• Former Kmart CEO Charles Conaway received nearly $23 million in compensation during his two-year tenure.
• When Kmart filed for bankruptcy in 2002, 283 stores were closed and 22,000 employees lost their jobs. Total amount of severance pay for them: $0.00.
• In the year before Enron collapsed, about 100 executives and energy traders collected more than $300 million in cash payments from the company. More than $100 million went to former CEO Kenneth Lay.
• After filing for bankruptcy, Enron lost $68 billion in market share, 5,000 employees lost their jobs and Enron workers lost $800 million from their pension funds.
• Former Tyco CEO Dennis Kozlowski made nearly $467 million in salary, bonuses and stock during his four years running the company into the ground.
• Shareholders lost a massive $92 billion when Tyco’s market value plunged.
• Wal-Mart CEO H. Lee Scott, Jr. received more than $17 million in total compensation in 2001.
• Wal-Mart employees in 30 states are suing the company alleging that managers forced employees to punch out after an eight-hour work day, and then continue working for no pay. Nevermind the Fair Labor Standards Act, which says employees who work more than 40 hours a week must be paid time-and-a-half for their overtime.
• Not just the private sector: More than 1 million US corporations and individuals have registered as citizens of Bermuda to avoid taxes, a practice OK’d by the IRS. Although the exact number is unknown, the IRS estimates that “tax-motivated expatriation” drains at least $70 billion a year from the US Treasury.
• If you were a worker poor enough to apply for the Earned Income Tax Credit in 2001, your chance of being audited was one in 47. If you made more than $100,000 a year, your chance of being audited was one in 208.
• In 2000, the average CEO earned more in one day than the average worker earned all year.
• In 2000, 25 percent of workers earned less than poverty-level wages.
• Between 1990 and 2000, average CEO pay rose 571 percent.
• Between 1990 and 2000, average worker pay rose 37 percent.

The point? The economic growth of the 1990s was not distributed equally. Though the U.S. economy has tripled in size since the early 1960s, the number of people in poverty has remained fairly constant. Sociologist Herbert Gans (1971), sort of tongue-in-cheek but not entirely, and as a response to the functionalist theorists of his day, tried to use the functionalists’ own premise to explain why the number of poor has remained so persistent over time. As he says, ‘poverty survives in part because it is useful to society or some of its parts.’ And as long as ‘those parts’ (we can speculate as to what they are) continue to enjoy political power, we shouldn’t expect very much to change, according to Gans. Now, we all know that there are populations of people who exploit the poor–loan sharks would be a good example. We also often think of ‘slumlords’ and the ability of property owners to work the system to avoid making improvements on their buildings, all the while collecting rent checks. Faith healers offer salvation for a small donation (funneled through their ministries). But Gans suggests that there are legitimate professions as well that benefit from the existence of a group of poor people.

Gans mentions several ways in which poverty is functional for the better-off members of society:

