Nova workboard

a blog from young economists at Nova SBE

Ideas to reduce urban poverty in developed countries


The current economic system seems to drift few people getting richer and richer while others get poorer and poorer. Recently, BBC news reported about the increasing gap between rich and poor. This development also has impact on the urban socio-economic stability of well-developed countries. In the following, I will present four ideas to reduce urban poverty in well-developed states:

Firstly, I see a need to increase the economic growth of a city. This might seem controversial on the first sight. Countries like Czech Republic and Portugal, or Sweden and Germany are similar developed. However, Portugal and Germany have higher childhood poverty rates, which is an important indicator for the well-being of a society as a whole. Generally, we should not set the current level of development equal with (future) economic growth. Sila, Kamols and Kamola (2015) do find a significantly positive correlation between economic growth and urban poverty in Latvia. This goes in line with my personal point of view. Additional economic growth might still not be distributed equally. However, I believe that poor people definitely profit from good economic times with economic growth.

Secondly, I find a need to legislate working conditions and fight illegal employment. Less regulated work conditions like in the United States tend to lead to higher poverty rate than in for example in Europe. According to the consultancy firm A.T. Kearney even Europe had a shadow economy employment of 18.5% (in relation to the GDP)in 2013. Fleming, Roman and Farrell argue that illegal employment might serve workers with their basic subsistence needs like food but also brings a vast of negative aspects: Among others, Fleming, Roman and Farrell name inappropriate working conditions, low income near or below the poverty line, limited access to social protection, further education and social services, and the possible abuse of entitled working rights. Additionally, I would like to stress that the worst scenario is when the (illegal) employment ends. Shadow employment does not offer pension rewards, which leads to the vicious cycle of long-term poverty.

Thirdly, the authorities should offer unemployment training and advisory. Sila, Kamols and Kamola (2015) find a statistically significant positive relation between low unemployment training possibilities and poverty. Generally, there are plenty of related studies that verify the effect of training and education for success in any area. Intuitively, this makes sense as employment agencies bring together open positions and potential employees who might not have found the position by themselves. These structures can be seen as an indicator for an effective and efficient working labour market. Hence, we can argue that high employment rates should be aimed for the well-being of the society and the reduction of poverty. This goes in line with the empirical research of Ryscavage who also examines the linkage between employment problems and poverty.

Fourthly, people should be offered better possibilities of education. Poverty is positively correlated with low levels of education. Moreover, the ETS Center Research on Human Capital and Education  find a strong connection between educational success and economic disadvantages. Taking both findings together a city´s level of poverty might be the result of access to education for unfortunate people. Universities with low poverty levels like Sweden, Norway, Germany or the Netherlands do not charge (high) fees and additionally offer financial support from the government. Contrary, the United State for instance are known for enormously high study fees. Additionally, the poverty rate and especially the amount of homeless is extraordinary high in the states. Moreover, not only post graduate education is important but also constant education and training system development during the everyday professional life. The process of constant learning also offers security of finding a new employment opportunity in case of sudden unemployment.

The gap between poor and rich in urban areas increased constantly over the previous decades. In order to fight this kind of poverty, I presented four structural ideas for cities to reduce their rate of poverty. Taking all ideas into consideration one can say that they all refer to some context related to employment. High rates of employment seem to be one of the main factors to reduce poverty. The final conclusion of my argumentation is that in the future, the socio-economic problems of employment and poverty should not be seen separately.

Thank you very much for your interest.

Any feedback or further thoughts are highly appreciated.

Best regards,


Simon P. Hitzelberger (2418)


Author: studentnovasbe

Master student in Nova Sbe

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