Thursday, November 26, 2020

Looking at Poverty Through a Social Market Lens

Sources:United States Department of AgricultureUSDA,National Low Income Housing CoalitionCoalition for the HomelessHundreds of NYC workers are homeless

Poverty is Regional

The problem with the current discussion of the causes of poverty is that it is discussed without context. Who are the poor in America? Where do they live? If we start with the right wing assumption that poverty is solely caused by a lack of work ethic and ingenuity then it should be pretty evenly distributed across the country assuming that work ethic and ingenuity are the result of the individual choices of homo economicus as is common in a classical economic framework. However, poverty rates vary significantly among states and even between urban and rural areas within the same states. For example, in my home state of Louisiana 18.6% of residents live below the federal poverty line, which is third only to Mississippi and New Mexico in terms of the percentage of residents living below the federal poverty line. Of course, this is only a state average because even within Louisiana the poverty rate varies wildly. In my home parish of St. Tammany, only 11.8% of residents live below the federal poverty line, much lower than the state average, but in neighboring Washington parish approximately 24.6% of residents live below the federal poverty line, which is significantly higher than the state average. Are St. Tammany residents really that much harderer working than Washington parish residents, bearing in mind that St. Tammany parish residents are drawn from poorer praishes such as Orleans and St. Benard parishes, or does their proximity to New Orleans, the center of commerce and trade for Louisiana, give them an economic advantage over rural Washington parish which, aside from a paper plant in Bogalusa and a few timber yards has very little industry? It's doubtful that St. Tammany parish would remain as affluent as it is if it were cut off from New Orleans and had to rely on its own service sector. Any wealth in Louisiana is largely a result of the oil industry, which explains why we find parishes with the lowest poverty rates in the southern portion of Louisiana, while the poorest parishes in the state, like East Carroll parish in which 45.7% of residents live below the poverty line, tend to be located in North Louisiana. Do South Louisianians have a much better work ethic than North Louisianians or does proximity to port cities and the oil industry have a much larger role in determining how poor a parish is? This same analysis can be applied to any region of the country. Virginia, with an average poverty rate of 10.7% just happens to have a much lower poverty rate than West Virginia, with a poverty rate of 17.4%. Are West Virginian's just lazyier? or does being a more rural state with less commerce and industry put them at a disadvantage relative to their more densely populated urban neighbor? To drive the point home, you cannot explain regional differences in poverty by alluding to platitudes about bootstraps; geography is destiny. There's a reason why the rural south has a much higher incidence of poverty (20.5%) than metropolitan New England (12.4%). There's a reason the incidence of earning below the poverty rate drops for all racial and ethnic groups when we move from rural populations to metropolitan populations. It has everything to do with the job opportunities and quality of education available in those areas and nothing to do with an imagined work ethic disparity between the rural south and metropolitan northeast or between people of the same ethnicity in rural areas and people in metropolitan areas. Someone can work as hard as they please in whatever low income jobs are available in their poor, usually rural, area without escaping poverty.

How the Federal Poverty Line excludes poor people

While it is evident that economic deprivation explains the disparities in poverty among certain zip codes and regions it doesn't give us the full picture. Family structure also plays a role in predicting poverty. For example a single mom is much more likely to fall below the poverty line (44.3% in non-metro areas) than a married couple with kids (5.8% in non-metro areas). Of course, this doesn't mean getting married is a ticket out of poverty or that having kids makes one poor (such an implication cannot account for single people with no kids who fall below the poverty line). It may be the case that the financial stability needed to maintain a successful marriage is much harder to obtain if your earnings fall below the federal poverty line, or in the case of single men, it's much harder to attract a potential spouse if your earnings are below the poverty line. More importantly though, married couples file their taxes jointly which means even if both spouses earn say $12,000 each annually (which is individually below the poverty line of $12,760) their incomes are counted together as $24,000 annually, which puts them well above the federal poverty line for married couples ($17,240.00 as of 20202) but doesn't mean they aren't struggling financially. We also need to keep in mind that while poverty rates are lower in metropolitan areas the cost of living, especially rent, is much higher while the inverse is true in rural areas. While the federal poverty line is a great indicator of economic deperivation it's a crude predictor of financial and housing stability.