1. Dirty work gets done. Poverty means there will be people to do low-wage, undesirable work. In a society where there are no populations dependent on low wage, where everyone has equal opportunity for social and economic advancement, where there wasn’t great variation in formal education levels and job skills, who would do the dirty work?
2. Domestic work gets done. This frees up wealthy for other pursuits (professional, cultural, fodder for people magazine, tabloids, etc.-we also love to cut them down in celebrity rags).
3. Professional and business niches get created. Poverty creates the ‘need’ for a number of professions, occupations that ‘serve’ the poor. Pawn shops are in a sense banks for those who couldn’t qualify for loans. Stores in inner-cities often specialize in cheap liquor, cigarettes by the carton, lottery tickets, etc. Payday loans. Collection agencies. Lawyers on contingency. Hotels/motels can prey on poor people who can’t afford to get into an apartment rental (because of the up front cash needed for security deposit, first and last month’s rent, etc. Hey! Maybe with a payday loan!). There are social workers, in the public, non-profit and private sector, professors who study poverty, etc.
4. Recycling contributions. Poverty helps with the recycling of goods and incompetent professionals. Poor people often buy goods others have discarded, including clothes, appliances, automobiles, etc. In addition, the poor may be forced to go to professionals that can’t attract wealthier clients (this is where the term ‘ambulance chasing lawyers’ comes from). If we recognize that most all professions have a normal distribution of competence, for instance, that a certain percentage, say 10%, are extremely skilled, and another 10%, are downright incompetent, and most fall somewhere in the middle, then there will be doctors, lawyers, contractors, etc., who are incompetent but still working, practicing. Maybe they charge lesser fees, accept more types of insurance, but who is in worst position to avoid going to incompetent professionals? Where are these people likely to operate? In Beverly Hills or Harlem?
5. A population of poor helps uphold conventional norms. The poor more often get ‘caught’ in criminal activity, and most studies deal with crimes committed by the poor.
6. Moral distancing. Poor people are perceived as morally deviant, engaged in debauchery–the rich can be said to be acting ‘decadent,’ like the poor, rather than morally deficient themselves (as Gans wrote, they can do it vicariously, rather than as a vocation);
7. Cultural contributions. Impoverished cultures have produced culture that has been valued by the wealthy classes. Blues and jazz, for instance, or country western music, all have their roots in black and rural heritage. The Beatles came from working-class Liverpool. Modern variants of this are rap and hip hop. Thank your ancestors, Robin Thicke …
8. Security of social location. With respect to status comparisons, the poor serve as reference points–guaranteeing status of those who aren’t poor. As long as there are poor, others ‘know’ they’re better off (morally, financially . . . ).
9. Helping others achieve. The poor aid in upward mobility of other groups. For example, waves of immigrants in the early part of the century provided services to people in slums, often of their own ethnic/racial group, and were able to work their way up the socioeconomic ladder as other immigrant groups, more recently arrived and less well off, followed in their tracks. Poor people still need goods and services, and there is usually some economic incentive to provide them.
10. Supply of charity balls. Poor people keep the aristocrats, philanthropists busy. Ever check out the society pages of the paper? Thousands of dollars are spent holding charity black tie balls, well-documented by a newspaper’s photographers?
11. Bearing the brunt of disruptive change. Poor people are often asked to absorb costs of change. Some examples include:
    1. urban renewal, the razing of neighborhoods. This was especially big during the time Gans wrote about, a period of industrial decline, suburbanization and growth of the interstate highway system. Those roads had to go somewhere, and it doesn’t take a rocket scientist to figure out which neighborhoods were dislocated.
    2. volunteer army. Who will fight a war in Iraq? Who fought in Vietnam? The wealthy were able to get deferments from the draft (VP Dick Cheney got two . . . here’s a list of some of those who avoided armed conflict but are now willing to send others off to war).
    3. ‘risk society.’ Think about risks in our society, and who takes them. I’m not talking about extreme sports, things people can choose (which are often limited to those with mountains of gear). Living next to a superfund site, or close to a nuclear power plant. Or a busy street, noisy or polluting factory, high-crime neighorhood. The wealthy can generally afford to pay money to reduce these risks, live in a gated neighborhood, on the hill, away from noise and congestion. In general, poor people bear more risks in our society, and are less able to avoid them.
12. Keeping American politics stable. The poor help stabilize the American political process. They are less likely to register, less likely to vote, but if they do vote, will more than likely vote for democrats. Why? Republican policies are generally pro-business (if not anti-poor), and pro-human capital arguments (those who want to advance must invest in their human capital). Their social policies are conservative. Democrats generally know this, and know that most poor people would not vote republican, and therefor have a limited obligation to address their needs. This is the sort of situation that allowed President Clinton to sign the 1996 welfare reform legislation, drafted by the Republican-controlled Congress. However, in the last 15 years, efforts to make voting more difficult have tended to affect poor people the most. Rather than ‘politicians should make sure no one legally entitled to vote is disenfranchised’ we get ‘politicians should make sure no one who isn’t entitled to vote is able to’ (a very small population by any objective measure).
13. Finally, if the poor are morally deviant, there is less pressure on other groups to alleviate poverty (back to human capital, poor are lazy arguments). Their own deviance is the root of the problem, not their neglect by better-off groups in society. And ultimately this means lower tax rates for the wealthier taxpayers. So stigmatizing the poor is a price society pays for a political system where money and campaign contributions seem to count over popular representation and voting.
14. (I’d add a couple): The poor pay out a lot in regressive tax revenue. Yes, the Wall Street Journal once contended that the poor are lucky duckies because they avoid paying income tax. But, what about more regressive taxes that hit everyone equally? Sales tax, for instance (which we don’t have in Oregon). ‘Vice’ taxes on cigarettes, alcohol. Payroll tax. Vehicle regisration. Lottery tickets. Written on one of my favorite bumper stickers is ‘a lottery is a tax on people who are bad at math.’
15. Low-wage work gets done. It’s not just the ‘dirty work.’ Welfare reform is increasingly designed to push welfare recipients into the workforce. They often can’t compete for decent jobs–there are already unemployed people with more skills. Often they end up in low-wage, low security employment. Who benefits from this? What are the potential costs to the welfare system of subsidizing predatory employers’ ability to pay workers non-living wages?
16. The wealthy can buy their illicit drugs without risking criminal charges. Groups of different SES all use illicit drugs at various rates. Law enforcement target minority inner-city areas, populations that aren’t likely to hire expensive lawyers and fight back in court. Black men make up 90% of the non-violent drug offenders in federal prisons, even though their use of drugs is proportional to their numbers in the population (13%).

