The Poor Would Have More in a Libertarian Society

In a Libertarian society, what will keep the poor from starving in the streets? What about the homeless and the people who are handicapped? What proof is there that private charity will be sufficient?

In a Libertarian society, the poor would almost certainly have more than they do today. A voluntary society would more efficiently provide aid and actually give the poor an opportunity to become rich. Part I of this article explains how a libertarian society would increase the resources available to the disadvantaged by several hundred percent!

During the 1980s, I rented to welfare recipients. Ninety percent of my tenants were able-bodied women with children who simply chose welfare instead of work. Indeed, one woman who tried to give me friendly advice suggested that I stop fixing up the apartments at night and give up my day job. "Have some kids and get on welfare so that you can enjoy your life," she counseled me. Although I did not take her advice, many young women did. Low-income teens often told me that they became pregnant in order to receive welfare checks and establish their own residences. The more children they had, the bigger their welfare stipend.

In 1992, New Jersey eliminated part of the monthly increase that women received for new children. Even though stopping this stipend only decreased the welfare package 4%, births to welfare mothers went down by 10%. Clearly, many women were getting pregnant as a means of self-support. No wonder that one in eight children now receive some form of government "aid."

Why would someone choosing to conceive children as meal tickets and live on welfare? By the mid-90s, a person would have to earn $5.50 to $17.50 per hour (depending upon your state) to get more after-tax benefits than they'd receive on welfare! Of course, choosing welfare instead of work didn't give a person job experience or regular raises, so choosing poverty as a teen was generally a life sentence.

When Ohio required capable welfare recipients to work, 40% of them decided that they didn't need help after all. Oregon tried to place its able-bodied welfare population in jobs by offering employers a subsidy to take them. Once welfare recipients found that they were going to have to work for someone, 80% went out and found an unsubsidized job. Clearly, a great deal of the welfare population simply chooses not to work when tax dollars, usually in excess of what they would initially earn, are readily available. Giving money to those who could work results in less money for those who can't.

In 1987, Wisconsin began requiring people on aid to seek or train for work. By 1997, Wisconsin had 55% fewer families on welfare than it did in 1987, while the rest of the nation experienced an average increase of 16%. In other words, Wisconsin's work program cut welfare by 71% !

Let's assume that Wisconsin's experience was atypical and that nationwide, only 50%, rather than 71%, of the people on welfare are capable of supporting themselves. Private charities would be likely to weed out such people. Thus, if we simply gave the equivalent of the welfare budget to churches and other private charities for distribution, twice as much help would go to the truly needy--virtually overnight!

Of course, public welfare gives over 2/3 of every tax dollar we give them to overhead (e.g., salaries of the bureaucrats who administer the program). Private charities, however, give 2/3 of every dollar to those who need help. By switching to private distribution, we'd cut overhead in half. In other words, we'd double the dollars available to the needy once again. By switching from public to private charity, we'd quadruple our help to the disadvantaged--virtually overnight!

Taxes are expensive to collect. Two-thirds of a dollar are spent to collect one dollars of taxes. If everyone in a libertarian society voluntarily gave the same amount to charity as they do today through taxes, once again we'd triple what the disadvantaged receive. In other words, if private charities received the entire welfare budget in voluntary contributions, we'd multiply by twelve the money available to the poor! Even if private charities received one-tenth of what our current welfare budgets are, the poor would still be better off than they are now!

From all indications, however, each generation of Americans is more charitable than the last. In 1996, the average donation per adult was twice the inflation-adjusted average in 1970 and triple the 1950 average. Volunteer work has increased in roughly the same proportions.

How significant are private contributions to charity? If volunteer time is valued at the minimum wage, total private contributions to charity exceed the combined poverty budgets of government at all levels. If Americans contribute so generously while they are also forced to pay taxes for government welfare programs, wouldn't we expect them to give more, not less, if government left more money in their pockets?

In summary, in a libertarian society, more dollars per capita-not less-should be available to the truly needy. Savings come from getting the able-bodied back to work, cutting the overhead of bureaucracy, and doing away with the collection costs of taxation.

The disadvantaged would benefit greatly from the increased monetary resources available from a libertarian society. However, a libertarian society has more than hand-outs to offer. A libertarian society provides better opportunities--even for the disabled-- to work and grow rich.

Providing help more efficiently to those who can't help themselves is only the beginning, however. Studies show that free markets, on average, create about ten times as much wealth as unfree ones. Not surprisingly, the needy in a wealthy society (e.g., the United States) are always better off than the needy in a poor country (e.g., India). Thus, deregulation, which stimulates wealth creation, helps the poor even more! A libertarian society would minimize the regulations which strangle the economy, thereby raising the standard of living for those on the bottom rungs of the ladder.

