The key to solving poverty without ruining incentive

Poverty is arguably one of our nation’s biggest problems that is yet to be solved. I have seen the attempts at resolving, and observe the many flaws. 

In the following ways people are trying to amend poverty: giving out money, privileges and jobs, while also taxing “the rich” and offering through-the-roof unemployment benefits. When those in poverty are constantly given money by the government, it chips at their incentive to actually earn those funds. Their day-to-day life is reliant on being given money by those in power, and therefore their incentive to improve their lives has been diminished. 

The consequence is similar for taxing “the rich.” This does not work because, again, it ruins incentive and nobody works, because what’s the point to earn good money if it’s then taken from you? Then there is the labor shortage that arises when people are incented to not work, resulting in an unbalanced labor market (demand higher than supply), which causes labor prices to rise, which are then passed into the broader economy through increased costs of goods and services. 

Raising the minimum wage and giving huge unemployment sums also reduces labor participation, hurting the same things that are trying to be helped—through labor shortages and the consequent inflation, things become harder for those of low income to afford. 

This is how the system spells out: 

Poverty>>>giving money>>>losing incentive>>>labor shortages>>>supply chain and prices of labor suffer, which impacts the same people that are trying to be helped. 

Poverty>>>taxing the rich>>>losing incentive>>>labor shortages>>>supply chain and prices of labor suffer, which impacts the same people that are trying to be helped.

These things have been tried. They do not work. And as a result, things are worse off than they started. There needs to be a new solution. 

Small, local businesses are doing their part in finding that solution. They, as more localized corporations, deeply touch people in poverty and give them a foundation to stand on, instead of distantly sending money in hope it’ll help. Local governments could partner with groups like these to actually help their community. 

A wonderful example of this is Thistle Farms. Thistle Farms (thistlefarms.org) is a nonprofit organization that helps women in poverty gain a better life. Their difference is that they help these women flourish. The women are employed in a community, where they work and are taught integral financial skills. They are given a home for two years, then afterward, the women have the financial skills and support they need to succeed in the real world. Thistle Farm’s website boasts that five years after graduating, 75% of those women once on the streets are living healthy, financially stable lives. They are given a foundation to grow from, not a fistful of cash to do as they please with. This is the kind of system poverty needs. One where those in need are employed while still working, taught the skills they need, and then are able to succeed. 

If groups like these are set up individually and locally all over the country, then we may be on our way to helping the crisis of poverty. 

(Madison Zaitz lives in Wilsonville.)