Welfare (and Wal-Mart) at the Eleventh Hour

December 14, 2010
Posted by Jay Livingston

Do poor people make unwise decisions – decisions that may have caused their poverty, decisions that aggravate that hardship? In the thread of comments on the previous post, there was some speculation that many of the poor, perhaps even a majority, were making these kinds of bad choices, perhaps because they were ignorant or, more likely, because they lacked the proper virtues and because government welfare allowed them to do so. In any case, the argument continues, the Heritage Foundation has told us that the poor in America are well-housed, well-clothed, and well-fed.

Maybe it’s time to go back to Wal-Mart. Three months ago Bill Simon, the Wal-Mart CEO spoke at a Goldman-Sachs Retail Conference, and some of what he said got picked up in the popular press – NPR’s “Planet Money,” Salon, and elsewhere. He talked about
an ever-increasing amount of transactions being paid for with government assistance.

And you need not go further than one of our stores on midnight at the end of the month. And it's real interesting to watch, about 11 p.m., customers start to come in and shop, fill their grocery basket with basic items, baby formula, milk, bread, eggs, and continue to shop and mill about the store until midnight, when electronic -- government electronic benefits cards get activated and then the checkout starts and occurs. And our sales for those first few hours on the first of the month are substantially and significantly higher.

And if you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it, and they've been waiting for it. Otherwise, we are open 24 hours -- come at 5 a.m., come at 7 a.m., come at 10 a.m.

But if you are there at midnight, you are there for a reason.
This snapshot of Wal-Mart at midnight doesn’t quite fit with the widespread and tenacious the image of the poor as drug addicted, lazy, heedless spawners of children that they won’t even feed a bowl of cereal to in the morning, all supported by a cushy welfare system that subsidizes their profligate, unwise, and unvirtuous ways.

(Click on the graph for a larger view.)

Shortage of jobs was also two to four times more likely than these other causes to be voted as “not a cause of poverty.”

The survey was done in 2001. Perhaps the current high rates of unemployment, especially long-term unemployment, have changed perceptions about the poor and the causes of poverty (though probably not at the Heritage Foundation).


Bob S. said...

I notice that he didn't mention any numbers.

Wonder why that is Jay?

What I'm not seeing is the reason why they are out of money.

Could it be that they lack the education -- through their own choice -- to get jobs that pay better?

Roughly 30 percent of illegal immigrants are poor by official government standards. Among the children of illegal immigrants, the poverty rate is 37 percent.[39] Overall, illegal immigrants and their children represent between 4.5 percent and 5.0 percent of the U.S. population, but they are roughly one-tenth of all poor persons appearing in government poverty reports.[40] -- from the Heritage Foundation.

And it isn't just the illegal immigrants. How many poor people are functionally illiterate but have graduated from high school?

Who's choice was it not to learn in school?

Could it be that they are there at midnight because they don't have the most stable family dynamics?
That they are trying to support a family on one income?

Nearly two-thirds of poor children reside in single-parent homes; each year, an additional 1.5 million children are born out of wedlock. Increasing marriage would substantially reduce child poverty: If poor mothers married the fathers of their children, almost three-quarters would immediately be lifted out of poverty.[35]

How does school lunch programs and tax payer subsidized impact family relationships?

It undermines it tremendously.

Why marry the baby's daddy/mommy when the government is there to step in?

Why not have another child you can't afford with another baby's mommy/daddy?

They don't have to stick around, you don't have to stick around; they can get 'free food'.

The factors affecting poverty are also echoed in many other aspects of society.

Crime, higher education, etc.

Do poor people make unwise decisions – decisions that may have caused their poverty, decisions that aggravate that hardship?

I think the answer is obviously yes.

How does providing free food help them make different decisions?

How does providing free food build them up as individuals versus making them dependent upon continuous aid?

PCM said...

I'm not trying to be snide, but why do we care about that poll? Is it just to show that most people have no understanding of poverty?

What I'd like to know is what poor people think about the causes of poverty. That would actually tell us something useful.

PCM said...

It's also interesting about the shopping of walmart because cops can tell you how the drug markets boom when government checks arrive.

And I can see why police (and others) might not like seeing their tax dollars go to buy crack and heroin. But it would be useful if people could see their government money being used to buy essentials.

