Friday, September 17, 2010

Deep Poverty Deepens In US

Robert Waldmann at Angry Bear has reported that the Census Bureau reports for 2009 that the poverty rate in the US rose to 14.3% of the population, while the deep poverty rate, those under half of the poverty line in income, rose to 6.3%. This last number is the highest seen since stats on that began being recorded in 1975. The previous high was 5.9% in 1983 at the end of the Reagan recession, when the overall poverty rate was higher than in 2009 at 15.2%. Waldmann hypothesizes that the difference is the result of the welfare "reform" of the 1990s, which replaced AFDC with TANF. He also notes that few seem to have noticed this. Mark Thoma links to this and some related discussions at http://economistsview.typepad.com/economistsview/2010/09/poverty-and-redistribution.html#comments .

I do not know if Waldmann is right about the source of this increased share of the poor who are very poor or not, although it is reasonable that he is at least partly right. He notes that most observers declared welfare reform a "success" around 2000, and the issue was put to rest. But careful observers then understood that much of that had to do with the booming economy that allowed many of the people being tossed off welfare to get jobs, and that when a serious recession hit, the new hole in the social safety net (can't stay on TANF for more than two years) would show up in increased poverty. Well, that recession is now, and the result should not be all that surprising.

Waldmann wonders about the lack of attention to this development, whatever its cause. I suspect that this lack is due to the focus many have had on the upper end of the income distribution. There we have indeed seen what may seem to be more dramatic developments, a huge surge in the share of national income going to the top one tenth of one percent of the population. This has indeed been the most dramatic shift and is an important matter. But in terms of human suffering, this increased share of the population at the rock bottom of the distribution in the sub-poverty basement may be more important.

6 comments:

Max Sawicky said...

The lack of attention is due to the fact that both parties, including President Clinton and later, Senator Barack Obama, claimed the reform to be a great success.

http://onlinelibrary.wiley.com/doi/10.1111/j.1743-4580.2002.00055.x/abstract

fuzzyface73 said...

Exactly how is the poverty line defined? I have the impression that it has less to do with what one can actually afford and more to do with income compared to everybody else. If it is indeed the latter, the statistic probably only really notes that income disparity has increased, not that more people are unable to feed their families.

The term "deep poverty" conjures up visions of entire families carefully washing the one "everyday" suit of clothes they own and scrambling in dumpsters for a crust of bread. I suspect the reality is a bit different.

rosserjb@jmu.edu said...

Thanks, Max. Good to hear from you.

ff73,

Actually, although the formula has become more complicated over the years (Max would know it) and I think some relativistic elements have crept into it, the core of it has been an absolute measure of poverty. The original version, due to the late Mollie Orshanksy, was that it was three times the amount that the average person in an urban area would need to spend for a minimum food diet. That is why US Dept. of Agriculture employee Orshansky was approached to estimate it initially in 1965 after the LBJ War on Poverty stuff got passed, and I think it is still USDA's job to update it, although I could be wrong about that.

Jack said...

"I suspect the reality is a bit different." Ff73

You might suspect that, but you would be wrong to do so. Don't be misled by your small circle of friends or even the wider circle of people who live in you vicinity.
Take that walk on the other side of town. Tobacco Road isn't too far off and it is real for probably 20% of the population. That's an educated guess, but look at the Census Bureau's household income stats for 2009. Abyssmal for those on the low end of the scale. Then recognize that at present about 10% are unemployed, as in no in cominig income, and some greater percentage have given up looking for work, as in no income coming in. Figure out for youorself what it means to try living in the good ole USA on $20 Grand per annum. With a couple of kids $35,000 doesn't go too far either.

"President Clinton and later, Senator Barack Obama, claimed the reform to be a great success."
It was a very great success if you have a good job with secure income streams. Or, if your a political whore selling your allegiance to the One Percenters and looking for a good book deal and a cushy retirement position as a Pres of think tank of VP at Goldman, CitiBank, etc. Very successful for everyone, but the poor.

fuzzyface73 said...

Thanks for making me check. The Census bureau does indeed use a fairly complex calculation, but the base is to start with the 33rd percentile of family-of-four expenditures on food, shelter, clothing, and utilities, and add 20% to the resultant amount in dollars. That means that the truth lies somewhere between our assertions. An increased divergence of wealth between the median families and those a bit below them will increase the poverty line to the extent that such families choose to spend more on nicer homes, clothing, and so on; luxury electronics expenditures on the other hand, should not affect it.

But as one commentator pointed out, increased unemployment is a major factor here. On the other hand, given the way the figure is computed, most people below the poverty should be able to feed their families. I know quite a few people whose income is around or a bit below $20,000; they make it by being careful with their money. Not a lifestyle I would choose, but still a far cry from what we have historically understood as "deep poverty."

rosserjb@jmu.edu said...

ff,

However, this deep poverty measure that is now at an all time high, or at least since 1975, is half the official poverty line, something a good deal more serious.