Beyond The Myths: A Clearer Path To U.S. Poverty Alleviation
In a new paper published by the Aspen Economic Strategy Group, Melissa S. Kearney and James Sullivan reassess poverty trends, policy responses and common misperceptions about the fight to reduce income inequality in the United States. Kearney is the Gilbert F. Schaefer Professor of Economics at the University of Notre Dame and also director of the Aspen Economic Strategy Group. Sullivan is a Professor of Economics at Notre Dame and also the co-founder and Director of the Wilson Sheehan Lab for Economic Opportunities (LEO), a research center that works with service providers and policymakers to identify effective and scalable solutions to reduce poverty in America. Sullivan spoke recently with Spotlight about the new paper; the transcript of that conversation has been lightly edited for length and clarity.
What was the idea behind this paper?
The paper originated from a series of conversations between me and Melissa Kearney. Both of us do work on domestic poverty and there were kind of two related topics. A lot of my work over the past two decades really has been on poverty measurement and how poverty has changed over time. And one major challenge is that even though there’s growing consensus that we’ve seen declines in poverty over time, that narrative isn’t understood everywhere. And some people still use flawed statistics like the official poverty measure to tell a very different narrative.
And so, we wanted to address that head on, but then also try to answer the question of, ok, then what do we do about it? We wanted to both kind of set the record straight on the progress that we’ve made and also be very clear that a lot more needs to be done. And there’s a lot of evidence out there that should guide us in terms of what we should do.
Could you walk us through the three myths that you address?
The first one is this idea that we’ve made little progress at reducing poverty. This is a narrative that’s been pushed from as far back as Reagan’s last State of the Union address where he said, to paraphrase, my friends, years ago we declared a war on poverty and poverty won. And since then, many policy makers and pundits have said the same thing basically—that we have made very little progress at reducing poverty. And that conclusion is based entirely on the official poverty measure. But there’s just been a growing body of evidence, and I would now characterize it as a growing consensus, that the official poverty measure is a very flawed statistic, particularly when you think about measuring changes over time.
Some of the problems are very obvious and stark, like the official poverty measure is pre-tax income, so it excludes most of the programs that we have ramped up to address poverty in this country using the tax system, things like the Earned Income Tax Credit and the Child Tax Credit. In-kind transfers like SNAP and housing subsidies also are not included in the official poverty measure. This is broadly understood, and yet people continue to cite the official measure, oftentimes when it’s convenient, There’s a bipartisan consensus around this. And yet, you have prominent sociologists building arguments for how we should fight poverty in this country by saying that poverty has not fallen.
And so, the first misconception is that that’s just not true. It’s pretty clear once you kind of lay out the facts and you address the well documented, broadly understood flaws, that poverty is falling. You could measure that a bunch of different ways. Even the Census Bureau now releases two different measures—the supplemental poverty measure and the official measure. And if you were to like track the New York Times and other press coverage on the day they released the official poverty numbers, if you go back several years, they highlighted first the official poverty. And now, they pretty much just jump to the supplemental measure
I was actually struck by that this year. I thought it was more noticeable in the coverage this year than it had been before.
Well, as an aside, I sometimes say that COVID had many casualties, and one of them was the official poverty measure. I mean, we issued hundreds of millions of dollars of economic impact payments and expanded unemployment insurance, reallocating billions of dollars, and none of it was being captured by our poverty measure because it was essentially through the tax system. It was clear that we did not have the right metric for measuring poverty. It just made it pretty stark.
Related to that first misconception is this narrative out there that anti-poverty programs have been ineffective—that we spend a trillion dollars a year fighting poverty to no avail. And so, I think it’s important to make a couple of very clear points. One is the effect of our social safety net on the level of poverty at any given point in time is very clear, right? We’re reallocating resources. It’s almost true by definition; if you’re going to reallocate resources, you’re going to reduce poverty, particularly if it’s targeting people just below the poverty line.
The harder question is why has poverty fallen? That’s harder to pinpoint, but it’s very clear that both economic growth and our efforts to redistribute to address the needs of vulnerable disadvantaged populations have played a role in that. If you just measure poverty based on earned income, we see that there’s this sharp decline, so that would suggest that independent of the social safety net, we see a decline in poverty. That’s in part economic growth, but also in part that our reforms to the social safety net encouraged work. But then once you include all of these government transfers, you see additional declines. And that’s the role of the safety net helping to reduce poverty even further.
And then the third point we make is to look at this idea that all we need to do to solve poverty is just give people more resources. It’s just not as simple as that. And we have growing evidence that speaks to the limits that redistribution of cash can have with all of these large-scale studies that have been going on of guaranteed income programs. There are all sorts of qualifications, but I think it’s fair to say that the impacts have been disappointing. And that’s not to say that we shouldn’t redistribute income, but it is just not going to solve the problem. Giving people enough resources to get to the poverty line at a point in time doesn’t address why are they below the poverty line in the first place. And so, there’s a real need to address underlying causes, and we then move to lay out what we think should be done about it.
And can you talk a little bit about some of the suggestions?
Our overarching prescription is that the key is in investing in people. We make a point that it is a bit defeatist to say, well, people can never do it on their own, so we should just give them cash. It’s very clear that not everybody has equal opportunities to invest in the skills necessary to thrive in today’s economy, and so we need to give them a chance. We need to invest in people in many different ways. And perhaps the most obvious, and we’re certainly not the first ones to point this out, is invest in their skills.
But I think it’s important to note that it’s not as simple as saying, everybody needs to get more education, because that might not be the right match for everybody. But everybody should have the opportunity to build a skillset that is marketable and generates a living wage in today’s economy. That might mean training programs, but we would really push for training programs that are backed by evidence. There’s a growing body of evidence for the use of sectoral training programs that build skills for the industries where there is high demand for jobs, so that once these individuals have these skills, they have a decent chance of landing a job and having job stability at a higher wage, General job training has shown in many instances to be fairly ineffective.
There are also ways to invest in education by addressing the fact that many people who go to college never finish. Making college free is not a very effective intervention because one, it’s poorly targeted, and two, it is not just that they can’t afford college, it’s that there are all sorts of other barriers and challenges that individuals face.
Are there more specifically targeted cash transfer programs—I’m thinking of baby bonds as an example—that you would be more comfortable with and which you think might have a better chance of positive impact?
There’s a lot to like in that idea, but it, it only addresses part of the challenge of the barriers that these individuals face. In many cases the bigger challenge is, what do you do about somebody who has a child but has no access to childcare? What do you do with somebody who has mental health challenges or a physical disability? There are all sorts of barriers that exist that often make it difficult for people to acquire the skills necessary to thrive in the labor market that solutions like baby bonds aren’t going to address.
Do you see any signs in the field of any sort of pause of guaranteed income pilots? The data that came out from Baby’s First Years really got people’s attention.
Those results and those from several other randomized trials have really kind of painted a picture of the limitations of the impacts of these projects. And absolutely every policy conversation that I’m in now that involves re-allocating cash references them. There are responses, however. They happened during COVID; maybe the transfers aren’t large enough; they were temporary; or it’s the targeting. There are all sorts of reasons why and I am supportive of and am actually involved in cash transfer experiments. Here’s an example of a study that has worked: if you’re about to get evicted from your apartment, you can get access to emergency assistance, a one-time cash transfer to help you smooth over this negative income shock. And we’ve now seen with a quasi-experimental study and a randomized control trial that that kind of emergency, one-time cash transfer significantly reduces the likelihood that that one becomes homeless.