USSR had a similar program. Criminals who were released from prisons after they did their time were not allowed to live within 100 km of Moscow for some period of time. But at least that was a judicial punishment for crime - not just for being poor and illiterate.
The alternative is to allow criminals and beggars to live among - and prey upon - honest citizens. Criminals don't have any other income except crime. That's what every country has now - and crime rates are not that great. Just today, minutes ago, we had an article on FR about a professional troublemaker (perhaps marginally sane) killing a kind-hearted person who wanted to help. At some point the society will want to expel those who don't want to live according to the laws of that society. Andre Norton created her Dipple many years ago, but it still looks like our inevitable future. Asimov's Currents of Space also depicts a layered society - though that one pits aristocracy against peasants. South Africa tried their Apartheid too, with the criteria that were simply based on race.
But I can envision a society that has a number of enclosed, concentric rings. The outer ring contains hardened criminals; the inner ring contains the best and the brightest; and the only criteria for moving between rings (a.k.a. ranks) is the person's abilities. Would that society be good or bad? What if an impersonal, unerring machine makes the most fair judgement ever?
Our cities are already built like that. They were *always* built like that, with ghettos being a forbidden territory for an outsider during the night, and with gated communities being a scary place for someone who does not belong. We are already there; it's just the walls are not there yet, and the guards at the gates are allowing anyone in or out. It will take only a small, gradual change to enforce the new rules. This particular proposal just speaks openly about something that the humanity accepted long ago and was practicing for thousands of years. Only the most recent ideas of "liberté, égalité, fraternité" pushed that old approach away, for a while. The excitement died down, but people still are not comfortable living and working with incompatible individuals. Would you like it if all criminals disappeared in a blink of an eye, being moved somewhere else, into some alternate reality? You wouldn't need to lock your doors, and your children would be as safe as they can be, barring a sudden mental illness of an otherwise good and honest person. A few crimes *are* committed by wealthy non-criminals, but they are a drop in the ocean of crimes committed by lowlifes.
There is a very easy way to build this new, brave world of tiers. Build a private city and put a wall around it. Only members of the city may enter at any time; everyone else needs a pass. The city votes to admit new members or to expel undesirable ones. Since it's all private ("gated") property it's all legal; the city can be owned collectively by all members, just as they own a piece of it in form of their houses or condos. Any human in good standing would be welcome (no racism.) But what about politics? Well, I think that city will be filtering its citizens. For example, one city will have no police, but every citizen has to be armed. Or another city will ban all weapons but will have two police officers per each citizen. (It's your money, spend it on whatever you like :-) I think this is a usable material for a SciFi story, though Robert Heinlein wrote a few already.
I saw this one. Didn’t the President’s plane go down and they sent in Snake Pliskin to rescue him?
If this were a physical configuration, the "hardened criminals" of the outer ring would end up enclosing and imprisoning the "best and brightest" at the center.
If I remember correctly, RAH devised a future society where those who broke its rules were expelled into a "reservation" called Coventry. If you don't want to live in our society and follow its rules, you don't have to. But we won't support you either.
Makes perfect sense to me, depending on who makes the rules and decides what constitutes breaking them.
For your private city with its own laws, check out Oath of Fealty by Pournelle and Niven.