The Myth of the Underclass

It makes sense that if we are to talk about how to improve the economic conditions of America’s poor, we must understand two things at the outset: who are the poor, and what is their condition? No policy can be effective if the premises on which it is based are faulty. As it happens, those who demand and develop anti-poverty programs are often guided by exaggerated and sometimes deleterious assumptions. The first problem in understanding poverty is defining it—even a complex consideration of factors will leave us with a relative and arbitrary measure. Do we base it on a certain level of income, health and education? Do we consider property as well? And how do we compare? If we are measuring against others in the community, or in other states, we might get a very different result than if we were to make global comparisons. “Poverty” is more conceptual than absolute. It just means very poor. That said, let us assume the measure used by the federal government. Looking at the poverty line, we see that since Johnson’s Great Society programs were passed in 1965, the poverty rate has bumped steadily along between 12 and 15 percent. It is interesting to note how little this number has changed, despite a roughly 1300% increase in federal welfare spending over five decades (adjusted for inflation). One might imagine what life is like beneath the threshold. Most of us have known someone in this group; many of us have even been there ourselves. Americans have great compassion for those who struggle just to keep food on the table and gas in their vehicle. To many, poverty in a nation as rich as the U.S. just seems unreasonable and immoral. How the other half tenth lives Indeed, Americans are rich; so rich that a poor person in the U.S. is still very wealthy by global standards. In fact, they seem to be doing well even by American standards. A report published by The Heritage Foundation, titled “Understanding Poverty in the United States: Surprising Facts About America’s Poor,” revealed some interesting data:

• Nearly two-thirds of poor households have cable or satellite TV, and one-third have a wide-screen plasma or LCD TV.
• One in seven have two or more computers, and more than half have a video game system.
• One-fourth have a digital video recorder system, such as a TiVo.
• Half live in separate single-family houses or townhouses, and 42 percent own their home.
• More than two-thirds have more than two rooms per person, and the average poor American has more living space than the typical non-poor person in Sweden, France or the UK.

This snapshot of the American poor—as defined by the U.S. Census Bureau—provides an image far from the one we tend to think of when we discuss poverty, and it should make us rethink how tax dollars are spent. To be fair, small luxuries such as these make a modest living more sufferable, and some families are truly destitute. No one believes the poor are having a great time. However, it should be clear than in all but a very small percentage of cases, when we are talking about poverty in America we are not talking about survival, but degrees of convenience. By convenience, I mean that economic choices are more limited. For instance, one must shop at Wal-Mart instead of Macy’s, or shop at Macy’s instead of buying a new TV, or shop at Macy’s and get a new TV instead of buying health insurance. It’s the “instead of” aspect that becomes more crucial the fewer resources one has. The Myth Though most “poor” households are faring quite well in global terms, it would still hold that, relative to the rest of American society, there is somewhat of a marginalized “underclass” that gets left behind at every turn. But there is a major problem with looking at income classes this way: it leaves out the actual people involved. It is easy to find charts and tables such as the one above, which describes aggregate poverty levels over time, but we rarely see what this looks like from the level of the individuals who constitute income groups. When we dig into this issue a little further and track changes in personal status over time we discover that “rich” and “poor” does not signify static classes at all, but rather categories of people who fall within a given income range at a particular moment. This short video by the Institute for Humane Studies does an excellent job showing how people are continually moving out of poverty while others are moving in: For the vast majority of those who enter poverty, it is a temporary condition—a fact that is made possible by free enterprise. When people are free to exchange goods, services and labor, there is opportunity for economic development, and this is true at both the local and international level. This point is illustrated in a second video by economicfreedom.org, in which nations with the most economic freedom are compared with those with the least: A quote at 1:27 of this video sums up nicely what this post is all about: “if you care about improving people’s lives, then you really care about economic freedom.” It isn’t as flashy as, say, fair trade coffee or TOMS shoes, but it works, and that’s what matters.