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Inherited poverty in developed countries: how to break the cycle?

A Note by the Director (Ditchley 2002/07)
10-12 May 2002
Over the weekend of 10/12 May we looked at the important question of how the cycle of inherited poverty in developed countries might be broken. As always with issues such as these, much depends on the definition of the terms used and we rightly, therefore, spent some time on definitional questions. But under the guidance of our chairman we were directed to the underlying issues to see if, drawing on the experience of participants from the range of countries represented at our discussions, we could come up with common assessments and agreed policies.
We began by looking at the aims and objectives of policy in this area. Admiration was expressed at the courage of the British Government in stating its intention of eliminating child poverty over the next 20 years. In discussion some doubts were expressed as to whether poverty could ever be completely eradicated. There was, however, agreement that setting a goal in this area could be important even if it might not be fully achieved. This led us to the conclusion that Governments should set explicit goals either to eradicate or substantially to reduce poverty. Care should also be exercised, in the present volatile economic conditions, to try to prevent people falling from relative prosperity into poverty.
We also looked at the question of whether it was preferable to express poverty in relative or absolute terms. The USA used an absolute definition which had the merit of clarity and permitted progress to be measured in a way which was comprehensible to the wider public. The problem was that the target in the USA was subject to heavy criticism for being too low. Relative definitions were more complex since they tended to be expressed in percentages - the UK target of eliminating child poverty was defined as 60% of the median income. The advantage of using a relative benchmark was that it increased the amount of income to the lowest earning groups and represented a more ambitious goal of what a society might consider as the minimally acceptable standards for its citizens and their families.
This discussion led us on the difficult question of measurements and money. Early on we were challenged to say if, when we were discussing poverty, all we were really talking about was money, or the lack of it, for a certain category of people. In support of the importance of income, one participant commented that high income earners had a marked propensity to pass on their high income-earning habits to their children. Another made the point that if one of the goals was to increase the area of choice for poor people, then giving them cash and vouchers was the best way to do this. During the course of our discussions, many other ways of tackling poverty were put forward but those who held money to be one of the key elements, while prepared to concede that it was not sufficient on its own, nevertheless insisted that money was of central importance. It might not be a very sophisticated measure but not having money lay at the heart of the matter. Not to have it was stigmatising.
While some of us were inclined to agree that income was a rather blunt measure - small movements above an arbitrary line could show a large apparent success in reducing poverty - it nevertheless had the merit of simplicity and the fact was that we did not have any means of measuring quality with accuracy. We also thought that the source of the income mattered. If all income transfers came from Governments then they could be counterproductive. It would be better to have income derived from real earnings. This led on to the observation that if benefits were universal they tended not to cause resentment among the public generally. A policy solely for the poor tended to be a poor policy. Targeted benefits, although sensible from an economic point of view often caused divisions in society, sometimes stirred by the tabloid press, which prompted politicians to demand such detailed scrutiny of cash grants that it caused alienation on the part of those whom they were intended to help. One participant recommended embedding policies for poverty in a broader framework which would help to avoid stigmatising the poor.
In this context we looked at the question of building a long-term political consensus to eradicate poverty where one of the major difficulties was that most policies required twenty years to prove their worth. Unfortunately it seemed that not many people cared about poverty which pointed to trying to build a political consensus around a limited agenda. There did not appear to be a clear constituency in most political parties and the press in some countries tended to portray the poor as "undeserving" receiving the same income through benefits as others did through work. The answer, according to one participant, was to make them less poor and more deserving.
Others commented, however, that both in the USA and the UK there were wider and more generous instincts in the general public than political leaders were inclined to believe. In the USA the problem was complicated by the "myth" of individual effort as the way to escape poverty. But, commented another participant, although there were many in the USA who had managed to escape out of poverty almost always there had been an external intervention somewhere along the way which had been instrumental in helping them to succeed. An exercise of pure will and determination was rarely sufficient on its own. Referring to the UK, one participant commented that although the Government took some trouble to consult about individual policies before they were introduced, there was almost no debate about the whole issue of poverty in an attempt to build a broad consensus. Another thought that the only way to build a consensus was issue by issue. In terms of spreading knowledge about policies, experience showed that local communities were among the most effective communicators.
We thought that NGOs could help by creating pressure for change from outside Government. They also had the expertise to help design effective policies. At times they could assist in the execution of programmes and delivering services to those who needed them and finally they were sometimes well placed to monitor and evaluate programmes. The delivery of programmes was a topic of current interest. It was pointed out that there were examples of good publicly delivered programmes and some bad ones too. The same could be said for those working in the private sector where it was important to ensure that they maintained high standards and were also held accountable.
