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Tuesday, August 29, 2017

10 Solutions to Intergenerational Poverty

Neither long-term government dependency nor wrecking the economy for a short-term payout is the answer.

From time to time, I see lists on the internet that propose to solve the problems of intergenerational poverty in America.

Unfortunately, most of the time, these lists recommend massive transfers of wealth from rich people to poorer people, or suggest the creation of new “poverty-fighting” government bureaucracies, in spite of the fact that neither of these approaches is likely to solve the underlying problems.

The Decline and Flatline of Poverty

The fact is that in the 25 years before Lyndon Johnson’s  “War on Poverty” began, the poverty rate in America was on the decline.

But now, decades after we’ve created numerous Federal bureaucracies formally dedicated to eradicating the problem for good and over $22 trillion spent, our poverty rates have flat-lined instead. Worse, many of the programs designed to benefit the poorest members of our society have actually created dependency traps that make it nearly impossible for people who grow up in impoverished conditions to escape. (For more on poverty under capitalism, see “Extreme Poverty Rates Plummet Under Capitalism.”)

And as for the idea that the problem of poverty could be solved if only rich people were forced to give their wealth to poorer people? That sounds plausible enough until you realize that it wouldn’t make a significant difference to poverty anyway.

For example, if you combine the entire net worth of Forbes’ list of the world’s 400 richest people, you’d come out with about $2.4 trillion. Yes, it’s an enormous number, but it’s not exactly what you might think.

This is not money all piled up in a grain silo somewhere, waiting for some rich guy to dive in and roll around. Instead, it’s the estimated monetary value of all the assets they own. That means all the office buildings, furniture, computers, telephone lines and other capital infrastructure of their various businesses; the value of their employee salaries, payroll, and pensions; and the on-paper economic value of the businesses themselves.

For example, Amazon reportedly holds $83.4 billion in assets. That includes all their warehouses, trucks, servers, and the actual stuff they keep in stock for people to purchase. And that money is what’s rolled into Jeff Bezos’ supposed $89 billion net worth. Bezos can’t just cash out to the tune of tens of billions of dollars without liquidating the inventory his company holds, selling all of his buildings, and divesting himself from Amazon entirely – and he could only do that in a world where there are other rich guys ready to buy.

So, that $2.4 trillion isn’t a real number in any sense that can be converted into a transfer of income.

Poverty is the natural state of the world and the big mystery of human history is not how people become poor, but how people get rich.

But let’s imagine that it was, even if we could just magically grab $2.4 trillion in cash from the world’s billionaires, when divided amongst the rest of us 99%ers in the United States (about 319,000,000 people), we’d all walk away with a one-time-payment of just $7,500.

Even if we just limited the transfer from the richest 1% to the bottom 20%; each person would get $37,151.70 – or basically a one-time payment of considerably less than the median salary in the US.

Not that we wouldn’t all like the extra cash, but let’s be honest… After that money is gone and we’ve sent a clear signal to the most successful businessmen & women in the world that the reward for building a company like Google or Apple is to have all your assets taken from you and your business destroyed, then what?

Neither long-term government dependency or wrecking the economy for a short-term payout is the answer.

So what should we do instead?

First, we should understand that poverty is the natural state of the world and the big mystery of human history is not how people become poor (that’s easy, do nothing), but how people get rich. Once we recognize that fact, we have to shift our way of thinking about poverty and start seeing growing wealth as a consequence of people’s ability to create and exchange goods and services with each other.

In the end, wealth is not just dollars in a bank account. It’s our very standard of living and quality of life. The money is just a measurement tool.

So what we need is to create a world where it’s incredibly easy for people from every conceivable starting point to enter the market and create their own success. To that end, I’d like to offer 10 actually effective ways to reduce poverty and inequality in America and around the world.

Here we go:

  1. Eliminate most occupational licensing restrictions and lower barriers to entry to getting jobs and starting businesses.

