Wednesday, March 29, 2017

No, Professor Deaton, Better to be Poor in America

Nobel laureate Angus Deaton, a Princeton economics professor, recently  said , “If you had to choose between living in a poor village in India and living in the Mississippi Delta or in a suburb of Milwaukee in a trailer park, I’m not sure who would have the better life.” As Deaton acknowledges, poverty is a complex subject and international comparisons are difficult. But in many ways, it is much worse to be poor in India than the United States.
Poor people in the United States have better access to the resources that help them build human capital. They also have a much wider set of economic opportunities, although this could be improved. While the poor in India are chronically so, there is less persistent poverty in the United States. People in America also fare better in many important areas outside the economic sphere, such as freedom of association and safety.

Removing obstacles that make it harder for people to find work and fostering more robust economic growth could improve their opportunities, regardless of where they live.
Poor people in developing countries such as India often lack basic amenities that are practically ubiquitous in America. In India, only 6 percent of poor people have access to tap water, 21 percent have access to latrines, and 61 percent have electricity. Only about 2 percent of Indians have access to air conditioning, compared to 87 percent of U.S. households.
Fewer poor people in India can build the human capital that will help them escape poverty. Forty-five percent are illiterate, according to the World Bank, and almost none have cars or computers. Only 11 percent of lower income people in India report using the internet at least occasionally or owning a smartphone. In contrast, in the United States roughly two-thirds of poor adults own smartphones, and among young adults’ ownership rates exceed 90 percent. The majority of poor households have wireless internet at home. This access can unlock more opportunities.
Two-thirds of the poor people in India living in the type of village Deaton mentions are working on a farm in some capacity. This isolation from the broader economy limits their opportunities and makes it harder for them to escape poverty. One study estimates  that 40 to 50 percent of the rural poor were in chronic poverty.
In contrast, far fewer people in the United States live in chronic poverty. Only 2.7 percent of people were in chronic poverty during the period 2009 to 2012, the most recent four-year period the Census Bureau analyzed. However, the American poor have access to many services their counterparts in India do not, from roads and transportation to electricity. This does not dismiss the hardships of the American poor, but in many cases these problems are less persistent and it is more possible for them to find a way out than people trapped in poverty in developing countries. There is also less concern that their children will have to face those same problems.
Deaton is right that social isolation or a lack of community can be keenly felt by the American poor. In some cases, it could be worse here than in other less developed countries. However, in other measures outside the economic sphere, America performs much better. The United States scores higher on the Human Freedom Index in measures as diverse as “Rule of Law,” “Freedom of Association,” and “Security and Safety.”
The case is clear when looking at the net migration between the two countries, or how people are voting with their feet. The United States consistently has substantial net inflows of immigrants from India. This substantially undercounts how many would come if they could; for a poor person in a rural village in India coming to America is rarely a possibility. A Gallup survey found that the United States was the top desired destination for potential migrants worldwide by far. According to the survey, 10 million people from India would permanently move to America if they could.
In every country, having a pathway to work for is key to escaping poverty.  The World Bank estimates that the “increase in labour earnings was a major factor in reducing poverty” in India, while transfers were not the “primary driver.”  Clearing these obstacles and making it easier for people in poverty to find work can improve their outlook, no matter where they are.  But in 2017, America is ahead.

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