Poverty Ended by Hard Work: The Role of Social Leverage

The value of something is based on how much people think it is worth.  In countries like the US, the widespread use of predetermined prices has helped eliminate the distorting effects of perspective, which can drastically affect the profit margin of a good or service.  Like antiques and other collectibles, the process of negotiating a price for a service introduces personal bias that can devalue a service so much that the service provider no earn an income.  When trying to address issues like poverty, socioeconomic status, i.e. the social leverage, of a business owner or contractor must be considered.

It is said America was built by immigrants, but migrant workers have always been looked down upon as inferior and lazy, i.e. their work is worth less.  Where people now look back on history to appreciate the contributions of immigrants, they were once seen as a plague.  Just as people in history found every means of justifying their bigotry toward immigrants and devaluing what they did, the US immigration debate of today too often reveals the same sentiments.  Looking at the Syrian Refugee Crisis, the same is clearly true elsewhere.  In fact, the same can be seen when discussing economic disparity among minorities, women, and the impoverished.  

Celebrities and CEOs are often able to extort millions of dollar in pay for their services, even if others can learn to do the same job.  The average person cannot do this.  The reason is that affluent people have greater leverage they can use when seeking compensation, i.e. the potential loss of revenue their employers might see if they quit affords them leverage.  For most other individuals, education, expertise, union membership, professional affiliation, and a whole host of other factors give them varying degrees of leverage.  

Unfortunately, immigrants, minorities, and those living in poverty often lack leverage.  Not only do they often face few prospects for work, which means they can be persuaded to work for less than what that they need to survive, they often live in poor communities where jobs are scarce and businesses close when their costs become too prohibitive, i.e. higher wages make employees too costly or businesses actively seek to suppress wages.  Businesses and service providers in poor communities also have a diminished potential for profit, because their customers cannot afford to pay as much as often.

There can also be a diminished perception of what things are worth among lower socioeconomic classes.  Because the poor cannot afford to indulge in many conveniences, or even necessities, they tend to learn to neglect their needs or find ways of compensating for their inability to pay for those things.  For the poor, money is often a scarcer resource than time, so they tend to forgo the convenience of using someone else’s services.  For the middle class to wealthy, time is a far scarcer resource than money, so they tend to favor convenience over necessity.  As such, they are willing to pay a premium for professional services, i.e. pay others enough to earn a viable income when they do work for them. 

That said, it is not just the poor who undervalue the services of others due to perception.  A practice of carpenters, mechanics, computer technicians, and other experts is to do private contract work.  Although these individuals may not earn as much for their “side work” as they do from their regular jobs, they can easily charge their clients the going rate for a particular service, even if that service is not their actual profession.  The same clients, however, will too often fail to pay the same amount for the same quality of services performed by a poor person.

One reason is that poor people often undervalue themselves.  They do not see their time and effort as valuable or they feel no one will pay the amount they deserve, so they charge too little.   Another reason is due to social leverage.  When dealing with contractors of the same or higher socioeconomic standing, peer pressure and high expectations guilt middle class and wealthy people into paying more.  When dealing with contractors of a much lower socioeconomic standing, little peer pressure exists while expectations are low, so they tend to devalue the services of the poor.  Whether the fault of the poor or those exploiting their work, undervaluing and underpaying the poor and disenfranchised makes it far more difficult for them to succeed with hard work.