American Myths About Poverty

Photo: A Church in Northwest Detroit on Rosa Parks Blvd.

Northwest Detroit on Rosa Parks Blvd.

Some highlights from Eduardo Porter’s recent New York Times piece “The Myth of Welfare’s Corrupting Influence on the Poor“…just more evidence that social analysis must always trump “conventional wisdom.”

Today, almost 20 years after Mr. Clinton signed a law that stopped the federal entitlement to cash assistance for low-income families with children, the argument has solidified into a core tenet influencing social policy not only in the United States but also around the world.

And yet, to a significant degree, it is wrong. Actual experience, from the richest country in the world to some of the poorest places on the planet, suggests that cash assistance can be of enormous help for the poor. And freeing them from what President <a title="More articles about Ronald Wilson Reagan."
href=””>Ronald Reagan memorably termed the “spider’s web of dependency” — also known as forcing the poor to swim or sink — is not the cure-all for social ills its supporters claim.

One billion people in developing countries participate in a social safety net. At least one type of unconditional cash assistance is used in 119 countries. In 52 other countries, cash transfers are conditioned on relatively benign requirements like parents’ enrolling their children in school.

Abhijit Banerjee, a director of the Poverty Action Lab at the Massachusetts Institute of Technologyreleased a paper with three colleagues last week that carefully assessed the effects of seven cash-transfer programs in Mexico, Morocco, Honduras, Nicaragua, the Philippines and Indonesia. It found “no systematic evidence that cash transfer programs discourage work.”

World Bank report from 2014 examined cash assistance programs in Africa, Asia and Latin America and found, contrary to popular stereotype, the money was not typically squandered on things like alcohol and tobacco.


What did the United States achieve with welfare reform?

Its core objective — getting the poor into jobs — was laudable. In the early years, the effects seemed almost too good to believe. The number of families on welfare plummeted. The labor supply of single mothers soared. Child poverty declined sharply.

But the cheering faded. Over time the labor supply of less-educated single mothers, those with at most a high school education, returned to its earlier level. Poverty rebounded, as did births outside marriage.

After the fact, many independent researchers concluded that the strong economy of the late 1990s, combined with bigger wage subsidies through an expanded earned-income tax credit, deserved most of the credit for the improvement. Meanwhile, pushing the poor off welfare — replacing the entitlement to cash assistance with limited state-run programs that sharply curtailed access to aid for all sorts of reasons — had definite costs, borne by the poorest of the poor.

“What we lost is a commitment to the poor who face significant barriers to work, whether because of child care or physical or mental disabilities,” Mr. Ziliak said. “We have walked away from cash for that group and that group has suffered considerably.”


Why is this debate still relevant today? The evidence has not caught up with the popular belief that welfare reform was a huge success.

The old welfare strategy Mr. Murray blamed for so many social ills died long ago. Its replacement is tiny by comparison, providing cash to only about a quarter of poor families and typically only enough to take them a quarter of the way out of poverty.

Still, it remains under siege. And the arguments against it are pretty much the same that President Reagan made 30 years ago.

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