Poverty in the United States

    Poverty is a pervasive human condition of being unable to obtain or provide a standard level of food, water and/or shelter. It exists in every country in varying degrees, and it is unlikely to disappear anytime soon. The United States is considered the richest country in the world, and yet millions of its residents live in poverty.

    Poverty is measured in two ways – absolute poverty and relative poverty. Absolute poverty looks at the goods and services someone (or a family) cannot obtain. Relative poverty looks at the context of the need, how one social group compares to others. The official method of calculating America’s poverty levels was developed in the 1960s and has not been refined substantially since then, although critics maintain that the government overstates the U.S. poverty level because it counts as impoverished people who in generations past would be considered as not living in poverty. The highest poverty rate on record was 22 percent (1950s). The lowest was 11.1 percent (1973).

    According to the U.S. Census Bureau’s 2011 Current Population Report, 46.2 million Americans are considered impoverished – 15 percent of the country’s population. Approximately 16.4 million American children – 22 percent of the population younger than 18 – live in poverty. The rate for people 65 and older is 8.7 percent.

    Among the most impoverished are:
    • Those living in female-headed households with no husband present (31.2 percent).
    • Young adults without a high school diploma (31 percent overall; 43 percent for blacks).
    • Those living in a family whose head is unemployed (32.9 percent).
    • Minorities (27.6 percent for blacks).

    If any good news can be extrapolated from these grim statistics, it would be that after three consecutive years of increases in the level of poverty in the United States, neither the number of people living in poverty nor the poverty rate was statistically different from the 2010 findings. In other words, things didn’t get any worse.

    Measuring the extent of poverty does nothing to ameliorate the lives of the poor, but compiling and understanding poverty statistics is essential to solving, or at least addressing, the problem.

    Governments, policy makers and society at large depend upon precise and timely information about poverty in order to create and deliver the most effective solutions, as they continue to chip away, bit by bit, family by family, and community by community, at the scourge of poverty.

    Absolute Poverty

    Absolute poverty is a measure of the minimal requirements necessary to afford the minimal standards of life-sustaining essentials — food, clothing, shelter, clean water, sanitation, education and access to health care. The standards are consistent over time and are the same in different countries. For example, one absolute measurement is the percentage of a population that consumes enough food daily to sustain the human body. This standard – 2,000 – 2,500 calories per day – is applied worldwide and across all cultures.

    The World Bank defines poverty in absolute terms:
    • Those living on less than $1.25 per day live in extreme poverty.
    • Those living on less than $2 per day live in moderate poverty.

    For instance, in 2008, one-half of 1 percent of the population of Europe and Central Asia lived in extreme poverty, compared with almost 50 percent of Sub-Saharan Africa.

    Relative Poverty

    Relative poverty is a measurement of income inequality within a social context. It does not measure hardship or material deprivation, but rather the disparities of wealth among income groups.

    For example, in the United States, a household that has a refrigerator, televisions, air conditioning can be considered impoverished if its income falls below a certain threshold. In other countries, those households might be thought of as wealthy.

    Measuring U.S. Poverty

    The federal government’s measurement of U.S. poverty was developed in the early 1960s by Mollie Orshansky, an economist and statistician at the Social Security Administration. Orshansky based her original poverty thresholds on the Department of Agriculture’s economy food plan, which detailed what it considered the least expensive, yet still nutritionally adequate, diet for American families that were experiencing a temporary shortage of funds.

    She then deduced from Department of Agriculture surveys that average families of three or more people spend about one-third of their money on food. By multiplying that amount by a factor of three, to include all other family expenses, and applying various weighted data, Orshansky established a detailed matrix of 124 poverty thresholds for families of different sizes and compositions. (Today, there are 48 thresholds.) Poor families were those whose yearly income was below the threshold for their category.

    Over the years, many attempts have been made to improve, update or even replace Orshansky’s methodology. In 1992, a National Academy of Science (NAS) panel suggested revisions to the system based on alternative definitions of both income and needs, suggesting that the traditional approach no longer provided an accurate picture of poverty. Legislation based on those findings has been introduced in Congress from time to time but has never been enacted.

    The Census Bureau uses several alternative methods to calculate the poverty indices, including the American Community Survey (ACS), which details a substantial increase in the number of Americans in poverty – from 46.2 million in 2010 to 48.5 million in 2011. In 2010, the Census Bureau introduced the Supplemental Poverty Measure (SPM) to reflect long-term changes in government policies that altered disposable income available to families and therefore their poverty status. However, the official rate is still based on data from the Bureau’s Current Population Survey Annual Social and Economic Supplement (CPS ASEC).

