Charitable Organizations

[Dr. Shane]

Prior to the Great Society programs in the US, the hungry and poor had to seek assistance from charitable organizations like churches. Since the beginning of the Great Society programs poverty has not changed much. The average percentage of those in poverty has been around 15% of the population, give or take a couple percentage points either way. So the Great Society programs have not helped reduce the number of people in poverty.

The group of people in poverty is not a set group. That means there are people moving in and out of the group. For example a newly married couple with a child may be in poverty and within five years they move into the middle class but as they move into the middle class an elderly couple moves into poverty. So while the 15% number has stayed relatively the same, it is not the same group or class of people that never seem to get out of poverty.

Those that are against government welfare programs argue that programs like AFDC and food stamps cause a person that is in poverty to stay in poverty longer. These programs discourage a person from saving money, buying a home or taking a fair, but not high paying job. An apprentice electrician, for example, that has enough hours to take the journeyman test and thus make more money decides not to do so because the pay raise would result in the loss of food stamps and medical assistance. Those against these programs would rather see charitable organizations take over the problem and recieve government funding through such programs as matching funds. That means the government matches all the funds the organization can raise on its own in the private sector.

Another problem that some point out with government welfare programs is that they encourage the wrong kind of behavior. Single mothers are encouraged to have more out-of-wedlock children so they can recieve more benifits. Some states actually provide more benifits to unwed mothers than they do to married couples in the same economic conditions so couples live together and do not get married so they don't lose benifits.

Charitable organizations are often relgious and thus tend to provide not only economic benefits to the poor but also spiritual guidence and opportunities which help them with emotional burdens in addition to the financial ones.

[Nicodema]

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Those that are against government welfare programs argue that programs like AFDC and food stamps cause a person that is in poverty to stay in poverty longer.

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I would argue that no, they simply enable a needy family to stay afloat while they are striving to get out of the negative vortex of poverty.

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These programs discourage a person from saving money, buying a home or taking a fair, but not high paying job. An apprentice electrician, for example, that has enough hours to take the journeyman test and thus make more money decides not to do so because the pay raise would result in the loss of food stamps and medical assistance.

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The reason for this is often the simple fact that the losses outweigh the benefits. More immediate needs are pressing -- children's health, for example -- thus forcing longer-term goals to go "on hold". There isn't any "gap management" going on, any way in which the gap is to be bridged, so they'd rather hold onto what they have that is at least keeping them afloat than risk upsetting the whole apple cart when the increase in salary alone simply isn't going to cut it in terms of covering what benefits would be lost. What there needs to be is a more realistic "gradient" or "curve" in getting families off assistance and on their own two feet -- not some abrupt cut-off that keeps them from advancing forward because help will stop before they are able to cover all bases themselves.

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Those against these programs would rather see charitable organizations take over the problem and recieve government funding through such programs as matching funds. That means the government matches all the funds the organization can raise on its own in the private sector.

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On the surface this seems like a good plan, provided the charitable organizations have no discriminatory criteria (race, gender, sexual orientation, religion, etc.) by which they exclude "needworthy" applicants from receiving assistance.

[Derrell M]

Also, many religious organiziation that provide no measurable charitable contribution to society enjoy the benefits of tax exemption and are able to provide tax deductable receipts to their donors. Is the government able to ensure that this plethora of "charities" are real charities? There are charities in the USA enjoying charitable exemptions that are donating to groups like Hamas, and functioning as money laundering fronts, as well as providing enormous profits to scoundrels like televangelists who take from the poor rather than give. I harbour deep reservations when it come to "privatisation" of the welfare system.

[Nicodema]

Good point, Friend. There would need to be really strict accounting and accountability practices to circumvent or prevent fraud -- and one wonders whether the government has the time or resources to so closely monitor every single "charitable org" out there ...

