Income Transfers Alone Won't Eradicate Poverty

Even in the current economic situation, in developed countries, rhetoric about cutting “poverty” is misleadingly outmoded—because it implicitly suggests that government income transfers can be the vehicle for achieving substantial reductions in poverty. Almost all Americans already live far above subsistence poverty: most because of their earnings, and the rest because of government transfer programs. This decline in material poverty is obscured by weaknesses in how the official U.S. poverty measure counts income. What is now called poverty is really “income inequality.” Reducing income inequality is also a vitally important social goal, but it cannot be accomplished through income transfers alone. The authors argue that, although income transfers have a role to play in lessening the impact of material deprivation, real progress in raising incomes will require building the human capital of the economically disadvantaged. This means both increasing the earnings capacity of lower‐income workers and reducing the number of female‐headed families.