Sunday, July 26, 2020

Why Poverty Persists?

Poverty matters and it persists.  It reduces well-being today and limits life-chances tomorrow. 

In the UK the incomes of the poorest families actually fell in the pre-crisis years, leaving them no higher in 2018-19 than in 2001-02

 More than 700 million people lived in extreme poverty in 2015. Why do people stay poor? 

 Research on poverty in Bangladesh debunks the idea that individual choice or failure is the explanation. Instead, it is a poverty trap. Using data from a programme that gave significant resources to poor families, the authors show there is a tipping point at around $500 (£391) under which people cannot sustainably break into higher-income opportunities. If the program pushes individuals above a threshold level of initial assets, then they escape poverty, but, if it does not, they slide back into poverty. 

The authors write: “It is not their intrinsic characteristics that trap people in poverty but rather their circumstances.”

There are two views as to why people stay poor. The equal opportunity view emphasizes that differences in individual traits like talent or motivation make the poor choose low productivity jobs. The poverty traps view emphasizes that access to opportunities depends on initial wealth and hence poor people have no choice but to work in low productivity jobs. W

 The lesson? If circumstances are the problem, then those circumstances can and should be changed.

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