Business: Powerful Antidote For Poverty

Business antidote poverty

by Bruce Strom

President Reagan famously said, “We declared a war on poverty, and poverty won.”  The problem is we waged the war with the wrong tools.  Welfare did not work.  When President Clinton dismantled welfare he recognized it failed to support four key American values – autonomy of the individual, virtue of work, primacy of the family, and the desire for and sense of community.   Welfare was largely replaced with the Earned Income Tax Credit which has lifted millions out of poverty and is the second most effective tool for combatting poverty behind social security.  This is because it rewards the autonomy of the individual, virtue of work, primacy of family and sense of community.

One reason poverty remains is that government alone cannot solve the problem and government largely ignored the private sector.  Since the heart of the challenge is jobs that was a mistake.  Government can, and should, provide jobs.  Our crumbling infrastructure needs modernizing.  But government should not ignore the role entrepreneurs and businesses play in generating jobs.  Too often government sees business as the problem instead of part of the solution.

One case in point is the Department of Labor’s new overtime rules that are set to go into effect this summer.  While there is a significant wage theft problem in America, the reclassification of previously exempt workers will not solve that problem.  Instead it will generate greater problems for schools and large segments of the employment world that are not the cause of wage theft.

Wage theft is when an employer pays less than minimum wage, forces employees to work off a clock, and fails to pay overtime.  As one book recently highlights, “If one tallied all of the losses suffered by victims of robberies, burglaries, larcenies, and motor vehicle thefts combined, the figure wouldn’t even approach what is taken from hard-working Americans’ pockets by employers who violate the nation’s labor laws.  And the victims are generally the most vulnerable among us.”  $2.00 a day, 2015, p. 163.

I agree that our vulnerable neighbors are victims of wage theft – but so are businesses.  I have many business friends who complain about other businesses that operate without licenses, insurance, and undercut prices because they are cutting corners and often victimizing workers.  That is not a free market.  But instead of further hurting the free market with additional regulations, why not let the free market work.  Why not require businesses to report labor practices in much the same way schools are now required to report cost so consumers can make informed decisions.  Presently many Christian friends tell me they agonize over being ethical when others are cutting corners.  The business pressure is actually toward corruption and greed.  But if we required transparency, I firmly believe consumers would support fair labor practices and reward businesses who treat employees well.

Transparency counteracts corruption.  Transparency allows for a truly free market to operate.  That market will correct present abuses of not letting employees know their schedules in advance and robbing people of wages.  That will also reward those who pay a living wage which can break the sad reality that about one in four jobs pays too little to lift a family of four out of poverty.

Additionally we should support incubator projects that train low wage workers to be entrepreneurs.  I am amazed at how well we micro finance entrepreneurial efforts in developing countries while ignoring the needs in our own communities.  New businesses create opportunity and innovation.

Admittedly some of these solutions won’t work without stabilizing housing which is the other great need to combat poverty.  Jobs and housing.  Today there is no state in the union in which a family that is supported by a full-time, minimum-wage worker can afford a two-bedroom apartment at fair market rent without being cost burdened (paying more than 30% of their income in rent).  That’s wrong.  While fair jobs will go a long way toward alleviating the problem, the government needs to reform and reevaluate its subsidy program to be more effective.  Presently only about a quarter of income-eligible families get any kind of rental subsidy.

There is work to do in eliminating the exploitation of workers.  But not all businesses are the bad guys.  We should encourage ‘just businesses’, reward transparency, and expand entrepreneurial opportunities.  It’s time to fight the war on poverty with the right weapons so that all Americans can flourish.