The Two Strategic Approaches to Fighting Poverty

There are two strategic approaches to tackling poverty. Strategy 1: raise the incomes of those with low incomes. Strategy 2: reduce the knock-on effects of having a low income on housing, schooling, safety, health or health care.

Strategy 1 policies attempt to reduce the number of people in income poverty, usually by transferring income directly. Strategy 2 policies try to blunt the impact of income poverty on overall quality of life. Strategy 1 anti-poverty policies are necessary, but far from sufficient. We must work harder on the Strategy 2 side, and make poverty matter less.

The motivation of Strategy 2 policies is to ‘decluster disadvantage,' to borrow a phrase from Jonathan Wolff and Avner de-Shalit, authors of Disadvantage. Inequalities will always exist on all dimensions; but these inequalities are amplified when they strongly overlap. Equality is impossible; but reducing the concatenation of inequalities is not.

‘A society of equals is a society in which disadvantages do not cluster, a society where there is no clear answer to the question of who is the worst off,' Wolff and de-Shalit argue. ‘To achieve this, governments need to give special attention to the way patterns of disadvantage form and persist, and to take steps to break up such clusters.'

Strategy 1 anti-poverty strategies: good, could do better

Strategy 1 policies typically take the form of an income supplement, such as social security, disability insurance, TANF, or a tax credit. The Strategy 1 goal is simple: get more money into the pockets of those with least income from other sources, and so reduce the number of people falling into poverty (against whatever benchmark is selected). Labor market policies can also lift incomes at the bottom and reduce poverty: the minimum wage is the most obvious example. But the most effective way to raise the incomes of poor people is to simply give them more income.

The Strategy 1 framework is working fairly well in the U.S. The redistribution of income towards the bottom has significantly - and increasingly - reduced poverty levels, especially among seniors and families with children.

Much more can and should be done to strengthen Strategy 1, by expanding tax credits to childless adults, making permanent some of the safety net elements such as TANF, reinstating more generous unemployment insurance, and so on.

But there are also political and practical limits to Strategy 1 policies. Making a big dent in the number of people in income poverty would require much more aggressive redistribution. This poses political challenges, of course. But it is also difficult to raise incomes at the very bottom without damaging work incentives. Tax credits for those in paid work help to make work pay and cut poverty at the same time. But the problem is that they do not reach the very poor, who are usually disconnected from the labor market.

Strategy 2 anti-poverty policies: three areas for concern

Strategy 2 anti-poverty policies are unlike Strategy 1. The main difference is that they provide services not cash. They do not make poor people any less ‘poor', in the narrow, income sense. But if successful, they reduce poverty in a broader, multidimensional sense by reducing the correlation between income poverty and other factors, such as education, housing, crime, or health. Here are a few examples of the goals of Strategy 2 policies:

*     Improving schools in low-income neighborhoods
*     Moving low-income kids to safer neighborhoods with better schools
*     Investing in quality affordable housing
*     Subsidizing pre-K for low-income families
*     Financial aid to help poor kids get through college
*     Strengthening public transport, especially in poor areas
*     Universal or subsidized health insurance

As the list suggests, a significant chunk of social policy can be seen as Strategy 2 anti-poverty approaches. The question is whether they are succeeding in the goal of declustering disadvantage. Recent research suggests the answer is mixed. In some critical areas, clustering has worsened. First, there is growing geographical concentration of poverty, according to the latest work from Paul Jargowsky published by the Century Foundation. Second, there is a growing gap by income in terms of college completion, according to studies by Susan Dynarski and others. Third, life expectancy is becoming more strongly associated with income, according to work by my Brookings colleague Barry Bosworth.

Health care reform: successfully de-clustering disadvantage

But there is at least one area of policy where disadvantage is being de-clustered: health insurance. The U.S. is still some way from universal health care, but great strides have been made at both a Federal and State level to reduce the chances of lacking health insurance as a result of lacking income.

Colorado offers a case in point. The proportion of state residents without health insurance has dropped sharply, from 14.3% in 2013, before the Affordable Care Act kicked in, to 6.7% in 2015, according to figures just released. This is obviously good news in itself. But it is also a step towards declustering income poverty and lack of health care. There is still a gap by income level and health insurance, but it has narrowed sharply since the ACA:

Health care reform provides a good example of a successful Strategy 2 anti-poverty policy. There is scope for more aggressive action in other areas, from housing to school quality to neighborhoods.

Perhaps the poor will always be with us. But we can work to make sure that disadvantage in one dimension of life does not translate automatically into disadvantage others.