    Overstating Poverty

    Critics of the current method of calculating poverty thresholds point out that the CPS ASEC measures only monetary income (e.g., earnings, Social Security income, veterans payments, workers’ compensation, pensions), but does not include other sources of in-kind or non-cash gifts from public or private sources, including:

    • Benefits from anti-poverty programs such as food stamps, federal housing subsidies, school lunches and Medicaid.
    • Tax advantages such as the Earned Income and Child Tax Credits.

    Adding these sources of income would change the poverty numbers considerably.

    They also contend that many families reported as living in poverty are not poor in the ordinary sense or as understood by most Americans. Impoverished families often have household appliances and adequate food, and live in adequate shelter — a higher standard of living than even middle class families maintained several decades ago.

    Therefore, current government methodology of measuring poverty, which calculates income inequality and not actual material deprivation, could be overstating the extent of poverty in the United States.

    Historical Changes in Poverty Levels

    In the late 1950s, the poverty rate was approximately 22 percent, with just shy of 40 million Americans living in poverty. The rate declined steadily, reaching a low of 11.1 percent in 1973 and rising to a high of nearly 15 percent three times – in 1983, 1993 and 2011. However, the 46.2 million Americans in poverty in 2011 is the most ever recorded.

    Since the late 1960s, the poverty rate for people 65 or older has fallen dramatically. This drop could be ascribed to the enactment of the Medicare Program in 1965, which dramatically lowered out-of-pocket health care costs for this age group.

    Causes and Effects of Poverty

    Impoverished families tend to have less education, more health problems and less access to nutritionally adequate food. They also are more likely to live in high-crime areas.

    Poverty and Education

    The more advanced one’s education, the greater the likelihood of achieving a more secure economic future. High school graduation rates for African-American and Hispanic students are almost 20 percentage points lower than for other ethnic groups, while their poverty rates greatly exceed the average.

    Without the knowledge and skills required for well-remunerated work in the modern workplace, each succeeding generation of undereducated adults merely replaces the one before it without achieving any upward mobility or escape from poverty.

    Poverty and Health

    Health is also strongly related to income. Poor people have higher mortality rates, a higher prevalence of acute or chronic diseases and more emotional and behavioral issues.

    According to a 2011 report issued by the U.S. Senate Subcommittee on Primary Health and Aging:
    • People in the highest income group live an average of 6.5 years longer than those in the lowest income group.
    • The mortality rate for African-American infants is double that of white infants.
    • Poor adults are twice as likely to have diabetes as affluent adults.
    • Poor children are twice as likely to have unhealthy levels of lead in their blood than other children.

    Poverty and Food

    Food poverty is defined as the inability to obtain healthy and affordable food. Poorer families tend to have low intakes of fruit and vegetables and high intakes of junk food. They also tend to suffer more from cancer, diabetes, obesity and heart disease.

    While food insecurity and poverty are not the same, they are related. Food insecurity means that that the availability of nutritionally adequate food or the ability to acquire it is limited or uncertain. In 2011, 14.9 percent of households – or 50.1 million Americans – were food insecure, according to the U.S. Department of Agriculture (USDA). Blacks and Hispanics were two and a half times more likely to face food insecurity than whites.

    Poverty and Crime

    The relationship between poverty and crime is complex, and many factors are associated with poverty and crime, including unemployment, population density, high school dropout rate and incidence of drug use.

    While difficult to quantify, some studies have indicated that as a particular population’s poverty rate increases, crime, particularly violent crime, tends to increase, as well.

    Government Programs that Lift or Help Keep People Out of Poverty

    Government benefits keep millions of Americans out of poverty, mostly women, children and the elderly. Social Security alone keeps approximately 21.4 million people above the poverty line, including 14.5 million senior citizens 65 or older. Expanded unemployment benefits helped an additional 2.3 million people stave off poverty in 2011.

    If non-cash government aid programs were counted in the Census Bureau thresholds, food stamps would lift another 3.9 million Americans out of poverty. In addition, the combined Earned Income Tax Credit and Child Tax Credit kept 9.2 million families from falling into poverty in 2010.

    Other government programs include:
    • Community Services Block Grant
    • Head Start
    • Low-Income Home Energy Assistance
    • Medicaid
    • Medicare prescription drug coverage
    • Family planning services
    • Supplemental Nutrition Assistance Program (SNAP) (formerly known as food stamps)
    • Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
    • National School Lunch and Breakfast Programs
    • Legal services
    • Jobs Corps

    Some state and local governments provide programs for the poor, as do some private companies and charities.

    How U.S. Poverty Levels Compare to Countries around the World

    According to the Organization for Economic Cooperation and Development (OECD), the United States has the highest poverty rate among the world’s developed countries. The United Nations Children’s Fund (UNICEF) ranks the United States second behind Romania on a scale of what economists call “relative child poverty” when measured against 35 of the world’s richest nations.

    These rankings are not absolute measures. Relative child poverty refers to a child living in a household where the income is less than half of the national median; the relative standards in the United States are high.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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