The Price of Being Poor

But inequality hasn’t gone away.

In his book The Price of Inequality: How Today’s Divided Society Endangers Our Future, Nobel laureate Joseph Stiglitz says, “The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live.”

The numbers are staggering. Around the globe, about 3,300 billionaires possess more than US$12 trillion in wealth, while nearly half of the world’s population live on less than $6.85 per day. For about 700 million of them, extreme poverty means struggling to survive on less than $2.15 per day. The richest 10 percent hold more than three-quarters of all global wealth. In 1965, according to the Economic Policy Institute, CEOs “were paid 21 times as much as a typical worker.” This disparity gap has only yawned wider since: “In 2022, [they] were paid 344 times as much.” Left to itself, inequality not only hasn’t gone away, it’s grown.

“Here’s a harrowing fact for you: If the world’s ten richest men lost 99.999% of their wealth, they would still be richer than 99% of the global population.”

These are stark statistics that go beyond “a little inequality.” They reveal structural practices woven into the fabric of our economy, politics and culture. Systemic inequality operates through policies and practices that create different outcomes for different groups.

Despite decades of improvement in reducing extreme poverty, progress has slowed since 2014, especially in the aftermath of the COVID pandemic. The United Nations set ambitious Sustainable Development Goals to end all forms of poverty and to reduce inequality between and within countries by 2030, but billions remain trapped.

Behind these numbers lie profound differences in human experience and quality of life. The affluent continue to gain influence, opportunity and control; the poor face increasing barriers that result in poorer health, limited educational achievement and diminished economic prospects.

US Senator Bernie Sanders highlights this reality in his foreword to Oxfam’s 2024 Inequality Inc. report: “Billionaires become richer, the working class struggles, and the poor live in desperation. That is the unfortunate state of the world economy.” This disparity has created a cycle where those with the financial resources can invest in their families’ futures, but those without struggle to meet basic needs, let alone build generational wealth.

Why is there so much poverty? The United Nations explains that the problem “has many dimensions, but its causes include unemployment, social exclusion, and high vulnerability of certain populations to disasters, diseases and other phenomena which prevent them from being productive.”

The effects of widespread inequality and poverty can extend beyond individual hardship; it can impede overall economic progress and weaken communities. When large segments of the population can’t fully participate in the economy, their untapped potential is a loss for everyone. Limited access to quality education, health care and economic opportunities hinders people from developing their potential talents, which can weaken society as a whole.

When Poverty Became a Moral Failing

What beliefs and attitudes allow these inequalities to exist? Throughout history, how a society views its poor has influenced how it treats them. Some have viewed poverty as a moral failing; others as fate, or destiny; and still others as the result of injustice or endemic social problems. Helping the poor is integral to some cultures; for many, it’s seen as a moral obligation and a means of drawing closer to God. The ancient Israelites were told that “there will never cease to be poor in the land” (Deuteronomy 15:11, English Standard Version). What follows that statement suggests they were not to just accept this fact; instead, it was meant to move them to personal generosity.

“There will never cease to be poor in the land. Therefore I command you, ‘You shall open wide your hand to your brother, to the needy and to the poor, in your land.’”

A cognitive bias that shapes how many view poverty today is the just-world hypothesis. This largely unconscious belief holds that people get what they deserve in life—that the world is fundamentally fair and that both success and failure are earned. It leads to the view discussed earlier that the poor must have done something to deserve their condition, whether through lack of effort, poor choices or moral failings. Instead of acknowledging that the system itself might be faulty, blame is placed on those who are trapped in it.

Related to this thinking is the individualist idea of “pulling yourself up by your bootstraps.” According to Alissa Quart in Bootstrapped: Liberating Ourselves From the American Dream, the “societal delusion” that we achieve success completely on our own “rests on a notion of personal responsibility, as well as one where the wealthy are deserving of their riches.” Conversely, “the poor and the strapped middle class deserve to live on the edge. . . . The bootstrapping myth drops the blame for inequality in our laps, while our flawed systems get off scot-free.”

“In truth,” writes Quart, “to bootstrap is to disregard or erase the roles of our parents, teachers, or caretakers as well as the roles of wealth, gender, race, inherited property, and a whole cache of related opportunities.”

The English Poor Laws of the 16^th–19^th centuries exemplified these misconceptions about poverty. The government divided the needy into two categories: The “deserving” (the elderly, ill or disabled) would receive aid, and the “undeserving” (able-bodied but unemployed) could receive assistance only if they left their homes to live in workhouses. This policy reflected the belief that poverty stemmed from personal failings. Conditions in the workhouses were harsh and unpleasant, so only the truly desperate would apply. According to historian Mark Neuman in Victorian Britain, the workhouse, as an institution, “was intended as a deterrent that would drive shirkers to honest toil.”

