7 Reasons Why Philanthropy Hasn't Made Much of a Dent in U.S. Poverty Rates

The U.S. Census Bureau released new data about poverty earlier this month, triggering the usual slew of articles about why the United States has made zero progress in this area for a generation. 

The overall poverty rate has ranged from 12 to 15 percent since the 1970s, with the latest figures showing that 14.5 percent of Americans lived below the poverty line in 2013.

I wrote countless words in my past think tank life on why government hasn't done more to promote shared prosperity and lift up those at the bottom. But the shortcomings of philanthropy on this front have also been significant, and have received less attention. I'm sure many readers have their own opinions about where and how funders have gone wrong in their own war on poverty, and I'd love for more people to chime in. I don't pretend that my own views cover the entire waterfront of this complex area of philanthropy. 

Two caveats before I get to my list. First, I'm writing about philanthropy's record from the 1970s onward, after funders did score some major successes in the 1960s. Second, I don't grapple here with the conservative critique of philanthropy's failures on poverty. The right has its own narrative of what went wrong, one that centers on how philanthropy reinforced patterns of dependency, undermined free enterprise, and neglected the all-important factors of family and culture. I don't share that critique, but it's interesting and worth engaging by reading this classic 1996 City Journal article or poking around the Philanthropy Roundtable

Here's my list, starting with the most obvious reasons for why so influential a sector has proven so impotent in this crucial area. 

1. Poverty Is Too Big a Problem for Philanthropy to Much Affect

Even if all the resources of philanthropy were targeted at poverty, as opposed to just a sliver, and even if funders had the exact right strategies, the philanthropic sector might still be no match for a problem of this scale.   

Last year, all charitable contributions combined totalled around $335 billion, according to Giving USA, which is less than what's spent annually on one of the bigger anti-poverty programs, Medicaid. If you divided up that $335 billion between the 44 million Americans who are officially poor, each would get $7,600—not bad for a family of four, but still not much. 

Americans love to congratulate themselves on their generosity. But the scale of our philanthropy is still modest compared to the kinds of resources that government can mobilize to solve big problems.  

2. Donors and Foundations Haven't Been All That Interested in Poverty

It's hardly a secret that direct anti-poverty giving makes up a small slice of all annual giving. For instance, Giving USA found that just around $41 billion last year went to human service organizations. Of course, many more billions go to combat poverty indirectly, through investments in education and health, so it's hard to nail down exact numbers here. 

An easier point to nail down is this: Many rich people, along with the foundations they leave behind, don't care all that much about helping poor people in the United States—as opposed to combatting climate change, finding a cure for cancer, funding the arts, building up their alma maters, defending reproductive rights, and helping the much poorer people of the developing world.

Yes, there are plenty of exceptions to this generalization, but not enough to have transformational power. Which isn't so surprising: Why would you expect the upper classes to come galloping to the rescue of the lower classes? 

3. Funders Overspend on Direct Services and Underspend on Policy Advocacy

The big reductions in poverty since 1960, when nearly 25 percent of Americans were poor, can be mainly attributed to successful government programs. So it stands to reason that a further expansion of government could lead to more major declines in poverty. But instead of bankrolling advocacy for that goal, most anti-poverty funders support direct services for poor people, which is helpful, but a drop in the bucket compared to the resources government can mobilize. 

A few numbers: Social Security keeps around 22 million people out of poverty, while the Earned Income Tax Credit and Child Tax Credit lift another 10 million over the poverty line. Without those programs, as well as Medicare, Medicaid, food stamps, unemployment, TANF, and some other programs, and the poverty rate in the U.S. would be roughly double what it is today. 

Ideas abound for reducing poverty by expanding existing programs and tax credits, and adding new strategies, like a guaranteed income. But advocacy for these ideas, along with work defending existing anti-poverty programs, doesn't draw major support from foundations and individual donors.

For instance, the top anti-hunger direct service group, Feeding America, pulls in roughly twice as much money annually in cash donations as the Center for Budget and Policy Priorities, one of the top groups advocating for food stamps, among many other programs for the poor. Likewise, Habitat for Humanity raises more money every year than the advocacy groups trying to keep Section 8 vouchers off the budget chopping block. And so on. 

4. Funders Don't Focus Enough on Promoting Economic Growth and Shared Prosperity

Data from the Census shows that the poverty rate falls whenever the economy is expanding. Poverty fell during the boom of the 1980s, and even more so during the boom of the 1990s. Other data has shown that the nature of growth also matters: The booms of the early postwar era, where prosperity was shared, did much more to improve fortunes at the bottom than more recent expansions. In fact, those at the bottom have benefited less and less over time from periods of growth, with the least trickle down during the expansion of the past few years. 

Given all this, you'd think that a great many funders would be investing in work on reshaping the economy writ large to benefit poor people. You'd be wrong. With the exception of conservative funders who spend heavily to promote the free market ideas they think will produce growth (and help the poor), economic policy is not a major focus of philanthropy. Trade and globalization is a case in point: While job losses due to imports have contributed to the decline of many cities and regions, and an overall depression of wages for unskilled workers, and while the converse is also true—higher exports could greatly benefit many low-income Americans—few foundations prioritize grantmaking on these issues. 

Philanthropy hasn't just been useless in dealing with the damaging effects of globalization, it also missed the boat on deregulation. Few events of the past half century have more adversely affected low-income Americans than the housing and financial crash of 2007-2009. African-Americans in particular saw the wealth gains of a generation reversed in a short time. But few funders made major investments in the years leading up to that crisis in strengthening oversight of the financial and housing markets. Even today, after some very harsh lessons, this remains a low priority area for funders. 

5. Funders Place Too Much Faith in Education As a Cure to Poverty

Big investments in improving education in poor areas by myriad foundations and major donors serve as a reminder that many philanthropists do care deeply about low-income American. Alas, their silver bullet—better schools and teachers, along with more access to college—has finite traction on a problem that's deeply rooted in larger economic and social forces. 

Yes, educational opportunity can pull kids out of poverty, or give adult learners a second chance, and we see this all the time. But for a whole bunch of reasons, improvements in education haven't done much to change the larger poverty picture.

By many measures, educational attainment has advanced significantly in the past few decades, especially when it comes to college access, where huge gains have been made. Also, in 2012, the U.S. high schoolgraduation rate crossed 80 percent threshold for the first time in the nation's history, while the number of kids in pre-K has risen to a historic high in recent years, along with the number in afterschool programs. None of this has much affected poverty rates amid the larger economic trends of our time. 

6. Funders Aren't Realistic About the Potential of Workforce Investments

Improving the skills and career readiness of low-income Americans is another favorite of funders that only gets us so far. These efforts tend to be very expensive and have proven hard to scale to the point that they can have a big impact. The larger problem is that many of the jobs created by the U.S. economy are low-skilled, poverty-wage jobs in sectors like retail and restaurants. 

So while workforce investments can and do transform people's lives, until the U.S. economy creates a much larger number of skilled jobs, there's only so many people who could be lifted up by this strategy even if it could operate on a much larger scale. 

7. Asset Building Efforts Have Been Swamped by Broader Economic Realities

Building up the assets of low-income households has been yet another favorite of many foundations. Most notably, it was the linchpin of the anti-poverty grantmaking strategy embraced by the Ford Foundation in the mid-1990s.

But major gains in building household wealth at the bottom were tough to achieve and sustain amid stagnant wages, a big rise in subprime lending that targeted the poor and, finally, the financial collapse of 2008 and ensuing epidemic of foreclosures that wiped out all of the wealth gains made by low-income Americans.

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Okay, that's my list, off the top of my head here on a slow Tuesday. What's yours?