Why Contemporary Capitalism Needs the Working Poor

prisme14Prisme N°14 December 2008

Bernard Gazier

Prisme N°14 December 2008 (426.5 KiB)

This short essay explores the apparent paradox of the “working poor” – persons remaining in poverty despite their working status. While it seems that the existence of the working poor is an inescapable by-product of capitalism, the size and modalities of this phenomenon vary considerably among countries.
The first section examines the various definitions of the working poor. Although great efforts have been made to gain a better statistical understanding and measurement of the working poor, researchers and governments are far from agreeing on one single definition. On the contrary, a set of different approximations, mixing low earnings, family composition and tax effects, are necessary for capturing what is a hybrid reality. The second section is devoted to a critical assessment of some selected empirical and comparative studies on Europe. They confirm the strong diversity in possible definitions, as well as in national situations and developments. They also suggest that a major role is played by institutions, not only transfers, but also the segmentation and organization of the labour market. The last section presents different theoretical perspectives on the working poor. It insists on the functional role played by low wages and the activation of social policies in jointly controlling the labour market and the workforce. Some public policy issues could contribute to mitigating this functional role.