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By Shawn Fremstad
W
hen compared to similar well-off nations, the United
States is an “outlier” in at least two respects—it is much
wealthier than other nations and a much higher share of its population has income below or near the poverty line. Our outlier
status is not due to a lack of work effort on the part of Americans with low incomes. In fact, Americans in general, and lowincome Americans more specifically, are more likely to work and
work longer hours than individuals in other rich nations.
Instead, our high rate of income poverty—particularly for nonelderly adults and children—is due in large part to our failure as
a nation to ensure that workers are assured a sufficient income
to meet basic needs.
Income Poverty in the United States
According to the most recent official data, nearly 37 million
people—about 12.7 percent of the U.S. population—had
incomes below the poverty line in 2004. Poverty has gotten
IN SOLIDARITY WITH THE POOR
Laura Sikes
Poverty in the United States
worse in recent years. Between 2000 and 2004, the number of
people living in poverty increased by 5.4 million; during this
period poverty grew at a faster rate than the overall population.
Conventional wisdom has it that poverty is something that
happens to “poor people,” who are different from mainstream
society in terms of behaviors, characteristics, and various other
factors. Another element of this conventional wisdom is that the
poor spend most of their lives in poverty, have little or no connection to the labor market as a general rule, and are “dependent” on public assistance as their primary source of income.
These commonly held beliefs, however, are not consistent with
fundamental facts regarding the nature of poverty.
Poverty affects many Americans. Almost half of all Americans have experienced poverty for a year or more at some
point in their lives by the time they reach age 60.1 Of these,
about a half will have lived in poverty at various points in
time for a total of four years or more.
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IN SOLIDARITY WITH THE POOR
Most of the poor are workers. Nearly two out of three
families with incomes below the poverty line include one
or more workers. Only about 3 percent of individuals
receive more than half of their annual income from TANF
income supplements, food stamps, and Supplemental
Security Income (SSI).
The largest percentage of poor Americans are white.
Almost half of all people living in poverty—about 47
percent—are white and non-Hispanic. However, African
Americans and Hispanics are much more likely to live in
poverty than other population groups. For example, while
the poverty rate for non-Hispanic whites is 8 percent, the
rate for African Americans is 24.1 percent and for Hispanics, 21.8 percent. For children, the poverty rate for whites
is 10 percent, while it is 28 percent for Latino children and
33 percent for African-American children. It also is worth
noting that the number of Latinos living in poverty is now
about the same as the number of African Americans living
in poverty.
The many misconceptions about the nature of poverty in the
United States reinforce the commonly held view that poverty is
due to the failures and deficiencies of individuals, rather than
the failures of structures that we put in place through the economic and political choices we make as a nation.
Are Americans Living in Poverty More Likely
to Move Up the Economic Ladder?
There is a widespread belief that high rates of poverty in the
United States are less of a concern because our economy provides greater advancement opportunities for low-income individuals than the economies of other nations. It is true that
many individuals are able to move out of poverty over their lifetimes. However, they often don't move that far out of poverty,
and a significant portion of those who do move out of poverty
fall back into it at a later date.
A recent study by researchers at the Federal Reserve Bank in
Boston tracked families' incomes over a 10-year period.2 The
researchers found that among families with incomes that put
them in the bottom fifth of the income distribution, slightly
more than half remained there after 10 years, and about a quarter had moved up, but only to the second fifth. Among families
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who started out in the second fifth, about a quarter had dropped
to the bottom fifth over the 10-year period.
Moreover, recent research finds that there is actually less
income mobility in the United States than in many other comparable nations. For example, Canada, France, and the nations
of Scandinavia have more income mobility than the United
States. Income mobility in Britain is about the same as in the
United States.3
The Role of Public Programs in Reducing
Poverty
As a nation, we have a set of basic public structures that work to
provide opportunity and security to all Americans, including
Social Security, Supplemental Security Income, unemployment
insurance, Temporary Assistance to Needy Families, the Earned
Income Tax Credit, food stamps and other nutrition assistance,
and housing assistance. According to data from the Census
Bureau, the poverty rate for individuals in 2004 would nearly
double if these opportunity and security structures didn't exist.4
However, public structures do more to reduce poverty
among the elderly than among non-elderly adults and children.
Before taking into account income from public programs, the
number of children below the poverty line in 2004 (14.8 million) was not that different from the number of persons age 65
or over below the poverty line (14.5 million). However, income
from public programs lifts about 12 million of these elderly individuals above the poverty compared to about 5 million of these
children.
