Progress for the Poor

Lane Kenworthy, Oxford, Oxford University Press, 176 pp, ISBN 978-0-19-959152-7 (hbk)

Reviewed by Stewart Lansley

Kenworthy examines the relationship between economic growth and changes in living standards among low-to-middle income households in 20 rich nations, including the UK and the USA, over the period from 1979 to 2005. He also examines how this relationship varies between countries, and what drives this variation.

Kenworthy argues that one of the principal goals of antipoverty efforts should be to improve the absolute living standards of the least well-off. He addresses a set of questions at the heart of political economy:

  • How much does economic growth help the poor?
  • When and why does growth fail to trickle down?
  • How can social policy help?
  • Can a country have a sizeable low-wage sector yet few poor households?
  • Are universal programs better than targeted ones?
  • What role can public services play in antipoverty efforts?
  • What is the best tax mix?
  • Is more social spending better for the poor?
  • If we commit to improvement in the absolute living standards of the least well-off, must we sacrifice other desirable outcomes?

In the analysis, ‘low-to-middle’ refers to households with incomes between the tenth and fiftieth percentiles (pp.10–50) of the income distribution. The countries vary in the degree to which low-to-middle households have benefited from economic growth. To understand why, Kenworthy separates household earnings from net government transfers. In the nations where growth was good for the incomes of low-to-middle income households, is that because earnings increased, because transfer programs passed that growth on, or both? And where earnings were important, did success stem mainly from increases in wage levels or from rising employment?

Kenworthy shows that, over the past generation, the world’s rich nations have differed markedly in their success at achieving this aim. This owes partly to differences in the pace of economic growth, but more important in most countries has been the degree to which growth gets passed on to low-to-middle income households. In successful nations, rising incomes in households between the tenth and twenty-fifth percentiles have tended to be driven by increases in net government transfers, while in households between the twenty-fifth and fiftieth percentiles both earnings and net transfers have been important.

See also:

Lane Kenworthy (2011) When Does Economic Growth Benefit People on Low to Middle Incomes – and Why?, London, Resolution Foundation

Tyler Cowen (2011) The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, New York, Dutton Books