Welfare and the Poverty Trap

February 7, 2012 § 1 Comment

Republican presidential candidate and former Massachusetts Governor Mitt Romney recently came under heavy fire when in an interview he let slip, “I’m not concerned about the very poor.” Although he clarified his position, saying that the poor have a “safety net,” the remark still drew criticism. Many critics were quick to point out that the comment revealed his ignorance of the challenges that low-income Americans face, such as a tight job market, limited educational opportunity, declining social cohesion, and international competition.  Not all of Romney’s critics, however, were motivated by an acknowledgement of the depths of American poverty.

In fact, Romney’s presidential rival Newt Gingrich criticized the former Massachusetts governor’s belief in any social safety net at all, attacking it instead as a “spider web.” Former Speaker Gingrich, along with many conservatives in the United States, argued that the social welfare system encourages laziness and dependence. They say that it discourages job-creation and thus perpetuates a cycle of poverty, unemployment, and social exclusion.

Gingrich’s point may contain some truth in theory, but an international comparison shows that a developed welfare system can be anything but a trap. In Denmark, nearly 50% of the country’s GDP goes through the government and is redistributed through spending and transfer programs. The nation’s welfare program provides free education through college, support for all families with children, guaranteed healthcare, and a public pension. According to Gingrich, this would be the ultimate poverty trap: why bother ever getting a job when everything is guaranteed for life?

Yet Danes are some of the fastest to exit poverty. As demonstrated in a paper by Danish sociologist Gøsta Esping-Andersern, Danes leave poverty faster than both Americans and other Europeans. In Denmark, only 41% of people who were in poverty are still in poverty the following year. Only 3% are left in poverty after 3 years.

The story in the United States is much different. Among people in poverty, 81% are there a year later. Three years later, 58% are still poor. This rate was the worse than other European countries, including France, Italy, and the UK.

What makes the Danish poor so mobile? For one thing, the Danish government has very proactive retraining and workforce re-entry programs. The resources to pull yourself up out of poverty are always available.

Perhaps the better question is, Why are the American poor so stuck in poverty? While a myriad of factors are no doubt involved, we certainly do not have the existence of the American welfare system to blame. Removing the small welfare state here, as Gingrich would advocate, would only make the duration of poverty longer, not shorter.

Poverty in America is deep and widespread, and simply telling the poor to get it together and pull themselves out of poverty will not accomplish anything. We have to address the sources of poverty: struggling schools, broken families, racial discrimination, lack of low-skill jobs, and low wages, among other causes.

In light of these challenges, it is unimaginable to have an American president who “is not concerned about the very poor.”


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