[Bravus]

We could argue that the reason some social welfare programs tend to create these 'poverty traps' where people literally can't afford to get off welfare and back into work, is not either (a) something inherent in social welfare programs or ( some inherent character defect in the poor. Rather, it is poorly designed social welfare programs, poorly designed tax systems and too-low minimum wages.

If the tax and benefits systems are set up in such a way that someone moving from welfare to work does not suddenly lose a heap of benefits and gain a heap of taxes, and if the minimum wage is in fact a living wage, then there should be a larger and more motivating gap between welfare and work. This should occur by raising the real wages of workers, not by lowering the already desparate living conditions of those on welfare.

The charity solution may sound good, but it is very unevenly distributed, and it essentially requires a 'double dip' (via taxes and via charitable contributions) into the pockets of those who are working.

Funny, though - it seems to be those who say 'welfare programs are broken' who are also saying 'don't raise minimum wages or you'll drive businesses under' (this at a time of record business profits).

I appreciate the way Shane has laid out this issue and the different perspectives, but I want to argue that the 'poverty traps' are something that can be designed out of a system in ways other than getting government entirely out of the business of caring for the poorest and most velunerable in a society.

[Nicodema]

As a side tangent -- but not an unrelated one (to the subject of poverty) -- I'd like to know how anyone these days is supposed to be able to afford a house when even mere townhouses have nearly tripled in price -- going to over $300k for even the smaller & less desirable models -- in the past 10 years, while comparable salaries have only increased by 5-10% if even that.

I realize it's not THAT bad nationwide -- yet -- but this is fast becoming the norm for metropolitan areas in the USA and where the housing prices are somewhat lower so are the comparable salaries -- e.g. someone earning $70k here in the greater DC area can no more afford a house at, say, $445k (lowest price for a REAL house around here that I've seen) than someone in Philly earning $50k for the same job can afford the comparable Philly home priced at $345k.

Around here you can't even find an efficiency condo for less than $200k anymore. Word.

Where's the incentive to "save up for a home" when you would never qualify for the mortgage in a zillion years anyway??? And how is the non-homeowner supposed to do this "saving up" when rents are correspondingly out the roof as a result of the rising costs of homes???

[Bravus]

{whisper}house prices are clearly on an unsustainable speculative bubble, which will burst as soon as the economy heats up and interest rates rise, and many 'homeowners' will be stuck with immense mortgages at high interest rates on properties that are worth way less than they owe on them. and then shall we who have been unable to buy houses go 'mwahahahaha - sorry'{/whisper}

[Nicodema]

[Dr. Shane]

Minimum wage is itself a game with market forces. Who is to say what a fair minimum wage is? $10/hour? Why not $15? Why not $20? Why not $200? Why not $2,000? As minimum wage is raised the companies pass the cost off unto consumers which means the cost of living is driven up which means the poverty line is raised. Which means that minimum wage, whatever it is, will not be enough and will need to be raised again.

Minimum wage jobs are entry-level jobs. In major cities even fast food restuarants are paying over $1/hour above minimum wage because market forces for labor have driven the cost above minimum wage. The answer is to provide educational opportunities so that the work force can develope skills that are valued at more than minimum wage. Which, in my opinion, has nothing to do with entitlement programs.

I would like to see the food stamp program go away although I know it never will. That is an area that charitable organizations with a national database could run much better and more efficiently than the government.

There does need to be more welfare to work plans that slowly allows a person or family ease off from welfare and into the workplace. Certainly a condition of recieving welfare should be that one is either in an job skills educational program or working a job that will lead to higher paying positions.

[Nicodema]

Minimum wage should be defined based on the costs of living in an area. If they defined it as the minimum amount needed by a single person to survive paying the lowest rent possible on the smallest place possible eating as frugally as possible etc. it would still probably be much higher than it is now.

They should establish a DIFFERENT minimum wage scale for underaged dependents who have their housing & food & other costs of living supplied by parental units.

Just my uneducated opinion ...