It’s an issue that people often know little about, but roughly 1 in 3 occupations in the United States require a government-granted license before people can even begin to earn a living. And while it’s common to believe that these licenses are protecting the public from bad doctors, dentists, and lawyers, the truth is that most of these licenses are for barbers & hairdressers, florists, landscapers, and gym class instructors. The Institute for Justice maintains an annual report on the state of occupational licensing in America.

According to IJ:

“The report documents the license requirements for 102 low- and moderate-income occupations—such as barber, massage therapist and preschool teacher—across all 50 states and the District of Columbia. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One-third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.”

These licenses are often insurmountable barriers to entry for low-income people not only to finding employment but also to starting their own businesses. In 2014, I made a documentary chronicling the story of one such entrepreneur, Melony Armstrong, and her battle against occupational licensing in Mississippi:

  1. Eliminate current zoning rules in most cities, and allow for mixed use residential/commercial occupation (ie. let people run businesses from their homes and neighborhoods legally).

Zoning regulations have a long and sometimes shady history of pushing low-income people out of areas where opportunities are widely available, and into areas that concentrate poverty into specific sections of a city. Especially in urban areas like New York City, these regulations can make it impossible for poorer individuals to find employment or start their own businesses where they actually live, and as a result, they’re often forced to commute sometimes over two hours per day just to get to and from their place of employment.

The Brookings Institution calls zoning and land-use regulation a form of “Opportunity Hoarding“.

With these kinds of restrictions, children who grow up in impoverished conditions are surrounded exclusively by other poor people and often go their whole lives without ever interacting with middle class or even wealthier people. This can mean fewer opportunities to learn about financial literacy, entrepreneurship, the value of education, or to get employment tips from middle class or wealthy role models. That can certainly contribute to a sense of hopelessness and prolong intergenerational poverty.

  1. End welfare dependency by eliminating most social welfare programs and replace them with more charity and means-tested vouchers for specific services that phase out as people’s income increases.

This suggestion is much more politically challenging, but welfare dependency is an enormous problem in America, largely created by the War on Poverty itself. The way most social welfare programs have been constructed actually punishes people for working and increasing their income, creating a much stronger incentive to continue to collect welfare and avoid working (or at least, avoid legal employment) as long as possible.

For an in-depth look at what creates the Welfare Trap, check out Charles Hughes’ article: The Welfare Trap: Maze of Programs Punishes Work

Of course, we don’t want to leave people in desperate need without any help, so it may be the case that we still need some form of assistance to people who are in genuine need.

However, instead of creating a new government program with the same problems as the older ones, we should look at market-oriented solutions such as vouchers for food, transportation, child services, or health care (ie. WIC, Food Stamps, etc.) that the poorest members of our society can use to buy goods and services from providers of their own choosing. Access to these vouchers would need to be means-tested, and instead of dropping off the minute someone gets a job, the assistance should decrease gradually.

Eventually, along with the other reforms I propose here, we should be able to get to a point where private charity alone would be enough to care for those who were truly unable to earn an income, but in the meantime anything that reduces the Welfare Trap and dependency on the government is a step in the right direction.

  1. End minimum wage restrictions that take out the bottom rungs of the economic ladder and prevent younger poor and frequently minority people from getting their first jobs and gaining necessary experience.

It may seem counter-intuitive to a lot of people, but the minimum wage isn’t actually a magic bullet that helps poor people get paid more.

To the contrary, most evidence actually suggests that significant increases in the minimum wage result in fewer hours worked and often higher unemployment rates – particularly among the lowest skilled or experienced parts of our society, which unfortunately tends to mean poor people and minorities. The Foundation for Economic Education has a fairly large archive of supporting articles and evidence for this problem which you can find HERE.

Nobel-prize-winning Economist, Milton Friedman called minimum wage laws the most “anti-black law in the land”:

55% of minimum wage workers are under 25. They are predominantly teenagers and college-aged students working in their first jobs, gaining experience that they will use throughout their lives. Minimum wage laws are effectively a barrier to those experiences, because they create incentives for employers to only ever hire people they are fairly certain in advance will be worth more than their wages.

