Thursday, September 13, 2018

Poverty in the USA

The U.S. Census Bureau reported that 39.7 million Americans experienced poverty last year. This works out to 12.3 percent of the population or one in eight Americans.

Millions of Americans – including children and their parents, senior citizens, people with disabilities, and workers – make up the national number of people living in poverty.

 12.8 million children lived in poverty. 4.7 million senior citizens lived in poverty. 3.8 million working-age adults with a disability lived in poverty. 2.4 million worked full-time all year and lived in poverty. 5.7 million worked less than full-time and lived in poverty.

US official poverty figures are determined using methodology developed in the early 1960s by Mollie Orshansky of the Social Security Administration. Taking Agriculture Department data on minimum food requirements, Orshansky calculated the annual cost of a subsistence food budget for families of different sizes and types. Household budget studies from the 1950s showed that families spent one-third of their income on food. So, Orshanksy multiplied the cost of a minimum food budget for each family type by three to arrive at their poverty threshold. Thresholds rise annually based on inflation over the past year. Being poor means having insufficient income during the year to purchase bare necessities. 

The Orshansky poverty measure has been subject to substantial criticism. Clearly, poverty thresholds are not very high. A single individual making US$1,060 a month would not be considered poor. Yet, in most areas in the U.S., it’s hard to rent a place for less than $500 a month. Even if that’s possible, this leaves only $20 a day for transportation, clothing, phone, food and other expenses. Orshansky’s minimal food budget assumed that people shop wisely, never eat out and never give their children treats. Another problem is that the U.S. poverty measure ignores income and payroll taxes. In the early 1960s, the poor paid minimal taxes. Starting in the late 1970s, low-income families faced a more formidable tax burden, leaving them less money to purchase basic necessities. Conversely, in the late 1990s, tax credits began to lower the tax burden on the poor. Finally, standards concerning what is required to be a respectable member of society vary over time and place. For example, cellphones did not exist until recently. Childcare was not necessary for many in the 1950s or 1960s; but when all adults in a family work, it’s essential.

The Luxembourg Income Study, a research organization that analyzes income distribution, considers households to be poor if their income, adjusted for household size, falls below 50 percent of the median income of their country for the particular year. Unlike the U.S. Census Bureau, the Luxembourg Income Study subtracts taxes from income when measuring poverty. It also adds government benefits, and makes data as comparable as possible across nations. The result is a poverty rate that is typically two to four percentage points above the official U.S. measure. From an international perspective, the U.S. clearly does poorly. According to Luxembourg Income Study, the U.S. poverty rate was 17.2 percent in the mid-2010s – much higher than other developed countries, such as Canada and the U.K.
While middle-incomes are treading water, the rich have prospered and the poor have fallen behind. Between 2007 and 2017, household income at the 90th percentile rose by 7.5 percent, according to the Census Bureau, while at the 10th percentile it fell by 4.5 percent.
Almost 3 in 10 black children were poor in 2017, as well as about 1 in 4 Latino kids. That’s compared with about 1 in 9 white children. More than two-thirds of children in poverty live with a working adult.
“It’s not about not working,” Olivia Golden, executive director of the Center for Law and Social Policy said. “But low wages, jobs that don’t offer enough hours, jobs that are transient ― it’s what’s going wrong at the low end of the labor market.”

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