Causes, Trade-offs and Policy Solutions
Chapter 3: The Three Mechanisms that Lead to Working Poverty
After having dealt with definitional aspects, I can now turn to the main driving factors of poverty among workers in post-industrial economies, in order to understand the roots of the problem. The present chapter regards socio-economic factors, while Chapter 4 will analyse public policy factors. The main contribution of this chapter is to present, in a systematic and summarized fashion, findings derived from a large body of literature in the fields of economic sciences and sociology, pertaining to a broad spectrum of topics such as low-wage employment, overall poverty, income inequality and unemployment, in order to identify the main working poverty factors. Perhaps more importantly, whereas the poverty literature identifies a myriad of risk factors and of at-risk groups, I have been able to single out three immediate causes of working poverty, which are the channels through which all poverty factors identified in the literature have a direct bearing on working households. The existence of these three mechanisms confirms the necessity of distinguishing various groups within the working poor. In this chapter, I argue that there is no such thing as ‘the working poor’, but different groups of poor workers who experience very different situations. 3.1 ECONOMIC FACTORS Most of the explanations provided below pertain to low-wage employment and income inequality, as the working poverty literature was until recently quite limited. I hereby present a wide variety of factors, which range from business-cycle related factors, to structural transitions in the labour market, as well as macrosocial changes. 3.1.1 General Framework...
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