Why are people poor?
Conservatives suggest much deprivation is the result of flawed behavior by the poor. They point to a strong correlation between poverty and a failure to follow the so-called “success sequence”: Finish school, get a job, get married, and only then have children. Few people who do those things end up in poverty.
Liberals contend that choices are always constrained by real-life circumstances. Therefore, the left thinking goes, conservatives are wrong to discount racism, gender-based discrimination and economic dislocation.
There is truth to both explanations. But in my new book, “The Inclusive Economy: How to Bring Wealth to America’s Poor,” I offer a third explanation: Too often, government policies help make or keep people poor.
We should reform government where it most harms the poor:
Criminal Justice: Scholars at Vanderbilt University have estimated that overcriminalization and the bias against the poor and people of color in our criminal-justice system have increased poverty rates by as much as 20 percent.
Harvard’s William Julius Wilson points out that nearly 1.5 million young black men have been rendered largely unmarriageable because of their involvement with the criminal-justice system.
This has inevitably led to an increase in childbearing outside marriage.
Education: Numerous studies show that educational achievement is a key determinant of financial success. At the same time, government-run schools are doing an increasingly bad job of educating children, especially children who grow up in poverty.
They tend to produce weaker educational outcomes than do schools attended by more affluent students. This has continued despite massive increases in spending on public schools. Yet poor families are often left with little alternative to these failing government schools.
An effective anti-poverty program would break up the government education monopoly and limit the power of the teachers unions.
Housing Policy: One of the worst areas is housing policy. Rent can eat up a disproportionate share of the poor’s income, yet government zoning and land-use policies can add as much as 40 percent to the cost of housing in some cities. In places such as New York City and San Francisco, the zoning cost is even higher, at 50 percent or more.
And these regulations don’t merely increase the cost of rent; they effectively lock the poor out of areas with more jobs or better schools. Historically, zoning laws were often explicitly designed to perpetuate racial segregation. They still have that impact today.
Savings: The route out of poverty runs through savings, not consumption. Yet too many government policies are perversely designed in ways that discourage saving. The more forward-looking a poor person is, the more government works against him.
Banking laws make it difficult for the poor to access our banking system. Asset tests for public programs punish the poor for saving. And Social Security squeezes out opportunities for the poor to save for themselves. We need to reconfigure these policies.
Inclusive Economic Growth: As President Obama once pointed out, “the free market is the greatest producer of wealth in history — it has lifted billions of people out of poverty.” We need to pursue policies such as low taxes, reduced government debt, and deregulation, policies that spur investment, entrepreneurship and the economic growth that will increase the wealth of our society.
We also need to eliminate barriers such as occupational-licensing rules, occupational zoning and the minimum wage. It is estimated that more than 1,100 different professions require a license in at least one state, from florists to funeral attendants, from tree trimmers to make-up artists.
Removing licensure barriers not only unlocks employment and entrepreneurial opportunities for the poor in low-skill occupations but also lowers prices. And minimum-wage laws can block low-skilled workers from getting that first job and starting on the economic ladder.
An anti-poverty agenda built on empowering poor people and allowing them to take greater control of their own lives offers the chance for a new bipartisan consensus that rejects the current paternalism of both left and right. More important, it is an agenda that will do far more than our current failed welfare state to actually lift millions of Americans out of poverty.
A version of this article first appeared in National Review Online.
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