2017, according to the nonprofit Center on Budget and Policy Priorities. Since 1993, according to a study by the nonprofit Child Trends, government assistance has reduced child poverty by 59 percent.
Still, most government benefits go to the nonpoor, mostly in the form of tax deductions and credits. Of the $1.8 trillion in tax breaks handed out by the Treasury in 2021, about half went to families in the top 20 percent of the income distribution: mortgage interest deductions, tax-free 529 plans for college and, yes, tax-free retirement accounts. “The American government gives the most help,” Desmond concludes, “to those who need it least.”
We may not have the means to eliminate poverty. But we can certainly do better than Estonia. We can halt low-wage worker abuses and evasions, raise the minimum wage, crack down on landlord profiteering, rebuild the labor movement and redistribute government assistance. We choose not to. The message of both books is that our first step as a society toward alleviating poverty will be to stop feeling so comfortable with the circumstances that perpetuate it.
Timothy Noah is a staff writer at the New Republic.
Poverty, by America
By Matthew Desmond
Crown. 284 pp. $28
The Poverty Paradox
Understanding Economic Hardship Amid American Prosperity
By Mark Robert Rank
Oxford. 212 pp. $27.95
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