We can all pretty much agree that poverty is a bad thing. 

But beyond that, we disagree on just about everything else, from how poverty works to how we can fix it.  Despite how much our opinions differ, they usually have one thing in common: they’re oversimplified. In reality, poverty is much more complex than most of us think, and there are a lot of inaccurate assumptions about it. Based on my own research, conversations, and past notions, I wanted to round up some of the most common myths about poverty. It’s a little intimidating to write a post like this, but I wanted to take an objective look about all the opinions I’ve come across (and held myself).

Some of these myths have a touch of truth to them, but for the most part, they’re huge generalizations, and the statistics, should you dig into them, show how inaccurate they are.  

What Is Poverty, Anyway?

When we talk about poverty, there’s often a disconnect in what it actually is; one person’s definition might differ from yours. So when I talk about growing up poor and say, “If you work hard, you can escape poverty–I did it,” I could be referring to a very different scenario than someone who’s impoverished is actually dealing with.

The thing is, the definition of poverty isn’t really set in stone.

Even the U.S. government has different definitions of poverty. First, there are poverty thresholds, determined by the U.S. Census bureau. This is simply a measure of the federal poverty level used for statistical purposes. Some of the latest released numbers (2014) look like this:

• One person, under 65, with no children: $12,316
• Two people, under 65, no children: $15,853
• Two people, under 65, one child: $16,317

But those thresholds are only used for federal statistics. When it comes to federal aid, there’s a whole different measure of poverty that’s used: poverty guidelines. In order to qualify for assistance, you have to meet those guidelines. Unlike the thresholds, these vary by state. You can check them out here.

And with income disparity, the definition gets even more confusing. The definition of middle class is so broad, it’s more or less meaningless now. Depending on how many children you have in your family, you can be “middle class” and still be under the federal poverty threshold. Beyond that, poverty has even more nuance. Margaret J. King, Ph.D., Director of The Center for Cultural Studies & Analysis, told me:

“What we call poverty is still middle-class in most of the world (Asia, especially). There is temporary poverty (as in student budgets) and very long-term, hereditary family traditions, which rely on state entitlements. But at its base, it’s not numbers but social equity that’s really the driver of poverty.”

If you want to understand how poverty works, it’s important to understand that its definition goes beyond the numbers.

UNESCO differentiates between absolute poverty and relative poverty. Absolute poverty is lacking the money to pay for basic needs (food, clothing, and shelter). Relative poverty is falling below those aforementioned thresholds.  UNESCO explains:

Today it is widely held that one cannot consider only the economic part of poverty. Poverty is also social, political and cultural…Rather than being interested in its measurement, sociologists generally study the reasons for poverty, such as the roles of culture, power, social structure and other factors largely out of the control of the individual. Accordingly, the multidimensional nature of poverty, in particular social aspects such as housing poor, health poor or time poor, needs to be understood in order to create more effective programs for poverty alleviation.

When we talk about impoverished people, we tend to lump them all into one big group, usually defined by income, with a one-size-fits-all solution. That’s probably why everyone and their grandfather seems to have the answer to ending poverty. In reality, it’s more complicated than that, and it deserves more analysis.

Myth #1: Poor People Rampantly Abuse the Welfare System

Public assistance is a hot button issue, and it’s easy understand why. First, people have different ideas about the fundamentals of government aid in the first place. That’s one thing, but we also accept a lot of misconceptions about these programs as fact.

For example, one big assumption is that public assistance, primarily welfare, is frequently abused. In 2010, the Los Angeles Times reported that $69 million worth of welfare money in California was spent out of state, “including millions in Las Vegas, hundreds of thousands in Hawaii and thousands on cruise ships sailing from Miami.” This is the report that’s often cited to support the idea that welfare abuse is common, but there are some important caveats to keep in mind.

First, while $69 million sounds like a lot, it actually only accounts for less than 1% of the $10.8 billion spent on welfare during that same period, the Times reports.  Second (and more importantly) in that same article, they cite a study that found 24% of welfare applications in San Diego County contain some sort of fraud, and this was later found to be inaccurate.