Urban Poverty and Rural poverty are two different problems

Rent is more often than not the greatest expense low income households incur and yet it is not accounted for in the federal poverty line. This narrow definition of poverty excludes many low income workers from federal assistance programs who are just as much at risk of losing housing, falling behind on bills or being unable to pay for emergency situations as low income workers below the federal poverty line. For instance, a single low income worker making about $12 hr in NYC (the city's minimum wage) and working 40 hours per week would not qualify for SNAP benefits or Medicaid because their annual income ($23,400) would exceed the eligibility threshold for both Food Stamps ($16,248) and Medicaid (138% of the federal poverty line or $17,608.80) even though they are likely struggling to stay afloat in a city where the average renter makes $25 per hour and where the average rent for a studio apartment is over $2500 per month. Even if they had a roomate to split the cost and spent only $1,250 per month on rent they would still end up spending nearly 2/3 of their income on rent not counting utility costs (health insurance would definitely be out of reach). This may explain the why there are thousands of homeless low income workers, including 300 municipal workers, and why 1/3 of families in the city's shelters have at least one employed adult.

I’m working from 8 to 8, 12 hours a day, but I can’t afford the rent,” says Ms. [Donna] Morgan, who works two jobs and earns about $2,100 a month ($25,000 annually). “Simple as that.Ms. Morgan is one of thousands of people in New York City who work but are homeless. Many are employed in low-paying jobs in the service industry that are crucial to keeping the New York economy humming. About 13.5% of jobs in the city pay minimum wage, according to an estimate from the Comptroller’s office, or $11 an hour for workers at businesses of at least 11 employees.

The push for a higher federal minimum wage falls into the same error as the federal poverty line by assuming a uniform cost of living in a country where the cost of living varies dramatically even among zipcodes in the same state. As I pointed out in 'It's the rent stupid', even if the Fight for 15 is successful minimum wage workers still won't be able to afford a market rate one bedroom apartment on their own in major cities like Los Angeles, San Francisco, New York, or Seattle, and unless it were adjusted annually it would fail to keep up with the rampant inflation in real estate prices, which also affect the cost of all good and services for sale within each zip code. So crude instruments provide crude measurements that produce one size fits all solutions that don't actually address the root of the problem. A federal minimum wage also would not be of much use in areas where job opportunities are sparse such as places where only seasonal and temp work is available or in places with high unemployment rates. For instance, a federal minimum wage would be of much benefit to the impoverished in East Carroll Parish, which as of September of this year still had double digit unemployment and which aside from agriculture, which is seasonal work at best, has little to offer in terms of job opportunities. A more robust policy proposal would consider rural and urban poverty to be two different problems that require two different approaches: one to address obvious economic deprivation in rural areas and one to address the problem of higher productivity being accompanied by higher rents in urban areas.


Short of a complete overhaul of the property tax structure, zoning ordiances, and new development permitting process in every major city that makes new market rate housing more expensive and inefficient, public housing would probably be the most expedient way to address housing and financial instability for low income workers in metropolitan areas. Although such a proposal would probably elicit cries of "SOCIALISM" the people claiming such likely live in suburbs that are a direct result of FDR's New Deal style "SOCIALISM": the Federal Housing Admin and Home Owners Loan Corp that insured and financed the development of lily white suburbs and the later creation of the Interstate Highway System that made further Suburban sprawl possible). Even bastions of Capitalism such as Singapore and Hong Kong have robust public housing programs (and embrace Land Value Capture in lieu of taxing wages) as does every other first world country. Federal jobs programs would be more beneficial in rural areas with very little industry because even cutting taxes to zero won't attract private sector employers (other than WalMart and Dollar General) to low income rural areas with crappy infrastructure and low educational attainment; Mississippi, a state which is very dependent on Federal Aid (2nd only to New Mexico) and defense contractors (read: more federal spending) is a great example of this. Jobs Programs could be federally funded through block grants but administered at the state level so each state could tailor it to their own needs; for instance, Louisiana could use it to rebuild its shrinking coastline while California could use it to prevent wildfires.

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