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Whither the Poverty Rate?

Allan Lichtenstein
July 8, 2014
by Allan Lichtenstein IsDissASystem-72dpiRGBIn September, the U.S. Census Bureau will release updated income and poverty data for 2013. Since 2000, the Census Bureau has annually collected demographic, social, and economic data, which allows for a more timely tracking of changes in the demographic and social make-up of the U.S. population than the old “long form,” which was distributed to a quarter of U.S. households every ten years. July marks five years since the officially declared conclusion of the Great Recession. One obvious key indicator of the strength of economic recovery is the extent to which poverty has declined. In 2012, the most recent year for which data are available, the poverty rate in America stood at 15 percent. More than 46 million people, a record high, were living in households with an annual income below $11,720 for a single person or $23,492 for a family of four, the official poverty thresholds. At the outset of the recession in 2007, the official poverty rate stood at 12.5 percent. In total, 37.3 million U.S. residents were living in official poverty. By 2010, the poverty rate had risen to 15.1 percent — a 2.6 percentage-point growth that meant an additional 8.9 million people were living in poverty. During the same period, the total population grew by a little under 7 million people, which means that the increase in the number of people living in poverty outpaced the increase in the total population over the course of the recession. Research shows a correlation between the unemployment rate and the poverty rate. After peaking at 10 percent in October 2009, the official unemployment rate declined steadily to 6.7 percent in December 2013. Over the same period, the number of unemployed workers fell 5 million, while total employment increased by 6.1 million, regaining about 80 percent of the jobs lost during the recession. However, according to work done by the Economic Policy Institute in D.C., the decline in the unemployment rate is more a consequence of a large underemployment number — which includes discouraged workers, marginally attached workers who are not actively seeking employment but would take a job if offered one, as well as part-time workers who would prefer to work full-time if a full-time job was available — than of the robustness of the growth in employment. EPI’s calculations show that as of November 2013, notwithstanding the employment growth that took place, the total “jobs gap,” meaning the number of jobs needed to return the U.S. economy to its position at the onset of the recession, was 7.9 million jobs, far more than the 1.3 million jobs needed to bring employment back to pre-recession levels. Moreover, the increase in employment that has occurred has not kept pace with the growth in the working-age population. The declining employment-population ratio is a statistic that captures this trend. At the onset of the recession in December 2007, it stood at 62.7 percent — that is, 62.7 percent of the total working-age population was employed. By the end of the recession, the ratio had dropped to 59.4 percent, and then continued to decline, despite the economic recovery, falling to 58.6 percent in December 2013. The reality is that the U.S. economy is still functioning well below its full potential. As a number of prominent economists have noted, the sluggishness of the recovery may be an indication of stagflation. The U.S. economy may be facing an extended period before it rebounds completely from the recession. A recent article in the New York Times, entitled “A Job Seeker’s Desperate Choice,” describes how a mother of two young boys was charged with two counts of felony child abuse for leaving her two sons in her truck on a parking lot on a hot day while she went to a seventy-minute job interview. Faced with a desperate choice after her childcare for the day had fallen through, Shanesha Taylor chose the job interview, her best chance of getting a job that would lift her family out of poverty. Taylor’s story, the New York Times correspondent wrote, is considered by many people “as emblematic of the harsh realities of today’s economy, where jobs are scarce and well-paid ones even scarcer, and where desperate choices have become common.” At the time, Taylor’s monthly expenses totaled $1,274, while her monthly income, including food stamps, amounted to $1,232, far less than the official poverty level in the United States. Shanesha Taylor’s predicament is not an isolated one, but typical of the harsh reality of an economy experiencing lackluster employment growth, high underemployment, and stagnating wages. For people without jobs or working in the low-wage service sector, poverty is often an inevitable outcome. While it is possible that the official poverty rate will decline slightly in 2013, the decrease is not likely to be meaningful. It is also possible that the official number of people living in poverty will grow slightly again this year. In reality, however, the condition of the U.S. economy indicates that far too many Americans will still be in a predicament not dissimilar from that with which Shanesha Taylor contended, facing the same desperate choices, she faced. Allan Lichtenstein has a Ph.D in urban planning from Rutgers University and has been working in the field of poverty research for eight years. He grew up in South Africa, lived in Israel for sixteen years, and has lived in the U.S. since 1986.