John Haley, commander of the financial crimes division of San Diego County, later admitted the vagueness of the 24% figure. It’s actually based on overall discrepancies in applications, whether due to a typo or a clerical error. The Voice of San Diego reported:

When we called Haley about the statement, he said the number refers to all welfare applications reviewed by investigators between 2001 and 2009 that contained discrepancies…Not all of those application issues rose to the level of fraud, however. “It could be that they lied on the application,” Haley said. “It could be that the person who took the application information took it down wrong.”

The point is, this widely cited study isn’t very accurate.

To study fraud, the U.S. Department of Labor analyzes over 24,000 cases annually and use a methodology called the Benefit Accuracy Measurement to ensure their info is as accurate as possible. In 2012, based on a three-year average data report, they found that fraud (in TANF) is prevalent in a mere 2.67% of cases. You can check out fraud rates by state in this interactive map.

However, in that map, you’ll also notice that the “Estimated Improper Payment Rate” is much higher.  But this rate includes clerical errors on welfare overpayments and underpayments. Depending on the state, the overpayment rate ranges from about 5% to 22%, which is enough for the Department of Labor to initiate a call to action.

The bottom line? Welfare fraud doesn’t appear to be as common as many people think. Still, I was surprised to discover just how high overpayment rates can be, but it looks like most of that isn’t even from fraud.

Myth #2: Welfare Recipients Don’t Pay Taxes

I pay taxes and poor people don’t, so when they take from the government, they’re taking my money. This is a common stereotype, and kind of an ugly one, when you think about it: poor people do pay taxes, yet they still have to prove their worth in a system they’re already paying into.

First of all, if we’re talking about unemployment benefits, the myth doesn’t even make any sense. Unemployment is measured by how much you earned in your previous job. If you used to earn money, you used to pay taxes. You might not like someone’s decision to take unemployment, but they’re allowed to take that benefit because they paid into it.

Beyond that, the statistics show that most of the people who receive entitlement benefits are “elderly, seriously disabled, or members of working households — not able-bodied, working-age Americans who choose not to work,” as the Center on Budget and Policy Priorities puts it.

Of course, that stat includes Social Security, a retirement benefit most of us rightfully earn by paying years of taxes. But let’s say we’re  just talking about Temporary Assistance for Needy Families (TANF).  TANF actually factors the myth into their eligibility requirements:

To help overcome the former problem of unemployment due to reliance on the welfare system, the TANF grant requires that all recipients of welfare aid must find work within two years of receiving aid, including single parents who are required to work at least 30 hours per week opposed to 35 or 55 required by two parent families. Failure to comply with work requirements could result in loss of benefits.

The reality  is, nearly all of us (96%) have relied on federal government assistance in some way, at some point, whether it’s college aid, retirement, or housing. So it really depends on the specific welfare program you’re talking about. But still–by design, these programs require recipients to work and pay taxes. “But they get around that by faking it,” some might argue. See Myth #1.

Myth #3: Welfare Will Fix Poverty

Welfare isn’t nearly as abused as people think, but it’s also not as effective as people think.

Some say welfare is totally ineffective; others say it works. The funny thing is, there are studies to support both sides. However, there’s a big problem with the accuracy of these studies: it’s hard to compare apples to apples.  Author and NPR correspondent Shankar Vedantam explains:

the most important lack in the evidence is it lacks what scientists would call a control group. When we say that welfare works or welfare doesn’t work, we have not randomly assigned families who receive welfare and compared the outcomes to families who’ve been randomly assigned not to receive welfare. I was speaking with economist Anna Aizer…“That’s really key to understanding the impact of cash welfare – is knowing what would’ve happened had these children not received it. And if you don’t know that, you really can’t say anything about the impact of cash welfare on child outcomes,” [Aizer said].

Basically, it’s hard to say whether or not a program works without comparing two people with completely similar backgrounds and opportunities–there are other factors that can impact a person’s rise out of poverty.

In that same interview, Aizer cites her own study, in which she accounts for that control group as best she can, but she still points out that it doesn’t end the debate. It’s just not that easy to say public assistance 100% does or doesn’t work. The situation is considerably more complicated than people assume, and anyway, there are so many different types of assistance.

