A short one today:

A brief summary of

Moller, Stephanie, et al. “Determinants of Relative Poverty in Advanced Capitalist Democracies.” American Sociological Review, vol. 68, no. 1, 2003, pp. 22–51. JSTOR, www.jstor.org/stable/3088901. Accessed 10 May 2020.

This article reviews the development of a data set to measure the impact of multiple different variables on poverty and proverty reduction efforts. It does this by devising a means to measure poverty with and without “tax and transfer” (ie government intervention via wealth redistribution). It tests 17 different variables which had been hypothesized to be indicative of poverty rates across 14 different countries with different rates of poverty to determine which factors had the greatest impact of causing poverty and which factors had the greatest impact on reducing poverty.

What has the biggest impact on causing poverty?

The data asserts that 3 variables successfully explain the majority (67%) of poverty pre-tax and transfer in all 14 countries assessed. (all democracies, BTW). Those variables are Industrial Employment(-), Unemployment(+), and Wage Coordination(-). What the crap are these things, you may ask. Let me tell you, because I had the same question. Unemployment is the easy one. What % of people in a country are unemployed. Being unemployed makes you poorer. (In the middle of Covid 19 Pandemic, there are millions more unemployed people. I fully support the efforts we are taking to decrease the pandemic, but the vast increase in unemployment and therefore poverty should cause us to reflect. One thing to note is poverty is generated by long term unemployment, and we can hope for an inverted “V” in the unemployment rates from Covid-19 at this time.). The second, Industrial employment, takes a bit more explaining. This is the ratio of jobs in a country that are manufacturing jobs vs services jobs. The more people are building things in factories vs working in restaurants or stores typically means more income equality and higher wages. The last one was confusing to me, because most definitions of wage coordination online obscure what it is referring to. It means individuals agreeing to go along with the whole via centralized bargaining for wages. In the US, the examples we can think of are unions going on strike to enforce collective bargaining and the military having set wages per role and tenure. This is fairly intuitive in a model that uses relative poverty as an indicator. The more people are paid the same, the less people can be below 50% of the mean.

This is all fairly intuitive. You reduce your chance of unemployment by having a highly skilled job with lots of mobility to other similar jobs which are highly skilled. You reduce your chance of unemployment when you don’t are seen as equally as valuable as your peers and not less valuable or more expensive. You reduce your chance of unemployment when you have people supporting you in that role.

What has the biggest impact on causing poverty reduction?

In the 14 countries measured, 91% of poverty reduction could be explained by 3 variables. These were the ideology of government officials, the dollars spent on welfare, and the number of opportunities in the government to veto bills. Government Ideology here means the larger amount of time government leadership is left leaning the higher the chance of poverty reduction. Countries with majority social democratic leadership time include Sweden, Norway, Denmark and Finland. More middle of the road countries would be Australia, United Kingdom, Belgium, Germany, and Switzerland. The least left leaning countries in the paradigm would be Canada, France, Italy, and the United States. Spend on Welfare programs is for the most part intuitive, with the article highlighting the most effective spend to reduce poverty being family and child allowances (tax breaks or financial benefits specifically targeting parents.) The last one is a little harder to explain, but I will attempt it. There is a direct correlation between the number of veto opportunities a government has and their ability to reduce poverty. The text explains this is due to veto slots giving interest groups more capacity to block legislation which would distribute income from them to others.

While higher spend and governments willing to spend more to eliminate poverty are both intuitive in turn, I had not previously considered this veto position and I find it very heartening. The countries with the greatest poverty reduction through government control are those countries where a majority of 1 person can change the law. Put another perhaps more provocative way, the more democratic a country is, the better outcomes in terms of caring for the poor. Or, as my heart takes is, the majority of people are kind and take care of each other when taken as a collection of equals. And that is a reason to hope.