As social sciences developed in the early 20^th century, researchers sought to explain poverty through cultural and psychological frameworks. In the 1960s, US anthropologist Oscar Lewis developed his “culture of poverty” theory, which asserted that those raised in poverty developed behaviors and values that kept them poor, and that they passed these down through generations. While more recent examinations of the systemic and social factors that contribute to poverty have debunked this theory, it still resonates with those who place the blame for poverty at the feet of the poor themselves.

“If we believe, however wrongly, that poor people don’t value education, then we dodge any responsibility to redress the gross education inequities with which they contend.”

The Victorian workhouse is a relic, but its underlying moral philosophy continues to shape modern social policy. Today’s debates about work requirements for public assistance, about drug testing for benefits recipients, and about the supposed “culture of poverty” echo those historical prejudices about the underlying causes of poverty. As these views persist, they mask a crucial reality: The factors that create and maintain economic inequality have become far more sophisticated and difficult to escape. Understanding poverty today requires looking beyond our assumptions about personal responsibility and sincerely examining the challenges people face in their daily lives.

Trapped in the System

In almost every aspect of life, disadvantaged people face obstacles. Just trying to get a bank account, or a place to live, or a medical appointment can mean negotiating a maze of paperwork and mounting fees. For families living paycheck to paycheck, the nuisance of an increased insurance premium, a bank fee or a flat tire can trigger a cascading crisis.

In the United States, state and federal governments spent more than a trillion dollars on anti-poverty programs in 2023. However, the money for such programs doesn’t go directly to those in need. Instead, the government often depends on private third-party contractors to deliver essential services. In her book Poverty for Profit: How Corporations Get Rich Off America’s Poor, Anne Kim calls these industries “Poverty Inc.” They are a “vast collection of industries that make their living off the poor.” According to Kim, “the infrastructure of poverty is big business. And as such, it is a major component of the systemic barriers low-income Americans face.”

The banking industry provides an example of this system at work. In “Banking and Poverty: Why the Poor Turn to Alternative Financial Services,” Berkeley Economic Review staff write that it’s “simply not profitable” for banks to offer services to middle- and low-income households. Banks combat this threat to their profitability by imposing fees for every service they offer. As a result, many low-income households can’t afford to use traditional banks. This forces them to rely on alternatives such as check-cashing services, which seem less expensive but come with their own steep costs. When emergencies strike (that flat tire, for instance), payday loans—cash advances on future paychecks—may appear to offer relief, but with annual percentage rates between 300 and 600 percent, they come at a crippling price if they can’t be paid back almost immediately.

This pattern repeats globally. A quick Internet search suggests that so-called loan sharks operate not just in the United States but in the United Kingdom, Canada, Australia, the European Union and many other ostensibly developed nations. Predatory lenders in Cambodia, Jordan, Mexico and Sri Lanka, meanwhile, have upended the personal finance industry. Weak consumer protection means borrowers are at the mercy of aggressive harassment, forcing some to sell their homes and land. Others, trapped in a cycle of deepening debt, have taken their own lives because of the hopelessness of their situations.

“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”

Beyond predatory financial practices, housing insecurity is another critical dimension of poverty. Finding an affordable place to live is growing more difficult around the world, fueled by factors such as excessive demand, zoning regulations and high costs, and opposition due to NIMBYism. Simple greed is also a factor. In the words of Liz Zelnick of Accountable.US, “big corporate landlords have kept right on raising rent on everyday families regardless of how high their profits have grown.”

Rising rents force people to make difficult choices between paying for housing and meeting other basic needs. While the US Department of Housing and Urban Development (HUD) offers rental assistance, their 2024 Rental Assistance Program report admits the program is underfunded and can reach only “approximately 1 in 4 eligible families.” Even when assistance does become available, affordable options can come with hidden costs: unsafe neighborhoods, aging infrastructure, and inadequate heating, electricity or plumbing. The United Nations estimates that globally more than 1.8 billion people live in substandard housing, and at least 150 million are unhoused.

For those without homes, the challenges increase significantly. They are more vulnerable to violence, abuse, and mental and physical illness. The lack of a permanent address can complicate the ability to get or keep a job, receive important documents, or access vital services such as health care, food assistance and housing support. Perhaps most shockingly, between 40 and 60 percent of those experiencing homelessness in the United States are employed, but their wages simply can’t cover the high rents for housing near their workplace. The homeless, according to Peter Edelman in Not a Crime to Be Poor: The Criminalization of Poverty in America, are also “always targets of criminalization.” He explains that while underlying prejudices have often led societies to penalize the homeless, “municipalities are now enacting even more punitive measures due to shortages of funds for housing, mental health services, drug and alcohol treatment, and basic cash assistance.”