And unfortunately, the labor of people with limited skills, limited education, and limited job experience isn’t likely to be valuable enough.

Allowing people to offer and accept jobs at whatever rates they voluntarily agree to would blow open the doors of opportunity to millions of people looking for employment. Once employed, those workers will gain more experience and skills. And as they become more specialized, more productive, and more valuable to employers, their incomes will go up.

My own story fits this pattern, as I suspect is true for most people.

When I was in college, I charmed my way into my first job in video production by offering to work for a day for free, and to work after that for just $6.00 an hour, which was below the local minimum wage at the time. It was probably illegal, but I worked for that company for almost a year and in that time developed a ton of skills and experience that I used to get my next job – which was also in video production.

That experience has led me to the position I’m in today, and without those first opportunities, I don’t think I could do what I do now.

  1. End the drug war, which disproportionately affects impoverished and minority areas and often results in unnecessarily fatherless children and the multi-generational problems that flows from single-parent families.

This one would be huge. The American Civil Liberties Union calls the Drug War “The New Jim Crow“, and it’s easy to understand why.

It’s led to a boom in incarceration that has ended with around 2.2 million Americans in prison. It’s also eroded protections of property rights and civil liberties throughout the country. It’s given enormous powers to prosecutors and police, and that power has been used mainly against the poorest segments of our society.

One of the most soul-crushing stories I’ve encountered after many years of working with people pushing for reform is that of Barbra Scrivner.

In 1992, Barbra’s ex-husband was embroiled in a criminal drug investigation, and prosecutors used Barbra to get to him by accusing her of conspiracy. Barbra had no knowledge of the crime because she’d spent the previous 2 years separated from her ex-husband, getting sober and taking care of her infant daughter. In spite of little evidence, Barbra was sentenced to 30 years in prison.

After 20 years, two suicide attempts, and numerous appeals, she was eventually granted clemency by President Obama. Unfortunately, it was too late, and Barbra’s daughter Alannah – who Barbra originally left her husband to protect – grew up without a mother, ultimately continuing the cycle of substance abuse and poverty.

Yahoo featured Barbra in a video about the struggles she experienced after being released from prison, and I also produced a short video for Families Against Mandatory Minimums with her that gets to the heart of how these incarcerations can affect families.

  1. Radically overhaul our prison system towards restorative justice as opposed to punishment, and end mandatory minimum sentencing.

Not only are we sending too many people to prison for offenses that shouldn’t be crimes, we’re also failing to create opportunities and incentives for people to turn their lives around once they’re in prison.

As a result, poor people go into prison with few opportunities and leave prison with even fewer, often leaving them with the options of either becoming homeless or turning back towards a life of crime. It’s no surprise that the recidivism rate for inmates within 5 years of release from state prisons are an average of 76.6%. This doesn’t help anyone.

Sending people to jail and building our prison system around punishing them for their crimes may be cathartic for some segments of the population, but it does little to improve the lives of the victims of those crimes. And evidence suggests that it may often make the perpetrators more likely to commit crimes in the future. Most of our criminal justice system should be focused on making sure that victims of crime are compensated for their losses, and prisons should mainly be reserved for people we’re actually afraid of – violent and dangerous criminals. Their focus should be on helping those people turn their lives around and become flourishing and productive members of society.

A couple years ago, I spent some time in a prison in Texas shooting a documentary on a program that does just that:

  1. Radically overhaul our criminal code and eliminate any laws that create crimes where there are no actual victims.

Admittedly, this one is also going to be a little tricky, but we currently have a criminal code that is so complex and overly broad that even the people who write and enforce the laws have no clue what it says. The most disturbing consequence of overcriminalization is that it enables police and prosecutors to use the law as a weapon – to extract cash from citizens, make headlines, and support their election bids for Sheriff or DA.

No one is actually immune from this problem, but poor people – who lack the resources in money and time to defend themselves or hire competent attorneys – are particularly vulnerable.