[Bravus]

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Certainly a condition of recieving welfare should be that one is either in an job skills educational program or working a job that will lead to higher paying positions.

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Absolutely agreed: rather than, as is very often the pattern now, people on welfare being banned from undertaking education, or having to take a cut in benefits to be students vs. doing nothing/searching for jobs they're not qualified for on welfare.

[Dr. Shane]

Do understand that when minimum wage increases, the price of basic goods and services increases too which somewhat defeats the purpose of raising the minimum wage. Different states do have different minimum wages.

I belive during the Newt Gingrich Congress, part of the Contract of America involved encouraging welfare recipients to go to school. I don't know if it is still like that or how it is in other countries.

[Bravus]

I think I might have been imprecise, too: I didn't necessarily just mean the legal, government-mandated 'minimum wage', I guess what I meant was 'low end wages'. If wages at the low end are so low that there's really no incentive to move from welfare to work, that's a problem (among other things with benefit settings and so on).

I get that an increase in wages can be passed through to prices, but how many low-wage workers can you bump up to a living wage for a multi-mullion dollar executives package? It's not fair that the top end salaries keep on rising, and the bottom end stay the same, and profits keep rising, and prices keep rising... and it ends up being the low-wage guy who is blamed for the rising prices.

This is not a total socialist rant - I totally accept the need for good compensation for the high end workers. But the idea that low end workers real wages (i.e. hourly rates adjusted for inflation) should have fallen for the last few decades is just obscene.

[Nicodema]

I still think the biggest problem/issue in welfare-to-work lies at the threshhold where one would cross over, as pointed out earlier. The gap is just too great to jump all at once -- at the same juncture where the worker is deemed "too wealthy" to qualify for assistance is where the biggest tax burdens essentially eat his net income down to what it was before the gross salary increase, and then there is still not enough to be able to afford the mandatory contributions toward health insurance, etc. required by most companies, so at the moment he crosses over into no longer qualifying for assistance, his actual need for it remains unchanged. This is a key problem that needs to be addressed.

And I completely concur with Bravus on this one:

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I get that an increase in wages can be passed through to prices, but how many low-wage workers can you bump up to a living wage for a multi-mullion dollar executives package?

It's not fair that the top end salaries keep on rising, and the bottom end stay the same, and profits keep rising, and prices keep rising... and it ends up being the low-wage guy who is blamed for the rising prices.

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Another problem is the location of jobs in particular fields. My career, for example, virtually demands I live in or near a major metropolitan area because you just are not going to find a demand for web development out in the "sticks". This means always being faced with having to live in a place where there is NO affordable housing AT ALL. Either that or change my career ... which is probably what will happen, God willing, if there be any practical reason why He is sending me back to school and not just to stick it in Satan's eye.

[Dr. Shane]

If you recall the story of Lee Iacoca saving Chrysler you will remember that for the first year he did not accept a salary for himself. When compared to all the union-workers wages combined, the executive salaries are not a significant cost for the major companies. However these fortune 500 companies normally don't have any workers working for minimum wage.

Many minimum wage workers are working in restuarants and retail stores. The store owners or managers are not normally making more than $100K themselves. There are a few factories that pay minimum wage in some rural areas but I suspect those are the exception rather than the rule.

[Dr. Shane]

Have you heard "It isn't how much money you make, it is how you use it"? The problem with welfare in many states is they won't let someone have more that a specified sum of money in savings. Some places won't let them have own a house or have too much equity in a house. There have been widows that had to sell their homes to qualify for assistance. If we are going to get people out of poverty we have to teach them how to use their money. Part of that is saving it and another part is home ownership.

I think it should be a crime to issue a credit card to someone living below poverty - including college students! Many people destroy their credit using credit cards before they have learn how to make good financial decisions. This is another area where laws have to be made to protect those in poverty. With debit cards and pre-paid credit cards now available, no one needs a credit card and no one ever needs to be paying 18%-21% interest - especial students and those in poverty.