In looking at policies which might help to meet the overall aim of breaking the chain of inherited poverty we looked at various points in the life-cycle of a poor person, concentrating most of our attention on the important early years of childhood. We noted the high incidence of teenage pregnancies in the UK with the corollary that many children of very young mothers frequently themselves had children when they were young. Children of such parents tended also to have very low birth weight. In some cases male babies were being born at below the average birth weight for female children. We thought that policies should aim to reduce low birth weight significantly. There were a number of ways of helping to do this. The greater the opportunities open to women the later they tended to have babies. Raising school achievement should help to reduce early pregnancy. Thereafter an effort should be made to improve diet during pregnancy coupled with thorough pre- and post-natal care.
Attempts to address poor initial starts in life such as the UK's Sure Start were discussed in some detail. The emphasis on local schemes with a high level of parent input was commended while acknowledging that because the policy applied only to communities with high concentrations of poverty, only about one third of poor households were covered. Help for parents who wanted to work was complicated, we thought, by local cultural factors. In Germany it was expected that mothers should be responsible for their young children and would stay at home to care for them. Childcare provision was low which contributed to the low birth rate. In the UK, universal access to nursery places had been extended to two and a half days a week by the age of three. Assistance before the age of three was complicated because there was no consensus about whether very young children should be cared for at home by their mothers or be in childcare. One participant suggested that we were edging towards universal childcare in the same way as universal education had been provided from the public purse. Others thought that there might be difficulties in persuading those tax payers who did not have any children that they should pay for those who did. We should try to get them to understand that children represented one hundred percent of our future, commented another. On this basis some of us thought that developmental childcare should be expanded. It should start earlier and end later thus incorporating after school care. Women, even if they were not professionally qualified should be paid for providing good child care. A participant with experience of schemes to help alleviate poverty, maintained that it was important to document success to convince taxpayers and legislators that their resources were being put to good use.
School education provoked a discussion in which a variety of differing views were expressed. Good schools were described as the most powerful social instrument for change. But we thought that state schools did not recognise performance by teachers. Teachers should be rewarded for helping poor students. The suggestion was made that the headmasters of the fifty most difficult schools in the UK should be paid £200,000 a year. This would indicate the importance attached to education and its potential to change the prospects of young people in later life. However we acknowledged that it would probably be resisted strongly by the majority of the other parents who would not wish to see resources diverted from schools attended by their children. In Germany we noted that schooling did not take place in the afternoon and thought that the educational deficiencies of those from poor backgrounds would need to addressed by extending the school day. In France one of the problems seemed to be that the school year had too few days even though there had been a massive extension of school participation and special zones with schools for the disadvantaged. Overall we attached importance to motivating parents to take an interest in the education of their children. Bottom up approaches usually worked better than top down.
Work occupied a central place in our discussions. In the USA 93% of those asked thought that a mother with children should not receive support if she did not work. One participant suggested that all low income adults in a national economy should be regarded as potential workers. The underlying philosophy should be to try to connect all adults to the normal economy. People in the USA did not expect to be poor if they were in work. But it appeared currently that there was a major problem of working poor. In Wisconsin some 90% of the welfare caseload had moved off welfare. But although 70% of them were in work there was little sign of upward mobility, particularly for women. Poor people were disconnected from the normal fabric of society. Policies such as working families tax credits were thought to be useful in enabling workers to provide properly for their families. The ideal should, however, be work that paid a proper wage. We noted the problems of programmes which had sharp "earnings cliffs" which acted as disincentives to try to move to the next highest level of income. We were informed that in the Scandinavian countries unemployment had been reduced through the provision of social services which could be channelled to particular groups and did not raise the presentational difficulties of cash payments.
We thought that policies needed to take account of people and place at the same time. Places often had bad reputations and people living there felt stigmatised and frequently resorted to drugs and crime. Place could also be associated with race and ethnicity which made it politically difficult to identify the problem too specifically and introduce policies to deal with it. Perversely the problem of success for some in such areas could lead to problems for others. Those who were successful often moved out leaving those behind in an even worse situation than before, deprived of their natural leaders. The only large scale programme for which controlled experiments showed a clear positive impact was the job corps scheme (of Americorps) in the USA. This involved a two year residential course for 16-21 year olds. There was now a waiting list for places at such schools which had demonstrated a positive impact on employment and crime reduction. But, we were told, it was crime reduction which made the programmes cost-effective.