Ironically, free societies have a more even distribution of wealth than those which try to redistribute wealth forcibly! The reason is simple: free societies provide the best opportunities for the poor to work and grow rich. Conversely, a highly-regulated society creates poverty by destroying jobs, especially those of the disadvantaged.

During the 1980s, I gained first-hand experience of how government destroys opportunities for the poor to earn while they learn. For example, while rehabilitating a dilapidated apartment building, a young man who wanted to better himself came by hoping for employment. He had some disabilities that made him less than an ideal worker, but suggested that I hire him for about half of the current minimum wage. With experience, he hoped that I would pay him more or recommend him to others.

Fearful that our arrangement would come to the attention of the ever-present building inspectors, I declined. I only lost a potentially good worker, but the young man lost a chance to earn while he learned--thanks to the aggression of minimum wage laws.

The very laws that were supposed to protect this young man from exploitation actually impaired his ability to get ahead. While well-to-do youths simply pay educators to train them, the disadvantaged are shut out of the work force, sometimes permanently.

Some of my low-income tenants made their living by providing child care in their apartments or taking in mending. One ambitious woman was able to get work sewing curtains for stores and offices. The city regulators started calling me to complain that these women hadn't paid expensive fees to register their business. The regulators threatened to serve me with zoning violations if I didn't evict these unfortunates and destroy their livelihood. This time I refused to be intimidated and assured my tenants that they had my support. Unfortunately, most of them buckled under the pressure. They couldn't afford the hassle and the registration fees, so most went on welfare instead.

Licensing laws destroy jobs-especially jobs for the disadvantaged and the minorities. Recently, Afro-American women in several states have started boutiques that braid hair exclusively. Cosmetology licensing boards have forced many out of work by demanding that these ladies attend a year-long program, costing an average of $5000, that doesn't even teach braiding! In many cities, would-be taxi and van drivers can't conduct business without paying exorbitant fees (over $200,000 in New York City) for the medallions (licenses). In some cases, the city or county won't grant new licenses at any price.

Such government intervention creates a great deal of poverty by putting people out of work! Thankfully, the Institute of Justice, a libertarian law foundation, is fighting City Hall-and winning--on behalf of the braid brigade and the would-be drivers. The Institute's pro bono service helps the poor help themselves. While big government caters to the special interests who benefit from high hurdles to self-employment, libertarians are defending the rights of the working poor. Such cases demonstrate that liberty, not government, is the true friend of the disadvantaged.

Government regulations not only put the poor out of work; they create homelessness as well!

William Tucker, using statistical analysis, found that 42% of homelessness could be explained by the high median price of homes in the 50 cities studied. The median housing price, the best single predictor of homelessness, increased as zoning regulations and stringent building or housing codes did. As a result, rents skyrocketed, pricing the poor out of the market.

When cities tried to protect the poor with rent control, the plight of the poor worsened. Rent controls drive landlords out of business. The few remaining landlords can pick and choose among applicants, so naturally they rent to people who are middle-class and most likely to pay. As a result, the poor have no place to go and often end up on the streets.

Government regulations, meant to help the disadvantaged, create poverty for them instead. On the other hand, liberty promotes prosperity, especially for the needy. Liberty empowers the poor with the opportunity to work and grow rich, just as penniless immigrants did in the early days of our nation.

Of course, a few people will still be unable to create enough wealth to support themselves. A libertarian nation, with its prosperity and better employment opportunities, will be much better equipped than today's society to care for such individuals.

Government licencing, minimum wages, and welfare harm, not help, the disadvantaged. If we truly want to help the unfortunate, we must give them the gift of liberty. Nothing else will do.

Mary J. Ruwart, Ph.D., is the author of Healing Our World: The Other Piece of the Puzzle, a liberty primer for liberals, Christians, New Agers, and pragmatists. She also wrote Short Answers to the Tough Questions: Sound Bites for the Libertarian Candidate after her Internet column (www.self-gov.org) of the same name.



References (from the National Center for Policy Analysis, Dallas, TX):

"Generous Americans," Executive Alert, March/April, 1999.

"Welfare Miracle," Executive Alert, May/June, 1997.

"Capping Family Benefits," Executive Alert, January/February, 1996.

"Does Welfare Reform Cost More Money?" Brief Analysis, #210, Friday, August 23, 1996.



Other References:

Economic Freedom of the World 1997 Annual Report, James D. Gwartney. Vancouver: The Fraser Institute, 1997.

The State Against Blacks, Walter William. New York: McGraw-Hill, 1982.

The Excluded Americans: Homelessness and Housing Policies, William Tucker. Washington, D.C.: Regnery Gateway, 1990.