Some people think poverty is what results when employers exploit workers on the bottom of the labor market. Other people think poverty is what results when individuals behave in dysfunctional ways. These two dominant theories then generate a variety of policy ideas, including increasing educational attainment and work incentives to improve labor market outcomes, changing employment rules so as to increase pay for lower-level workers, and instructing people to change the way they engage in family formation, among other things.
When I first got interested in practical poverty policy nearly two decades ago, I went into it with these two theories in mind, assuming that what I was likely to find was that employer exploitation was the better theory of the two. What I found instead was that both theories are way off the mark and that poverty in developed countries is actually much simpler and much dumber than all of that. It’s not bad behavior by employers or degenerates. It’s just what happens when the following conditions are present:
- The national income is distributed using payments to laborers and capital owners.
- Capital ownership is very unevenly distributed across families.
- A large share of the population is not working at any given time.
- Nonworkers are unevenly distributed across families.
People really seem to want poverty to be something much bigger than all of that. Its existence in a rich society is so troubling that it seems to call out for a heavier explanation. But it really is just a simple math problem that has a very straightforward solution.
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Auteur: Matt Bruenig
