Poverty, By America Chapter 3–Chapter 6 Summary & Analysis

Chapter 3: How We Undercut Workers
Chapter 4: How We Force the Poor to Pay More
Chapter 5: How We Rely on Welfare
Chapter 6: How We Buy Opportunity

In Chapter 3: How We Undercut Workers, Desmond examines exploitation by corporations, which, he argues, have succeeded in lowering wages for workers over the past 50 years, while simultaneously destroying both employment stability and mobility. These actions allow affluent people to enjoy low prices and the increasing value of stock investments. Desmond uses the story of Julio as an example of how a low minimum wage forces workers into life-limiting overwork. While some argue that raising the minimum wage would increase unemployment, when New Jersey raised the minimum wage and neighboring Pennsylvania did not, employment rates at fast food restaurants remained the same in both states. These results show that raising the minimum wage did not affect employment rates. Workers have also lost power due to the decline in labor unions, leaving workers unable to bargain communally. In recent years, corporations have come to increasingly employ workers as contract employees, either through staffing agencies that pay poorly or as gig workers with no job security. Even entry-level employees are often subject to noncompete agreements, limiting their ability to find better wages with another company.

Chapter 4: How We Force the Poor to Pay More analyzes the housing market—another example of a system that contributes to the wealth of affluent people while draining the resources of the poor. For affluent people, housing is a common means of creating wealth. Homeownership is seen as an investment, as homeowners expect the value of their homes to rise, and they thus favor policies that make that more likely. The increase in an affluent family’s home value often provides money for younger generations to make down payments on their own homes, a form of intergenerational wealth. In addition, affluent people often earn money as the landlords of rental properties inhabited by poor people. The rising value of property makes affluent people more wealthy, but that value depends on exploiting poor people, Desmond argues. Thorough analysis of the income and expenses associated with rental properties shows that rentals in low-income areas produce higher profits for landlords than those in middle- and upper-income areas. Desmond asserts that these profits are acquired at the expense of poor people.

Read an explanation of a key quote from Chapter 4.

Rental housing is frequently exploitative for poor people, but homeownership is often impossible, Desmond argues, because of exploitation by the banking sector. In many areas, the cost of rent is equal to or even higher than the monthly mortgage payment for an equivalent property. When it comes to lending for real estate, banks often refuse to issue mortgages for properties in low-income areas, as loans on cheap properties tend not to bring in high profits. Conventional banks also exclude poor customers in other ways, such as only opening branches in affluent areas, which creates banking deserts in poorer neighborhoods. Banking fee structures put an undue burden on people living on marginal incomes; for instance, charging fees on accounts that do not meet minimum balance requirements and charging high penalties for overdrafts. Federal law limits the interest rates conventional banks can charge for loans. However, payday lenders, the shadow banking system that proliferates in many low-income areas, are not bound by these laws. In the absence of conventional banks, Desmond asserts that many poor people are forced to rely on these predatory institutions to gain the credit needed to afford necessities in an environment of housing and employment instability.

Read a key quote about how the wealthy benefit from tax codes.

Through tax structures and public goods and services, the government also favors the affluent at the expense of the poor. It’s commonly imagined that poor people receive more in benefits from the government than they contribute. However, while people living below the poverty line benefit from social welfare programs, Desmond argues that affluent people receive government support as well. Support for the wealthy comes in the form of tax breaks tailored to favor them, including mortgage interest deductions and benefits related to college savings plans. People may not see tax breaks as morally equivalent to welfare benefits, but both systems take money from the nation’s shared resources and award it to individuals. To lower their tax burden further, affluent people tend to favor policies that reduce spending on public goods and services, such as schools, transportation, and parks. When affluent people can afford to create private versions of public goods, the public versions tend to become underfunded. As underfunded services degrade in quality, more affluent people abandon them, which only accelerates the problem.

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