How can taxation be leveraged to empower the poor? What practical action can any American take to fight poverty?
To truly alleviate poverty, it’s essential to go beyond providing financial assistance, although that’s undeniably important. Matthew Desmond argues that, to eradicate poverty, we need to empower the poor, granting them economic and political agency to shape their economic futures.
Keep reading to learn Desmond’s proposed solutions to poverty in the United States.
Solutions to Poverty in the United States
Desmond takes a multifaceted approach to poverty: strengthening unions to enhance collective bargaining power, creating paths to homeownership, ending exclusionary zoning policies, and cracking down on welfare for the rich. Let’s look at these proposed solutions to poverty in the United States.
Empowerment Strategy #1: Strengthen Unions
One powerful way to empower workers, writes Desmond, is to reinvigorate the labor movement and strengthen unions. The existing legal framework, which requires workers to organize company by company, often puts unions in a disadvantaged position—since employees at each company need to mobilize and negotiate separately, requiring unions to invest significant time, effort, and resources in the logistics of coordinating this. This fragmentation of organizing efforts can also make it easier for employers to target and disrupt specific campaigns.
Sectoral bargaining, writes Desmond, offers an alternative that would empower labor in negotiations with employers, benefitting even employees who are not union members. Sectoral bargaining allows workers from multiple companies within the same industry or sector to negotiate collectively. This increases workers’ leverage and can lead to potentially better outcomes in terms of wages, benefits, and working conditions. And when agreements are reached that cover all employees in a sector, non-union members often receive the same improvements in their conditions as union members. This inclusivity promotes solidarity among workers.
| The Argument Against Sectoral Bargaining Despite Desmond’s claims that sectoral bargaining would be a lift for American workers, some critics contend that it would have a negative impact on the economy. Sectoral bargaining could undermine the flexibility of the labor market. Imposing uniform labor standards across entire sectors may reduce adaptability to changing economic conditions, making it harder for businesses to adjust their workforce as needed. This could potentially hinder job creation and economic growth. Moreover, sectoral bargaining could limit individual worker choices. Rather than allowing workers to negotiate their own terms with employers, sectoral bargaining sets collective agreements that apply to all workers in a given industry. This may not align with the preferences and needs of individual workers. Finally, sectoral bargaining could diminish competition among businesses. When labor standards are uniform across an industry, there may be less incentive for companies to compete by offering better employment terms, such as higher wages, benefits, or working conditions. |
Empowerment Strategy #2: Create Paths to Homeownership
Desmond writes that homeownership can be a path to financial stability for many. However, as we’ve seen, people in poverty face significant hurdles along the path to homeownership—further perpetuating the cycle of poverty. One proposal, writes Desmond, is government guarantees of home loans for disadvantaged borrowers. This would help such borrowers bypass the banks (who, as we saw, see little profit in mortgages for affordable homes and are therefore less likely to issue those kinds of mortgages) and open the doors to generational wealth.
Empowerment Strategy #3: End Exclusionary Zoning
Desmond writes that providing people in poverty with the opportunity to move into wealthier neighborhoods has a demonstrable impact on their economic well-being. But, as we’ve seen, exclusionary zoning rules often create an impossible barrier. Abolishing exclusionary zoning rules (like bans on multifamily housing) and implementing mandatory inclusionary zoning rules (like requiring a certain proportion of multifamily housing) can break down that barrier. And, despite the fears of incumbent homeowners, affordable housing—when managed properly—does not negatively affect neighboring property values.
Desmond urges individuals to become anti-poverty crusaders in this regard by actively participating in local zoning or planning boards to help ensure affordable housing and integrated neighborhoods become a reality.
Empowerment Strategy #4: Crack Down on Welfare for the Rich
Desmond further recommends cracking down on the nation’s exorbitant welfare for the rich—largely through preferential treatment in the tax code—and reinvesting it into anti-poverty initiatives.
He notes that there is approximately $1 trillion in unpaid tax annually, a disproportionate share of which comes from the wealthy. He recommends stepping up enforcement of these unpaid taxes, while also increasing the top marginal rate (the taxes on the portion of income that falls within the highest income bracket) and corporate tax rates, which currently stand at nearly half of what they were in the 1970s. Finally, he urges lawmakers to close tax loopholes, such as the mortgage interest deduction which overwhelmingly benefits the affluent, and tax capital gains (taxes on profits earned from the sale of assets, such as stocks or real estate) at rates equal to ordinary income, so that corporate shareholders pay the same rate as workers.
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Like what you just read? Read the rest of the world's best book summary and analysis of Matthew Desmond's "Poverty, by America" at Shortform.
Here's what you'll find in our full Poverty, by America summary:
- Why the United States suffers from so much poverty and inequality
- How some Americans benefit from the poverty of others
- How we can empower the poor and eradicate poverty