According to noted criminal defense attorney Harvey Silverglate, because of the massive size and complexity of our criminal code, the average American is likely to commit as many as three felonies a day – often without knowing they’re doing anything wrong.

And as Radley Balko explains:

“…these sorts of laws give police more excuses to make pretext stops when profiling for drug couriers. Once they have you, they can take your cash, car, jewelry or other possessions based only on the flimsiest evidence that it might be connected to drugs. They’re opportunities for harassment. The U.S. Supreme Court has ruled that even a crime as petty as a seat belt violation is justification for an arrest — and all of the life disruptions that come with a trip to jail. (Don’t forget that no matter what the offense, a trip to jail can also include a strip search.) Heavy enforcement of these sorts of crimes can breed distrust between police and the communities they serve, and creates more interactions that carry the risk of escalation.

But even assuming that all of these stops, fines, and citations are always legitimate, they’re always going to have a disproportionate effect on the poor, because the poor are the people who can least afford to pay them.”

Solving our overcriminalization problem would go a very long way to reducing burdens on the poor and ending cycles of intergenerational poverty.

  1. Stop subsidizing and encouraging university degrees at the expense of any other kind of education. It makes higher education considerably more expensive (thus taking it farther out of reach for many poor people) and is not a good fit for everyone; whereas many great careers and ways out of poverty do not come from a university program.

We know that Federal student loan programs have caused an enormous increase in the cost of higher education.

Even though most of these subsidies have been created with the idea that they would help low-income people gain access to college degrees, the reality is that they’re doing this at the expense of burdening people with extraordinary debts that can’t even be escaped through bankruptcy.

Fortunately, there are better alternatives available all over the country right now that offer a range of options for people with diverse interests and needs. Trade-schools, apprenticeships, affordable (or free!) online or distance learning courses, and programs like Praxis or Vocatio can be a positive way to skip college and succeed in life.

Everybody needs an education, but not everyone needs to get a four-year degree.

Making more options available and reducing the subsidies, incentives to take on unsustainable debts, and constant pressure to push everyone into a single educational box would benefit poor and low-income individuals most of all.

  1. End corporate welfare across the board, allowing businesses to compete on a level playing field, based on the value they add to their customers not on their ability to benefit from political favoritism.

If it’s important to end the bad incentives created by costly welfare programs for poor people, it is equally, or perhaps even more important to end welfare for the rich.

Corporate welfare is a huge problem, and it pervades every city and state. Taxpayers are on the hook for professional football, basketball, or baseball stadiums; new opera houses; theme parks; shopping malls; pharmaceutical companies; and on and on. Poorer people are frequently forced to pay for direct subsidies to giant businesses that promise jobs and long-term tax revenue that never seem to materialize. And all of this happens at the expense of smaller businesses and local entrepreneurs.

I recently made a new documentary for the Beacon Center of Tennessee on this topic

  1. Allow school choice as the norm. People should never be stuck in a terrible school district just because of their income bracket or because they were born in a certain part of town.

Finally, we must allow school choice.

Currently, low-income people in America – zoned into poorer and more dangerous areas, restricted from economic opportunities, and burdened by a criminal justice system that often treats them as cash machines with little recourse – are also unable to even move their children to better schools where they might have a chance at a decent education and high-quality educational role models.

There’s a reason why charter school lotteries are flooded with applicants from poor communities every year.

Parents are desperate for options, and an awful lot of the time, those options are much better than the existing alternatives.

Antony Davies & James R. Harrigan, hosts of FEE’s “Words & Numbers” Podcast recently tackled this issue and note that school choice is always an option to wealthy people who can afford to move to better school districts or even send their kids to private schools, so it shouldn’t be such a shocking or politicized struggle to expand those opportunities to the poor through tax-reductions and voucher programs:

  • Sean W. Malone has spent over a decade building creative teams and producing content with the goal of effectively communicating the value and importance of human freedom to as many people as possible.