We thought that to address some of these problems there should be a concentration on improving local areas. We also recommended simplification of programmes and legislation intended to help combat poverty. At times the complexity of some programmes made them inaccessible. One participant recommended placing all existing policies under the single heading of "The New Deal" with internal options. We thought that a premium should be placed on policies which encouraged stability since this was one of the main needs of deprived areas and that more time should be spent on learning from those who succeeded in climbing out of poverty. We also thought that local communities were often better able to address crime and dysfunction than outsiders.
In conclusion a participant suggested that social solidarity was a crucial factor in helping to tackle poverty. We needed to increase the capacity of those in poverty to help them out of it. The aspirations of this group were the same as those of the rest of society. When asked, the overwhelming majority said they wanted to work, to have children and to give them a good start in life. They were interested in having choices. Our policies should be designed to help people do what they wanted to do.
Future Ditchley conferences will no doubt look at this again and it will be interesting to see how many of the ideas explored at this conference stand the 20 year test of success or failure. In the meantime I am grateful to the Chairman for coming to Ditchley for the second time to help focus on this issue and also to the participants, some of whom travelled a long way, for the experience and commitment they brought to these discussions.
This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman : The Rt Hon Frank Field MP
Member, House of Commons (Labour), Birkenhead (1979-); formerly: Chairman, Select Committee on Social Security (1991-97); Minister for Welfare Reform (1997-98); author
Mr Richard Shillington
Tristat Resources, Ontario (1984-); analyst in health, social and economic policy
Mr William Watson
Associate Professor of Economics, McGill University, Montreal; Editor, Policy Options Politiques, National Post
Mr Laurent Caillot
Chargé de Mission to the Executive Director, Ministry of Employment and Solidarity
Mrs Michéle Leliévre
Chargé de Mission to the Executive Director, Ministry of Employment and Solidarity
Dr Francine Jobatey
Press Secretary, Land Brandenburg
Dr Peter Krause
Department of Longitudinal Data and Microanalysis, German Institute for Economic Research; author
Dr Peter Scherer
Head of Social Policy Division, OECD
Mrs Fran Bennett
Department of Social Policy and Social Work, Oxford University; formerly: Director, Child Poverty Action Group
Professor Richard Berthoud
Institute for Social and Economic Research, University of Essex: co-ordinator of the European Panel Analysis Group
Mr Tim Boswell MP
Member of Parliament (Conservative), Daventry; Opposition Spokesman for Work and Pensions
Mr Nicholas Holgate
Director, Welfare Reform, HM Treasury
Dr Meg Huby
Director of Graduate Studies, Department of Social Policy and Social Work, University of York
Professor David Piachaud
Professor of Social policy, London School of Economics and Political Science
Dr Shamit Saggar
Reader in Politics, Queen Mary-University of London; on secondment to the Performance and Innovation Unit, Cabinet Office
Ms Maeve Sherlock
Council of Economic Advisers, HM Treasure (2001-) formerly: Director, National Council for One Parent Families (1997-01)
Mr David Willetts MP
Shadow Secretary of State for Social Security (1999-); Member of Parliament (Conservative), Havant; Visiting Fellow, Nuffield College, Oxford, author; member, Programme Committee, The Ditchley Foundation
Mr Neil E Bomberg

Associate Legislative Director for Labor and Employment, National Association of Countries, Washington DC
Professor Peter B Edelman
Professor of Law, Georgetown University Law Center, Washington DC
Professor David Ellwood
Lucius N Littauer Professor of Political Economy, Kennedy School of Government, Harvard; formerly: Assistant Secretary, Department of Health and Human Services; author, "Welfare realities: from rhetoric to reform"
Mr Pete C Garcia
Chicanos Por La Causa Inc (1972-): President and CEO (1984-)
Ms Julie Kerksick
Director, The New Hope Project, Milwaukee, promoting policies that help the working poor (1990-)
Dr Demetra Smith Nightingale
Principal Research Associate and Director of the Welfare and Training Research Program, The Urban Institute, Washington DC; author
Mr David R Riemer
Atlantic Fellow in Public Policy, Inland Revenue and Oxford (Jan-Aug 2002); formerly: Director of Administration for the City of Milwaukee (1996-2002); author of "The Prisoners of Welfare: Liberating America's Poor from Unemployment and Low Wages"