Last month Hong Kong lawmakers rejected motions for a minimum wage and maximum working hours, as well as an increase in welfare spending. It is a positive sign that this newly-elected Legislative Council recognizes regulation and massive federal spending on welfare are not the answer to poverty. This lesson is exemplified by the United States’ “war on poverty” — with a price tag of $9 trillion and counting. What did we get for that money? An explosion of out-of-wedlock births, the breakdown of families, no meaningful reduction in poverty rates, and increased dependency on government assistance.
In 1996, the United States overhauled its federal welfare system with the Personal Responsibility and Work Opportunity Reconciliation Act. Welfare reform gave the states more flexibility in how they spent funds and how they administered programs. A welfare check now came with a work requirement and time limit. It was an important step in the right direction — sending the message that welfare is meant to be temporary assistance, not a lifetime subsidy. In the eight years following welfare reform caseloads have dropped by more than half.
However, the “spend our way out of poverty” myth continues to persist even today. Since 2000, Temporary Assistance for Needy Families (the US’s traditional welfare program) spending has increased 6 percent, yet the poverty rate just went up. Obviously a stagnant economy and poor job market are responsible for the increase in those living below the poverty line. However, spending more money on social programs is not raising them back out of poverty.
The best way to reduce the poverty rate is to convince people to avoid poverty in the first place by finishing school, delaying parenthood, and getting a job (any job). In the United States, high school dropouts are roughly three times more likely to end up in poverty than are those who complete at least a high school education. A common reason why teens drop out of high school is out-of-wedlock births. Teenage pregnancy initiates a single mother into a life of dependency that is difficult to overcome, especially if she goes on to have additional children. Over half of welfare money is spent on families that began with a teen birth.
Getting a job as a solution to poverty may seem like common sense. Granted, not every job pays a wage that will catapult a family into the middle class. However, every job provides job experience, and that leads to a better job. Maybe today’s low-wage, service industry employee is not on a track for management. But he is showing that he is a reliable worker who can learn and perform duties, something a future employer will value.
Despite all this common sense, members of Congress cannot resist the urge to throw money at the poverty problem. Welfare reform is due to be debated by Congress next year, and liberal members refuse to endorse welfare reform that would emphasize actual work experience. They would spend money to send single moms to college or train them in a specific skill for which there may be no demand in the job market. Conservative Congressmen are not doing much better by encouraging social spending on programs like promoting marriage, suggesting that coupling off the poor will somehow raise them out of poverty. In the past 40 years, we have spent at least $8.9 trillion (in constant 2003 dollars) on the “war on poverty.” Hong Kong should learn from our mistakes and avoid the temptation to increase labor regulation and spending on social services.
If education, pregnancy prevention, and employment are the solutions to poverty, a nation needs legislators to advocate policies that promote these things. Job growth results from a dynamic economy: lower taxes, less regulation on business and industry, and freer trade. Such an economy will produce the jobs necessary to help people escape the bonds of poverty. Hong Kong’s Legislative Council was right to avoid “worker rights” pitfalls such as a minimum wage and maximum working hours. An economy needs a range of employment options to support low-income and second-job wage earners who are trying to work their way up the economic ladder. We need lawmakers who enable and promote personal responsibility and self-sufficiency, instead of promising to throw more money at the poverty problem. As the United States has shown, that clearly doesn’t work.