Inadequate health care further compounds these struggles. Due to high costs, lack of insurance and the limited number of providers in underserved areas, many don’t have access to desperately needed medical interventions, much less preventive care. Even with insurance, high deductibles and co-pays can make care unaffordable. A single medical emergency can wipe out life savings or push families into bankruptcy. Chronic health conditions, untreated mental health issues, and disabilities exacerbate the struggles of those living in poverty.

The criminalization of poverty adds another disturbing dimension to these challenges. Edelman explains how the justice system often operates as a two-tiered system. “Low-income people are arrested for minor violations that are only annoyances for people with means but are disastrous for the poor and near poor because of the high fines and fees we now almost routinely impose. Poor people are held in jail to await trial when they cannot afford bail, fined excessive amounts, and hit with continuously mounting costs and fees. Failure to pay begets more jail time, more debts from accumulated interest charges, additional fines and fees, and, in a common penalty with significant consequences for those living below or near the poverty line, repeated driver’s license suspensions. Poor people lose their liberty and often lose their jobs, are frequently barred from a host of public benefits, [and] may lose custody of their children.”

“The rich fictions about being self-made or being more worthy involve the megarich both covering up their dependencies and blaming normal people for needing assistance.”

These challenges hit some groups especially hard. Racial minorities face additional barriers, including wage discrimination, housing segregation, and higher rates of policing and incarceration. Women, particularly single mothers, juggle the demands of caregiving with low-paying, unstable jobs. Immigrant communities also face such unique obstacles as language barriers, precarious legal status and workplace exploitation. When multiple barriers intersect, climbing out of poverty becomes extremely difficult.

The result? A vicious cycle where each issue makes the others worse. Breaking free requires not just extraordinary effort from those struggling but also changes to address the underlying systems that create and maintain these barriers.

Breaking the Cycle: Systems and Solutions

In looking for solutions to break poverty’s cycle, one fact is clear: Inequality exists in almost every country, regardless of economic system. Market economies often generate enormous wealth for a few while leaving many in abject poverty. Defenders praise the efficiency, productivity and innovation of market economies, but critics point out that capitalism concentrates wealth in fewer hands while the poor pay the costs.

Socialist and mixed economies haven’t eliminated poverty either. Some nations have reduced extreme poverty through social programs, but challenges persist. Nordic countries, often cited as models of democratic socialism, still grapple with pockets of poverty, particularly among immigrants. China’s dramatic economic growth has lifted millions out of poverty, yet significant disparities remain between rural and urban populations. And despite a reduction in poverty, the inequality gap between these groups has, in fact, increased.

Economist Thomas Piketty asserts, “The current economic system is not working when it comes to solving the key problem we have to solve—the problem of rising inequality.” What becomes clear across different systems is that poverty’s persistence is a result of political choices and power structures. Whether in market, socialist or mixed economies, those with wealth and influence shape the rules and institutions in ways that will preserve their advantages.

The question isn’t whether a particular economic system causes poverty, but whether any system can be structured to ensure more equitable outcomes for all members of society when mistaken beliefs about poverty blind us to its true nature.

“Poverty is not just lack of income. It’s a lack of education, food, health care, shelter, political inclusion, choice, safety, dignity.”

When we judge people’s situations before understanding their needs, we risk perpetuating the systems that profit from their struggles.

But if we aren’t personally touched by the effects of poverty, why should we care? The United Nations offers an answer: “As human beings, our well-being is linked to each other. Growing inequality is detrimental to economic growth and undermines social cohesion, increasing political and social tension and, in some circumstances, driving instability and conflicts.”

With that in mind, we can conclude that the ancient wisdom—“the poor will always be with you”—wasn’t meant to suggest that we should be resigned to poverty’s inevitability. It is rather a reminder of our ongoing responsibility to care for one another. Yet today’s responses to the poor often mirror the same judgmental attitudes that shaped the Victorian workhouses. We still tend to divide people into “deserving” and “undeserving” categories, ignoring the complex systems that create and maintain poverty.

Solutions to inequality and poverty are possible but require both systemic and personal change. Policy reforms are essential, but these changes can’t occur without a shift in how we view the poor.

The ancient command to “open wide your hand to your brother, to the needy and to the poor” speaks to individual charity. By implication for our day, if we are to improve the dilemma of the poor, it surely suggests a fundamental transformation in how we structure our communities and economies, with equity as the goal. The measure of a society’s success should include how it treats its most vulnerable members.

In the end, addressing poverty requires us to move beyond judgmentalism. It demands that we see the poor not as problems to be solved, moral objects to be judged, or opportunities for profit, but as fellow human beings whose dignity and potential matter to us all.