Understanding the Artificial and Natural Barriers to Economic Mobility
By Ben Wilterdink, Director of Programs at the Archbridge Institute
One of the most enduring, and detrimental, stereotypes haunting those who spend their careers helping alleviate poverty is that those struggling with poverty are somehow significantly different from “the rest of us.” Low-income families are often dismissed as units in need of some kind of material assistance that they could not possibly attain on their own, requiring the intervention of others to teach everything from the skills necessary for work to how to become “improved” parents. Much energy, time, and resources are poured into efforts that mitigate material deficiencies instead of attempting to understand why these disadvantaged families and individuals are poor.
The truth is, these individuals routinely show perseverance, determination, and self-sacrifice in their daily lives — traits that deserve to be recognized and valued. From this starting point, the reasonable question from scholars, policymakers, and social workers becomes, “What is preventing these people from being able to move up the income ladder?” In answering that question, those interested in empowering individuals and families to escape poverty can work to identify and remove the barriers that stand in their way. But not all barriers are the same, and predictably, the tools and solutions to address them will not be the same either.
In fact, there are two major categories that represent barriers that stand in the way of low-income individuals and families striving for a better life for themselves and for their loved ones. Some barriers are artificial in nature, meaning that they are imposed from an external authority and would not exist without that imposition. Others are more natural, barriers that occur without external imposition and typically exist on an individual level. Sometimes these barriers can overlap or influence one another, but if we are to take the problem of poverty seriously and create an environment which allows low-income individuals to get themselves out of poverty, both kinds of barriers must be addressed.
In the modern American context, artificial barriers are typically those imposed by some level of government. Usually justified by claiming to protect citizens from some kind of harm, these policies often end up as little more than legal obstacles that prevent people from being able to take the calculated risks necessary to climb the income ladder. Laws such as occupational licensing requirements, restrictive land-use regulations, and ever increasing minimum wage mandates are some of the most obvious examples of artificial barriers currently faced by low-income individuals and families.
Occupational licensing requirements are one of the most direct forms of artificial barriers making it difficult for individuals to climb the income ladder. Often adopted in the name of consumer protection, these requirements are almost always imposed on the state level and essentially require would-be workers to obtain permission from the government before they are allowed to participate in a chosen occupation. This often comes with strict educational requirements, mandatory fees, and can even include gaining permission from incumbent market participants before any license is granted. While occupational licensing requirements vary from state to state, they have grown significantly over the past several decades. In the 1950s, about one in 20 occupations required a license, but by 2016 that number ballooned to nearly one in four, covering such occupations as interior designers and animal massagers in some states. Despite the vast economic research concluding that such laws provide little to no benefit to consumers and that they represent egregious impediments to those seeking to improve their career opportunities, most states have not adopted the comprehensive reforms necessary to evaluate their licensing requirements sufficiently. Too many low-income individuals seeking pathways to a stable middle-class income are met with the barriers of high fees, strict educational requirements, and a bureaucratic maze of occupational licensing requirements.
Another artificial barrier to economic mobility is promulgated at the local level in the form of restrictive land-use regulations. While there are certainly economic opportunities all across the country, the most dynamic economies and areas with the most employment opportunities are increasingly located in large metro areas. Designed to protect home values, schools, and neighborhoods in these dynamic areas, local policymakers have adopted restrictive land-use regulations that limit development and significantly drive up housing costs. One study found that these restrictions impose a 10 percent “regulatory tax” in some of the most desirable metro areas in the country. Whether these regulations require a minimum lot size or use exclusionary zoning laws to restrict denser development, the result is housing costs that are artificially much higher than they would be and limited ability of low-income individuals and families to access the opportunities that these areas provide.
The minimum wage is also an artificial barrier faced by those looking to climb the income ladder. While implemented almost exclusively in the name of helping low-income individuals and families, high minimum wages are likely among the most damaging policies for economic mobility. While the exact effects of minimum wage increases on employment and wages remain unsettled, a recent study on the Seattle minimum wage increase (from $11 per hour in 2015 to $13 per hour in 2016) found that, since hours were cut significantly for low-wage workers, their monthly income was reduced by an average of $125. Furthermore, minimum wage increases have been shown to be the predominant factor in the decline in teenage employment since 2000 — cutting off access for adolescents to develop soft skills highly valued by the labor market. Higher minimum wages are also particularly difficult for small businesses to absorb, and since the 1970s these business have provided 55 percent of all jobs and 66 percent of all net new jobs according to the Small Business Administration. In addition to creating jobs, small businesses are often the best route out of poverty for the entrepreneurs themselves and saddling these struggling ventures with artificially high labor costs makes them more likely to fail.
These are just a few examples of the many artificial barriers faced by low-income families and individuals looking to better their lives and the lives of those around them. But while identifying and working to remove these barriers is necessary, it is not sufficient to remove all the barriers that stand in the way of low-income individuals and families. Natural barriers must also be overcome.
Unlike artificial barriers, typically imposed by an external authority, natural barriers are not the result of some external actor. Natural barriers are those personal barriers that each of us face when looking to live better and fuller lives; however, some barriers are much more significant than others. Some of most significant natural barriers faced by low-income individuals and families include exposure to major financial shocks resulting from lack of savings, growing up or living in an environment that provides few employment opportunities and fewer meaningful social connections that spur these opportunities, and troubles with substance abuse or bouts of homelessness.