Myth #4: Economic Growth Will Reduce Poverty

Surprisingly, a lot of the solutions people think will fix poverty don’t actually work.

For example, economic growth doesn’t necessarily reduce poverty. The New York Times reported:

But over the last generation in the United States, that simply hasn’t happened. Growth has been pretty good, up 147 percent per capita. But rather than decline further, the poverty rate has bounced around in the 12 to 15 percent range — higher than it was even in the early 1970s. The mystery of why — and how to change that — is one of the most fundamental challenges in the nation’s fight against poverty.

This data comes from the Economic Policy Institute (EPI). Here’s a graph of the actual poverty rate, compared to what the poverty rate should be, in relation our economic growth. The numbers are based on trends from 1959 to 1973:

The EPI blames wage stagnation for the lack of decline in poverty rate. Basically, despite our economy growing, most American workers have had pretty much the same wage (adjusted for inflation, of course) since 1979. Most economists seem to agree that raising the minimum wage would help with poverty, but it’s not clear how much of an impact that would have, either. And in an interview with Gawker, Nobel-prize winning economist Joseph Stiglitz seems to suggest that minimum wage is only one part of the solution.

There have been a few steps forward—the raising of the minimum wage, the number of cities passing local minimum wages. But at the other end I guess you’d say that the statistics in many ways have gotten worse. The share of the top 1%—almost all of the increases in income from 2009 to 2012 went to the top 1%. Ninety one percent of the increases. Probably the most unequal growth we’ve had…

Stiglitz says focusing on the tax system would help the most:

The first order of business should be creating a fair tax system, so that we tax dividends and speculators at the same rate that we tax ordinary income. That would be huge. That’s where I’d begin.

Stiglitz adds that banks play a big role in income inequality, too, from predatory lending to excessive compensation. He adds that charity isn’t much of a solution to poverty, because it doesn’t do anything to fix the underlying, systematic social issue.

In short, economists have solutions, but they’re not as simple as “raise minimum wage” or “stimulate the economy.” This isn’t to say those are bad things, but they don’t do as much as we often assume.

Myth #5: It Comes Down to Basic Financial Literacy

Another commonly held belief is that all it takes to fix poverty is a little  financial literacy. Don’t get me wrong, it can help one’s individual situation tremendously, but it’s a little idealistic to think it’d fix the whole issue of poverty. 

I’ve touted this myth myself (Remember that whole “it worked for me” argument?) The idea is: if only people knew how to manage personal finances better, they could avoid debt traps and learn how to break out of a paycheck-to-paycheck cycle. Of course, then the solution becomes: teach money in schools. Again, not that simple.

I once interviewed Laura Levine, President of the Jump$tart Coalition, an organization dedicated to teaching financial literacy in schools. She pointed out that, although they’re working on it, there are a lot of details to iron out. For one, there’s not much funding. We say we want financial literacy, but when it comes time to vote on funding, we drop the ball. There’s also the issue of how to teach the topic in schools to begin with. Levine said:

There isn’t a way to identify where all the finance teachers are. If you teach algebra, there’s very little debate that’s in the Math Department. But personal finance might be social studies or consumer science or business. There are a lot more variables.

Plus, the fundamentals of personal finance just aren’t realistic for many people, or they’re just not enough. Poverty is a systemic issue, so I hate to say it, but that could mean the solution isn’t as simple as “learn to manage your personal finances.” Financial literacy is awesome, and I stand by the fact that you can accomplish a hell of a lot with it. Hell, that’s what this whole blog is about! But it’s not that easy to teach it, and it’s not a cure-all. We need additional solutions.

Related: What Can You Do When the System Is Broken?

We can all agree that poverty is terrible and it needs to be fixed. Beyond that, the details aren’t as black and white as we usually assume. It’s not that poverty is impossible to understand, but we often fail to consider the complete picture, with all its complexity and nuance, in order to understand it a little better.

A few books I’d recommend if you’re interested in learning more on this topic:

• Scarcity: The New Science of Having Less
• Rich People Things
• Perfectly Legal