Liberating the Poor from Poverty

April 17, 2014

Despite a "War on Poverty" that began in 1965, the poverty rate today is nearly the same as what it was when the war on poverty began. Basically, we fought the War on Poverty, and poverty won. Why, asks Peter Ferrara, a senior fellow at the National Center for Policy Analysis.

  • One reason is because lower income populations stopped working: While almost two-thirds of households in the bottom income quintile were headed by working persons in 1960, only one-third of households in the bottom quintile were working in 1991, and only 11 percent were working full time, year round. Only 2.7 percent of Americans working full time and year round are in poverty.
  • Another reason is that there exists a "poverty trap" that encourages welfare dependency, because when those in poverty do enter the workforce, they are effectively subject to taxes on that rising income.
  • Family breakup is another major contributor to poverty: Female-headed households with children have a poverty rate of 44.5 percent. Married couples with children, on the other hand, have a poverty rate of just 7.8 percent.

All federal programs could be reformed through block grants, like those used in the 1996 welfare reforms. Ferrara suggests using a work safety net.

  • All able-bodied Americans that show up to their local welfare offices could be guaranteed a minimum-wage work assignment for a full day's work. Welfare administrators, in addition to charities, local business groups and churches could organize local employers to offer these private job opportunities.
  • People would be incentivized to take these jobs (because they would not be able to receive benefits otherwise), and the poverty trap would be eliminated, as earning more would not reduce a person's benefits.
  • Eventually, these temporary jobs will lead to permanent employment and wage gains, as workers gain skills, experience and new work opportunities.

The current minimum wage, plus the Earned Income Tax Credit, plus the child tax credit adds up to more than the poverty line for every possible family combination. Consequently, this work safety net -- which would guarantee a full-day, minimum-wage job -- could completely eliminate poverty in America.

Source: Peter Ferrara, "Liberating the Poor from Poverty," National Center for Policy Analysis, April 17, 2014.

 

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