The marriage of poverty and inequality

Poverty and inequality are inextricably linked. That's because poverty is not a personal attribute such as hair color or height, but a relationship between poor people and the society in which they live. The experiences and behaviors of the affluent — the wages they take home, the bonuses they receive, the price they pay for basic goods, the amount of taxes they pay, and the political policies they support — all help constitute what it means to be poor.

And yet many rich people insist that their fast-increasing wealth has nothing to do with the fact that others are poor, and everything to do with merit and just desserts. A number of politicians and pundits have recently given credence to this position, seeking to divorce the fight against poverty from the push for greater equality. In arguing that poverty and inequality are unrelated, they suggest that to help the poor, we must focus on addressing the attributes of people that make them poor in the first place. This is called an “attributionalist” stance.

One of the best representatives of this point of view is New York Times columnist David Brooks, who recently suggested that the uneducated poor “can’t control their impulses, can’t form attachments, don’t possess resilience and lack social and emotional skills.” He’s not alone: other so-called experts point to divorce and teen pregnancy rates among the poor to illustrate the moral failings of irresponsible behavior and sexual promiscuity — failings that lead to cycles of poverty wherein parents transfer their immorality to their children, creating generation after generation of poverty.

This attributionalist stance is false and misleading. It is seductive because it offers a convenient excuse for elites who benefit from today's extreme levels of inequality in America.

In the attributionalist’s view, people are poor because of personal traits — especially their moral failings. In order to relieve poverty, we must make poor people into better human beings, by essentially regulating their behavior. The opposing “relationalist” view contends that economic positions are largely explained by relationships between groups, and that we all share a responsibility to alleviate poverty because the experiences and behaviors of those who aren’t poor have an effect on the lives of those who are.

We can debate these points theoretically, but we can also look directly to evidence of the relationship between poverty and inequality to evaluate whether the relationalist or attributionalist stance makes more sense in the real world. The rich have become richer in the United States, but they haven’t done so simply by creating new economic value through their own hard work. Instead, they have seized considerable value created by others.

Look, for example, at the relationship between productivity and wages. From the 1950s through the 1970s, productivity increases and wage gains kept pace with one another. Workers took home much of the value created by their increased output. But starting in the late 1970s, the relationship between wages and productivity began to diverge. American workers continued to be more productive, but they didn’t enjoy anywhere near the wage increases they once did. As economist Lawrence Mishel has shown, productivity from 1973 to 2010 increased about 80.4 percent, but wages increased by only 11 percent over the same period.

If workers became so much more productive, what happened to the extra value they were creating? The answer is simple: Executives and shareholders took it for themselves. This is evidence that supports the relationalist point of view. The rich aren’t getting richer just because of their personal attributes; they’re getting richer because they’ve been able to appropriate the value created by others.

There’s even stronger evidence for the relationalist position. In his research, the president of the Russell Sage Foundation, economist Sheldon Danziger, has asked how different factors — the changing racial composition of the U.S., shifts in family structure, education, growth and inequality — have affected the poverty rate since the 1980s. His findings are powerful and instructive. While the attributionalists point to divorce and “the breakdown of the family” to explain why poverty persists in America, Danziger demonstrates that inequality is four times as important for explaining poverty as the other factors faced by American families. One basic relationship — the gap between the richest and the poorest — is perhaps the most important reason behind the current poverty rate of 15 percent (about 45 million people).

But why does inequality have such a strong effect on poverty? Danzinger and his colleague Peter Gottschalk argue that as economic growth in America slowed down, the rich managed to be largely unaffected by the declines by seizing a larger share of others’ productivity. In other words, slowing economic growth has hit the middle classes and poor far harder. Writing recently in The New York Times, Jared Bernstein has drawn on Danziger’s work to argue that “Inequality serves as a wedge or a funnel … redirecting growth from a broad swath of households across the income scale to a narrow slice at the top.”

Given this sort of evidence, it’s not a stretch to conclude that the affluent are morally obligated to do something for the poor. After all, they’ve seized a much larger share of economic growth than they’ve contributed. Yet few members of the upper classes see the world this way; instead, many of them believe they are entitled to virtually all the increase in our nation’s growth. There is an irony to their stance. The rich credit their own attributes — hard work, skill, discipline and intelligence — for their good fortune. They shame the poor, painting them as immoral and lazy no-gooders waiting for the next handout. But who really lives off the gains of others? Who really reaps the rewards of economic gains for which they are not responsible?

While a tiny fraction of Americans enjoy almost all the spoils of our national growth, the majority of Americans have a radically different experience. About 40 percent of Americans will live in poverty at some point in their lives, and many more will scrape by, living paycheck to paycheck. The universality of this experience suggests that there is something other than personal attributes (or as some would have it, personal failings) that explain the condition of poverty. The attributionalists need to redirect their sanctimonious moral grandstanding and think more carefully about social and structural causes for poverty. It’s only then that we will uncover effective strategies to deal with it.

Programs that focus on the “culture of poverty” and the alleged “attributes” of poor people don’t get to its root cause, which is, quite simply, that millions of people don’t have enough money. Poverty is not a fixed trait; we can easily make people less poor by giving them enough money so that they’re no longer poor.

There’s considerable evidence that this method works. Progressive thinkers have recently suggested that, in light of such evidence, a guaranteed basic minimum income should be central to addressing poverty and building a better society. But let’s not assume that this is just a liberal idea cooked up by the economically naive: Conservative economist Milton Friedman argued that a similar idea, in the form of a “negative income tax,” might be the path to prosperity. In imagining the poor as moral failures, we have created an elaborate system of government surveillance, security and regulation, infantilizing and demonizing those who are suffering. Instead, we might look to policies like a guaranteed basic income or a negative income tax, in which we give people money and treat them with the dignity their humanity entitles them to.

That can be achieved by giving them the means and the freedom to choose. Not only would it help those who are suffering get by, but rather than treating them like social degenerates, it would trust and empower them to make their own financial decisions. Given how much responsibility the more fortunate among us have for the problems plaguing the poor, it is the least our society can do.