Anonymous said...

this is certainly a telling and tragic account, but i'm not sure it's necessarily telling the story you think it is. everything you wrote would mesh pretty parsimoniously with a time inconsistency model, i.e., a specific type of bad decision making.

note that i'm not saying this with any great amount of smugness or class condescension -- time inconsistency is a huge problem for academics too, as seen with jeremy freese's "violet" or any number of examples you could find by observing me closely for a day or two.

brandsinger said...

This entire debate is so '80s. No one condemns the poor as lazy. The old welfare system was reformed years ago. But there still are poor and hungry people -- and the challenge is, What to do about them? The answer is to support their rise from dependency to independence. That requires a growing economy -- new jobs -- and of course great teachers -- great schools -- great education. (...not, ahem, union-dominated abominable inner-city school traps.)

Check out David Brooks in the Times -- the answer is a rising middle class -- worldwide!
"In 2000, the World Bank classified 430 million people as middle class. By 2030, there will be about 1.5 billion. In India alone, the ranks of the middle class will swell from 50 million to 583 million.

"To be middle class is to have money to spend on non-necessities. But it also involves a shift in values. Middle-class parents have fewer kids but spend more time and money cultivating each one. They often adopt the bourgeois values — emphasizing industry, prudence, ambition, neatness, order, moderation and continual self-improvement. They teach their children to lead different lives from their own, and as Karl Marx was among the first to observe, unleash a relentless spirit of improvement and openness that alters every ancient institution.

"Last year, the Pew Research Center surveyed the global middle class and found that middle-class people are more likely than their poorer countrymen to value democracy, free speech and an objective judiciary."

So the point is:
Education, jobs, positive values -- these reinforce one another. Our policies should reinforce these -- not extend and deepen dependency on government.

Jay Livingston said...

Peter, the poll is important because those ideas also affect policy. Politicians too believe (or act as though they believe) that the major causes of poverty are drugs and laziness (“lack of motivation”). If they don’t want to come right out say “lazy,” they’ll talk about “dependence” caused by welfare.

The idea that jobs is the most important factor is a minority view. But in terms of policy, job creation would probably get you more poverty reduction than would programs aimed at changing people’s morals or marital status.

In 1992, there were 37.6 million Americans – 14.5% of the population – living below the poverty line. By 2000, that rate had fallen to 11.3 %.. Despite the increase in the US population, the absolute number had dropped by 6.5 million. Did those 6.5 million people throw away their crack pipes, go back to school, or in other ways become more moral?

They rose out of poverty, but was it because they got virtue, because they got married, or because they got jobs?

By 2009, the poverty rate had climbed back to 14.3%, and there were 44 million poor people in America. Had 12-13 million people lost their virtue? Or had they lost their jobs?

FWIW, the Census shows that 44% of poor families were headed by married couples. About 25% of the poor (11.3 million people) were adults 18-64 who worked full time. Nearly 3 million of the poor had a 4-year degree, another 6.7 million had some college. That’s about one-third of all adults in poverty. (I may be wrong about those figures – the Census tables didn’t all present these data directly, and I had to calculate from a couple of different tables. If you have a better source on this info, let me know).

Gabriel, What you’re calling “time inconsistency” – is that what people mean when they refer to “stretching a paycheck” (or in this case, an unemployment or welfare check) when it doesn’t quite stretch enough to reach the end of the month?

I had a very hard time getting Jeremy’s game to run on my computer. When I did get it to run (sort of) I realized that not having grown up with computer games, I just didn’t speak the language.

Anonymous said...

>Gabriel, What you’re calling “time inconsistency” –
>is that what people mean when they refer to
>“stretching a paycheck” (or in this case, an
>unemployment or welfare check) when it doesn’t
>quite stretch enough to reach the end of the

Not really. It's kind of like solvency vs liquidity.

It could be that the check is simply inadequate to last the fortnight by even the most heroic frugality, which is what I take it you mean by "stretching the paycheck."

Time inconsistency is different -- it's when people do something that they'll regret later, tell themselves "I'm not gonna do that again," then do it the next time anyway. In a household financial sense it would consist of going over your daily budget right after payday (or disbursement day or whatever) so that you run out of money shortly before the next disbursement. For people with a marginal existence such splurging could be pretty petty, maybe a carton of cigarettes and a few take out meals, but if such relative extravagance causes them to run out of formula and other staples at the end of the fortnight this would be time inconsistency. Note that this is basically the criticism people make of the payday loan industry -- that it exploits people's time inconsistency.

>I had a very hard time getting Jeremy’s game to
>run on my computer.

You should be able to run it locally on your computer with Zoom (you're a mac guy, right?) or run it in the browser.