What does Gans suggest?

With respect to dirty work-

• We could increase wages (how?). What are the general arguments for increasing the minimum wage, and who is generally opposed? Why don’t we increase the minimum wage more often?
• We could encourage more automation, have some of the dirty work jobs performed by machinery (and people could be employed designing, building and maintaining the machinery . . . ). But would that drive up costs for consumers? And displace workers?
• Increasing wages might actually lessen the strain on welfare programs. How?

As for old, decrepit housing-

It might actually have to be torn down, rather than provide slumlords with a means of income. But likely at the public’s expense, which wouldn’t be too popular.

Incompetent professionals

They could receive other training–this would be a benefit for us all. We could tighten requirements for practicing medicine, law, etc. Why don’t we currently do this better? Would we in the end get rid of the normal distribution of competence that likely characterizes most professions, or could be truncate (cut off) the lower end?

Status functions of the poor

• We could use relative measures of poverty. There may still be a class of poor, but they wouldn’t have to be as poor-suggesting a more equal distribution of income and wealth in society. But wait–that’s socialism, ain’t it? Strike that.
• What would the human capitalists say about this? It would involve killing incentive, but for whom? The least competent? Who may have to find other things to do if they can’t cut it in their professions?)
• As for those who provide goods and services–yes, the poor could, with more resources, compete with them in providing these. In any case of social change, some will benefit, some will be worse off (but presumably with a few more resources to deal with it, or more clout to advocate for public spending).
• Philanthropy would continue, especially with the proper mix of tax incentives, in some form or another, as long as there were groups considered ‘less poor’ (could it become more international in scope?)

Political functions of the poor

• More equitable distribution of risk in society – if the poor are less poor, they have more resources to fight back against changes that adversely affect them. They are less likely to be the ones who always absorb the costs of social or economic change.
• With respect to voting – if they felt they had a voice, they might be more likely to register, to participate in the political process. After all, Obama did become the first African American president in 2008, so . . . change happens.

In essence, we could make poverty less functional, but as with any change, there are winners and losers. Who would be the losers in this case, and what is the likelihood of things changing? You might also ask yourself, who can most easily afford to be worse off? And what are the trade-offs between societal benefits, and individual benefits or class benefits?

The reasons we don’t do many of these things should give you some insight into why poverty still persists. What makes Gans’ article even more compelling is that it was written in 1971, and things don’t seem to have changed much in the interim.

Gans, Herbert. 1971. The uses of poverty: The poor pay all. Social Policy 2:21-23.