The recurring link between these natural barriers is their deeply personal nature and wildly different causes and effects. In practice, this means that these are the kinds of barriers that must be overcome on an individual level and are not likely to be solved (at least not in the long term) by impersonal or top-down solutions. So, while there is certainly a role for government or large charities to play in helping low-income individuals and families, the transformative effect of overcoming these natural barriers is likely to come from a context of mutually respectful personal relationships and bottom-up solutions. Here, the role of community, family, and local civil society organizations are paramount.
For example, the Family Independence Initiative (FII) was founded by Mauricio Lim Miller in 2001, after spending decades working in community development and becoming frustrated with the failings of the traditional social services model. In his book, The Alternative: Most of what you believe about poverty is wrong, Miller writes, “Government and private philanthropy are good at talking and planning, but even after a fifty-year war on poverty they never consider the possibility that their top-down solutions and plans will never solve poverty or create economic mobility.” Accordingly, FII does not provide any services or advice directly. Instead, FII offers families a platform to connect to one another and contributes small payments for tracking and reporting certain behaviors on a monthly basis (such as monthly savings). Through these connections and reports, families build their networks and work together to chart their own path out of poverty. Partnering with more than 2,000 families in more than 10 cities across the nation, after two years with FII, on average, families report an increase in monthly income of 23 percent, a 60 percent decrease in subsidies such as TANF and SNAP, and 90 percent of students maintaining excellent, good, or improved grades. No training, no caseworker, no advice, just families working together to find out what works for them in achieving financial stability to weather financial shocks and remain out of poverty.
Other organizations are tackling natural barriers by taking a more holistic approach to revitalizing entire communities, creating employment opportunities, and fostering more social connections at the most local level. But here too, success depends on recognizing the strengths and value of those already in the community and letting local leaders take charge. Based in Atlanta, Georgia, Focused Community Strategies (FCS) was founded in 2001 by Bob Lupton. Similarly to Miller, Lupton spent decades working to revitalize underserved and low-income communities in Atlanta before taking a different approach that put low-income families and individuals in the driver’s seat. Author of Toxic Charity and Charity Detox, Lupton explains the lessons he learned from working with low-income urban communities and how too often our attempts to help only make things worse. In Charity Detox, Lupton writes, “The hard reality is that it takes more than compassionate hearts and generous gifts to elevate people in need out of poverty.” Lupton continues the thought, “The fact is, we cannot serve others out of poverty, no matter how much we may want to.” These principles, and others based on his experience, have become the basis for Lupton’s community revitalization work and even form the basis for the Oath for Compassionate Helpers, which begins with, “I will never do for others what they have the capacity to do for themselves.” After being invited by residents and local leaders to help revitalize neighborhoods in South Atlanta, FCS has developed two mixed-income subdivisions, started a number of businesses, and created housing for hundreds of families. Residents report that their communities have many more opportunities and are much more socially connected than before the revitalization efforts.
Just as a personalized approach based on creating and maintaining personal relationships can enable low-income individuals and families to establish some financial security or revitalize a community, the approach is essential to ensuring lasting freedom from addiction or other common causes of homelessness as well. Unlike using impersonal and complex government assistance, tapping into the community can provide the flexibility and trust most needed for individuals and families facing a crisis. In southwestern Florida, Safe Families for Children, an initiative of FlourishNow, connects volunteer families willing to provide children a safe and secure place to live for a flexible period of time while parents seek help becoming sober or returning to work. Instead of separating families in need, Safe Families utilizes the resources within the community to keep them together; often forming lasting relationships along the way. Since 2015, the program includes 140 hosting families that have served 402 families and 721 children in crisis. In Cary, NC, The Carying Place (TCP) helps currently homeless families by providing a cost-free apartment (including utilities) for the duration of an intensive 16-week program that equips parents with the tools and knowledge to live independently. More than 350 families have graduated from TCP’s program and more than 90 percent have successfully remained independent for at least a year following the program.
These are just a few of the organizations that are working to empower low-income individuals and families to overcome their natural barriers and climb the income ladder — there are far too many more to mention here. Addressing natural barriers may seem daunting, but those seeking to truly eliminate the barriers that stand in the way of upward economic mobility cannot shrink from the challenge. For most of us, removing these barriers will require a re-examination of what our traditional tools and methods to help low-income individuals and families actually accomplish. Our approach should be one that recognizes value, dignity, and potential rather than one that makes living in poverty more materially bearable while disempowering those it purports to help.
Every individual and family deserves the opportunity to earn their success and create a better life through hard work and perseverance. Low-income individuals and families are no exception and are just as capable of achievement when encountering opportunity. As the FII website notes, 75 percent of families rise out of poverty within 4 years, but 50 percent fall back in within 5 years. The overlapping and interlocking artificial and natural barriers that stand in the way of lasting escape from poverty must be overcome. A holistic approach to lifting the barriers to economic mobility is vital to success. Understanding these barriers, where they come from, and the most effective means of removing them is essential to making progress.