Existing public programs could do much more to help lift
children out of poverty. Of particular note is Temporary Assistance to Needy Families (TANF). TANF provides monthly
income supplements that could boost opportunity and security,
but fewer than one in three poor children currently receive
TANF supplements. This is due in part to the fact that many
states deny TANF supplements to working parents with quite
low incomes—in the typical state, a family loses eligibility for
TANF when they have earnings equal to only two-thirds of the
poverty line. But even among those families that meet these low
eligibility limits, only about half actually receive TANF supplements according to the U.S. Department of Health and Human
Services.
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The poverty level set by the federal government for a family
of four is about $20,000. A growing body of research finds
that this official poverty line is much lower than the
amount that families need to meet basic consumption
needs. Although it varies by location, this research finds
that a more accurate “basic needs” budget for working families who pay for health care and child care is in the range
of $30,000 to $40,000.5
In public opinion surveys, most Americans also believe
it takes about this amount of income to afford basic necessities. This common sense definition of poverty is more consistent with historical understandings of poverty than the
current poverty measure. For example, Adam Smith defined
the lack of “necessaries” of daily life in the Wealth of Nations,
published in 1776, as the lack of “not only those commodities which are indispensably necessary for the support of life,
but whatever the custom of the country renders it indecent
for creditable people, even of the lowest order, to be without.”
Another limitation of the current poverty line is that it
doesn’t capture the extent to which a lack of savings and
other assets may heighten economic vulnerability.
Researchers at the Institute for Research on Poverty at the
University of Wisconsin have found that one-quarter of the
U.S. population is “asset-poor”—that is, they could only
live for three months or less at the income poverty line on
their savings, home equity, and other assets.6
Will Poverty Get Better or Worse in Coming Years?
The answer to this question depends in large part on the
choices we make as a nation in coming years. There is reason to be concerned that poverty could get worse rather
than better in coming decades as U.S. workers face more
global competition and economic rewards go disproportionately to highly educated “knowledge workers.”
Sound policies are needed for the United States to have
an economy that works for all Americans. A top priority
needs to be placed on promoting full employment and
increasing wages. About one in four full-time jobs in the
United States are “low-paid.” That is, they pay less than
two-thirds of median earnings in the nation. Most other
countries with advanced economies have a much larger proportion of middle and upper-wage jobs than the United
States. Increasing the minimum wage and expanding current tax credits for low-income families to ensure that all
working Americans earn a living wage would bring about a
significant reduction in poverty. The federal government
also should set rules that require the Federal Reserve to place
a greater emphasis on promoting full employment when it
makes interest rate decisions.
The United States should set a national goal of eradicating poverty in 20 years. The United Kingdom set a goal of
eliminating child poverty and has already made substantial
progress toward it. An essential element of their success has
involved the extension of child allowances—monthly
allowances to families with children—to all families. The
United States should turn its current child tax credit—
which already provides $50 billion in subsidies to families
with children, but excludes those families with incomes
under $11,000—into a child allowance modeled on the
one adopted in the UK and also in Canada. Just as important are measures designed to increase the education and
earnings potential of American workers, including universal
access to pre-school and post-secondary education. a
Shawn Fremstad, an attorney and consultant who lives in Washington,
DC, is an expert on social and economic policy. This article is based on
a presentation he delivered at the Catholic Charities Annual Gathering
in Phoenix, Arizona in 2005. A copy of that presentation is available at:
http://inclusionist.org/files/Povertypercent20Presentation.pdf.
IN SOLIDARITY WITH THE POOR
Limitations of the Current U.S. Poverty
Measure
1
Mark Robert Rank, One Nation, Underprivileged: Why American
Poverty Affects Us All (London: Oxford University Press, 2004).
2
Katherine Bradbury and Jane Katz, “Are Lifetime Incomes Growing
More Unequal? Looking at New Evidence on Family Income Mobility,”
Regional Review Q4, Reserve Bank of Boston, 2002.
3
See David Leonhardt, A Closer Look at Income Mobility, The New York
Times, May 15, 2005, www.nytimes.com/pages/national/class/.
4
See “The Effects of Government Taxes and Transfers on Income and
Poverty: 2004,” Census Bureau, February 2005, www.census.gov/
hhes/www/poverty/effect2004/effectofgovtandt2004.pdf.
5
See Jared Bernstein, Chauna Brocht, and Maggie Spade-Aguilar, How
Much is Enough? Basic Family Budgets for Working Families, Economic
Policy Institute (2000).
6
Robert Haveman and Edward Wolff, “Who are the Asset Poor? Levels,
Trends, and Composition, 1983-1998,” Institute for Research on
Poverty (2001).
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