Inequality And Those Lazy Poor People

Posted by Bob Lord

The results are in: The financial crisis is a distant memory and it's time for conservatives to blame poor people for our economic ills. Just when economic inequality is becoming a front burner issue. What a coincidence!

Ultimately, I'll make the argument that you can't logically lay inequality at the feet of the poor, even if they are lazy. First, some background.

Charles Blow's op-ed in Saturday's NY Times, A Town Without Pity, explores this phenomenon:

In this America, people blame welfare for creating poverty rather than for mitigating the impact of it. An NBC News/Wall Street Journal poll in June foundthat the No. 1 reason people gave for our continuing poverty crisis was: “Too much welfare that prevents initiative.”

…

Part of our current condition is obviously partisan. Republicans have become the party of “blame the victim.” Whatever your lesser lot in life, it’s completely within your means to correct, according to their logic. Poverty, hunger, homelessness and desperation aren’t violence to the spirit but motivation to the will. If you want more and you work harder, all your problems will disappear. 

…

But another problem may be more broad-based: the way that many Americans look at the poor with disgust.

As Susan Fiske, a Princeton professor who has studied people’s attitudes toward the poor for more than a decade, told me on Friday:

“The stereotypes of poor people in the United States are among the most negative prejudices that we have. And people basically view particularly homeless people as having no redeeming qualities — there’s not the competence for anything, not having good intentions and not being trustworthy.”

Fiske’s research shows that people respond not only to the poor and homeless with revulsion, but they also react negatively to people they perceive as undocumented immigrants — essentially anyone without an address.

I wonder whether a dim view of the poor correlates with age, with older folks more likely to hold such a view. This is anecdotal, but a 70+ year old acquaintance of our family recently sent my sister a somewhat angry email in reaction to one of my posts. After referring to me as "abysmally ignorant" he went on about his own economic views, in which he ultimately took up where Mitt Romney left off, going after the 47% for their laziness. But the telling thing about his rant is that the jargon was from yesteryear. He even quoted Maggie Thatcher. So, my hypothesis (and its only that) is that as one grows older it becomes increasingly less likely that his worldview will continue to evolve as times change. If I'm correct, then many of today's seniors would still have a 1980 worldview, when it was fashionable to regard the poor with disdain. Reagan tapped into that disdain with references to "welfare queens."

And of course there's Thucky, my detractor-in-chief. The Thuckmeister's been on a tear about this lately, in part because he finds it offensive that safety net beneficiaries own flat screen TVs. I think he and other conservatives are delusional (and utterly lacking in personal experience) when they speak of how comfy life is on welfare, but Thucky actually raises a point worthy of discussion when he notes that the effective tax rate (think: lost benefits = taxes) on an unemployed person is 67%. That ties into the view Blow notes in his op-ed that welfare undermines initiative. I personally don't think there is a specific effective tax rate for the unemployed who commence employment, as Thucky and the conservative economist upon whom he relies do, but that doesn't really detract from the point. There are "cliffs" in our safety net system where the loss of benefits creates a disincentive to work, and sometimes the effective rate going over those cliffs is even higher than 67%. 

Are the conservatives wrong about the laziness of poor people? Not entirely. After all, laziness lies on a continuum, and everyone who has some activity (or non-activity) he prefers to his work has his threshold. If safety net benefits provided me with 95% of the income I make working, I'd pack it in. To some degree, we're all lazy. 

So, to say poor people are lazy really is to say nothing more than that we have an economic system that does not provide enough incentive for every able bodied person to work. If the goal is either to coerce or entice every able bodied worker into the workforce, that could be achieved by reducing social safety net benefits (coercion) or increasing wages (enticement), or some combination of the two.

That of course assumes it's optimal for all able bodied persons to work and that it's possible to reach that level of employment. It may not be.

With all that as background, compare the impact on poverty and inequality under two alternative approaches. The first, which conservatives favor, would be rein in safety net benefits for all except those who absolutely can't work. The second, the one favored by progressives, would be to enhance the safety net system so as to eliminate poverty for all.

The first alternative would push us closer to full employment, especially if the minimum wage did not interfere with the operation of the market. Workers, desperate to avoid starvation, would accept jobs they otherwise would refuse if safety net benefits were available. Unless the economy produced a surplus of jobs (a rare situation in any economy), the pressure on wages would be downward. The sharing of income between capital and labor would shift towards capital. Inequality would increase.

The second alternative would not push us to full employment. Workers would accept employment only if the incremental benefit beyond safety net receipts created enough incentive for them to do so. Yes, some workers would opt to sit on the couch. But so what? Employers always would have the option to raise wages in order to incent the unemployed to get off the couch. Under this alternative, wages would increase. After all, the unemployed would acquire modest bargaining power, as employers no longer would have leverage from the threat of poverty if a worker refused the terms offered him. The sharing of income between captial and labor would shift towards labor. Inequality would decrease.  

What about Thucky's concern regarding the effective rate of taxation? It's actually a red herring. Thucky uses it to support his view that safety net benefits are too generous, but we can solve the effective tax rate problem without reducing safety net benefits. All we need to do is restructure the phasing out of benefits as a person's income increases. If the benefits are phased out more gradually, the effective tax rate can be brought into the desirable range. And making the phase out of safety net benefits more gradual would reduce inequality further. 

The bottom line? There really is no basis to believe the poor are any more or any less lazy than the population at large. But be depicting the poor as lazy, compassionless conservatives push us towards policies that increase economic inequality, and protect the pocketbooks of the very wealthy. And that is why Washington has become the town without pity that Mr. Blow describes.