Education: Poverty’s Nemesis

Two weeks ago, the U.S. Census Bureau released an alarming report regarding the economic well-being of Americans. According to the release, 15.1 percent of people in the world’s largest economy with one of the highest per-capita income rates in the world are below the poverty line.

Before jumping to alarmist conclusions, let’s look into the details of how the 15.1 percent number was built, its implications, and finally examine education as a way of addressing the issue.

According to the poverty threshold tables for 2010 from the U.S. Census Bureau, the U.S. poverty threshold for a single person under 65 was $11,344 and the threshold for a family of four, including two children, was $22,314. These numbers are adjusted annually to reflect adjustments to the Consumer Price Index for All Urban Consumers (CPI-U) such as seasonally adjusted increases in the indexes for gasoline, food, shelter and apparel. In other words, the methodology used to construct the poverty line is fairly sound, but not a complete or a faultless measurement. The prison and nursing populations, occupants of college dormitories, and those in “living situations without conventional housing (and who are not in shelters),” or the homeless are all excluded from the number. On the other hand, it ignores food and housing subsidies. The effect is ambiguous, and it should consequently be remembered that the number is not without its peccadilloes. Additionally, Dr. Debraj Ray points out in his ubiquitous undergraduate textbook, “Development Economics” another obvious problem with using a poverty line as a measure of inequality. Defining people below a threshold of annual income as “impoverished” creates incentives for politicians to target people below but nearest to the line for transfer payments because that is where the greatest reduction in poverty can be made for the lowest cost.

The political incentives for a short-term solution are clear, but such a makeshift answer doesn’t have a material impact on the well-being of the impoverished. A stop-gap measure merely serves as a commodious addition to some short-sighted result-driven politicians. Another point to consider is how much better off a household of four is if they are $1, $1,000 or even $5,000 above the poverty line and no longer considered poor in a country where the average family can find challenges living on a real median household annual income of $49,445. Also, there is the risk of a positive-feedback effect where the economic hardships perpetuate from generation to generation within a less affluent family.

A college education is one proven panacea to the cycle of poverty but it is also more difficult to attain for those who would benefit from it the most. While it is always possible for a child to grow up lacking the opportunities of his or her wealthier peers and still gain acceptance into an Ivy League school, it is markedly unlikely. Who is going to pay for what has become one of the “basics” of America today? Year-round tennis lessons, piano teachers, SAT tutoring and martial arts classes can be prohibitively expensive. The days where one could waste a high school summer selling hot dogs outside of Fenway Park and get into Harvard are over (see Michael Winerip, Class of ’70). All of the above their related ilk are essentially tacit pre-requisites for considering application to an elite school with any realistic hope of admission, but even then you’d have to “excel at a national or international level” according to Harvard’s dean of undergraduate admissions. Despite possessing great talent, some will never see that potential fully realized simply because of a lack of means.

Education is a major solution to poverty. A cursory glance at three academic class models by Beeghley (2004), Gilbert (2002) and Thompson & Hickey (2005) that have examined the characteristics of various segments of our society by economic power found many commonalities. They all found that the top 1 percent of America by income commonly have Ivy League educations. The next 15 percent or 5 percent are labeled as “upper middle-class” and characterized as “highly-educated” “often with graduate degrees” or at least college degrees. The next 30-46 percent usually has at least some college education while the lowest rung, below poverty line, is described as having only some high school education at best. But it is already hard enough for people of modest means to go to college.

Consider the apotheosis of a great public university system, and a recent article in The Economist: “California’s public universities: Excellence for fewer,” that proceeds to highlight increasing tuition and consequent decreasing accessibility. Also, with increasing domestic competition, undergraduate colleges are seeing admission rates trending downward despite a smaller number of college-age teenagers. Falling admission rates show the greater advantages most families today can afford for their children that help weave together a more competitive college application. Then, there is the massive influx of highly competitive and accomplished foreign applicants from the burgeoning East Asian Tigers (Hong Kong, Singapore, South Korea, Taiwan), China and India. All of the aforementioned places host local cultures that put great stock in the importance of academics. They are familiar with and have always hungered for the prestige of the best American universities for the pride of their families. The consequence of those sentiments is being felt even more today because such immigrant families are now finding the economic resources to send their children to the U.S. as exceptional candidates to compete for lucrative spots at wealth-enabling institutions.

The destitute have no champion, no voice and constitute a de-facto disfranchised segment of society. Yet ironically, we have a “billionaire-friendly Congress” that “coddles the rich.” Even now, there is strong resistance to increasing the tax burden of the wealthy primarily based on the argument that it will not generate significant revenue. But the point is that it will generate some during a time of little, and it will have limited, if any adverse effects on the economy. Trickle-down Reaganomics is a myth, discarded as “voodoo economics” by at least one Nobel Laureate in Economics, Republican and Democratic presidents alike, and constitutes a dogmatic ideology based on a tenable understanding of the Laffer Curve (a thought experiment: consider a 0 percent and a 100 percent tax rate. Both will lead to no government revenue and a breakdown of the economy, so the ideal must therefore lie somewhere within that range, forming a curve. Zero percent is not reasonable for long-term economic health. What will happen to entrepreneurism without patents or intellectual property rights, conflict resolution without a judicial system, and stable credit markets without the SEC? As an aside, Reagan thought we were above that golden point and that tax reductions were needed for the wealthy. One hundred percent is also foolish because it destroys a rational worker’s incentive to work).

The 15.1 percent proportion of Americans living in poverty will decrease eventually, commensurate with the gradual recovery of the economy from the financial crisis and housing bubble.

While education is probably the most effective means of dealing with long-term destitution, it is also one that is difficult to see effectively distributed without more federal aid. Meaningful reform in education is always difficult during budget-trimming manias that often see public education budgets as the easiest to target. But I have not lost hope for the future, and I am sure we will find the political empathy and public conscience to hear these soft voices in the dark in better economic times.

Andrew Wong is a UCI      alumnus. He can be reached at               acwong77@gmail.com.