Monday, September 20, 2010

U.S. Poverty Rate: 1959 to 2009

According to the recent Census Bureau report (historical data here), the poverty rate in the U.S. increased to 14.3% in 2009 from 13.2% in 2008 and 12.5% in 2007 (see chart above).  A few items of interest:

1. The poverty rate in 2009 (14.3%) was below the poverty rates in 1992 (14.8%), 1993 (15.1%) and 1994 (14.5%) following the 1990-1991 recession.  

2. The poverty rate in 2009 was below the rate in 1982 (15%), 1983 (15.2%) and 1984 (14.4%) following the 1980 and 1981-1982 recessions. 

3. The increase in the poverty rate (Table 5 in the report) associated with the recessions of the early 1980s was 3.8 percentage points (11.4% in 1978 to 15.2% in 1983), which is more than twice the 1.8 percentage point increase from 2007 (12.5%) to 2009 (14.3%).    

4. The poverty rates in recent years, and even the 15-year high of 14.3% rate in 2009, have been below the rates from the late 1950s to the mid-1960s. 

29 Comments:

At 9/21/2010 6:17 AM, Blogger Colin said...

In other words, the poverty rate has largely stagnated since the launch of the War on Poverty.

 
At 9/21/2010 7:22 AM, Blogger Sean said...

Isn't this a bit like tracking the percentage of C students?

 
At 9/21/2010 7:39 AM, Blogger sykes.1 said...

All of the reduction in poverty occurred in the 50s prior to the War on Poverty. All Johnson's social programs have had zero impact on poverty. Probably because it is based on IQ differences.

 
At 9/21/2010 8:46 AM, Blogger Sean said...

Wow, that could be really misread! I meant that isn't poverty graded on a curve anyway: it's measurement is subjective, subject to influence, and tends to be relative to the rest of the population.

 
At 9/21/2010 9:26 AM, Blogger bix1951 said...

this poverty number is purely political
the media always report the
"number living in poverty"
as if those people are destitute and deprived and suffering
but they fail to include all the food stamps and housing vouchers and dozens of other benefits.
And yet there are some people that need more and different help
It would be good to look at them more carefully. I expect you would find substance abuse and mental illness are the real problems

 
At 9/21/2010 9:36 AM, Blogger Paul said...

Poor people in the US would be considered very middle class in my wife's country of Colombia. The difference is in Colombia there's not much opportunity to do better.

 
At 9/21/2010 9:48 AM, Blogger juandos said...

bix notes: "the media always report the
'number living in poverty'
"...

USAToday seems to prove the point:

U.S. Census: 43.6 million live in poverty, the most in 51 years

Sep 16, 2010

The number of people living poverty in the United States increased to 43.6 million in 2009 -- the largest number in 51 years, according to U.S. Census data.

The poverty rate rose to 14.3%, up from 13.2% in 2008. The rise in the number of people living in poverty from 39.8 million people to 43.6 million people is the third consecutive annual increase.
(there's a bit more)

 
At 9/21/2010 10:12 AM, Blogger morganovich said...

sean-

i think you make the correct point, but draw the wrong conclusion.

poverty is not relative, it's absolute.

our poor are as well off as many of the european middle class.

read cox and alms on the topic.

i've lived in europe, the french and dutch middle classes have nothing like what ours does. they don't have washers and dryers, own cars, or often even own their furniture. they live in spaces half the size of those in the US.

http://coyote-blog.com/wordpress/wp-content/uploads/2010/01/EUUSAHOUSEHOLDS.jpg

http://mjperry.blogspot.com/2010/01/eu-vs-usa-part-iv.html

read the timbro study.

more important, out poor don;t stay poor.

The authors analyzed University of Michigan Panel Study of Income Dynamics data that tracked more than 50,000 individual families since 1968. Cox and Alms found: Only five percent of families in the bottom income quintile (lowest 20 percent) in 1975 were still there in 1991. Three-quarters of these families had moved into the three highest income quintiles. During the same period, 70 percent of those in the second lowest income quintile moved to a higher quintile, with 25 percent of them moving to the top income quintile. When the Bureau of Census reports, for example, that the poverty rate in 1980 was 15 percent and a decade later still 15 percent, for the most part they are referring to different people.
Cox and Alm's findings were supported by a U.S. Treasury Department study that used an entirely different data base, income tax returns. The U.S. Treasury found that 85.8 percent of tax filers in the bottom income quintile in 1979 had moved on to a higher quintile by 1988 -- 66 percent to second and third quintiles and 15 percent to the top quintile. Income mobility goes in the other direction as well. Of the people who were in the top one percent of income earners in 1979, over half, or 52.7 percent, were gone by 1988. Throughout history and probably in most places today, there are whole classes of people who remain permanently poor or permanently rich, but not in the United States. The percentages of Americans who are permanently poor or rich don't exceed single digits.

 
At 9/21/2010 10:57 AM, Blogger Sean said...

morganovich,

I think you are generally correct, although I think there's more going on here.

For example, merging these findings with anecdotal evidence (this can feed fallacies, but it's still better than not trying) leads me to believe that a good part of this measured income mobility is age related. For example, going from student to careerist or from real estate trainee to senior agent to laid off may be examples of income mobility but don't really describe what people tend to think of when the words come up. I won't fully trust those statistics unless I hear a lot more depth.

"Stuff" is a lot cheaper and prevalent in the US than Europe, and some of that is due to relative means. But part of that is culture, and part of that is the VAT taxing structure. Wouldn't most Europeans tell you they are happier and less stressful than Americans, or is that my naivete? And like my grandmother, they may be able to afford a dishwasher, but think it's a foolish expenditure. I speak with quite a few Europeans, but I haven't gotten much insight on European poverty from them.

As to the other part, there is a large service sector in the US that is clean, physically non-demanding, involving work that doesn't require much education (although some employers require it anyway), where 2 earners can keep a family above the poverty line. It's not a great living, but it's not poverty.
So the American poor are those that for various reasons can't or won't take part in that sector, or who have structural costs above the norm (health care costs, for example). However, post recession, these jobs are short of demand, and that's worth watching.

I actually believe life in the US is quite good across the board by historical standards and compared to global competition. But I think there are a number of headwinds that bear watching, and they do affect the lower end of the economic spectrum more than the upper end.

 
At 9/21/2010 11:28 AM, Blogger Benjamin said...

The War on Poverty has stagnated.
Let's see, we have spend $3 trillion in Iraqistan: Have we won the GWOT?
How about the new trillion we spend every year on Homeland Security, DoD, and the VA, and debt from previous wars. Have we beaten the bad guys yet? It must be a failure to spend that money.
How about the war on drugs?

In other words, whenever the federal government declares a war, grab onto to your wallets.

 
At 9/21/2010 1:29 PM, Blogger Jet Beagle said...

Sean: "leads me to believe that a good part of this measured income mobility is age related."

Of course it is. If income mobility exists, it can only mean that over time (ie, as wage earners age) a person's income increases.

Of course, the so-called "progressives" in this nation continue to argue that family incomes have stagnated for those not in the "favored" class. Turns out that the "unfavored" class is transitory, representing both the young who have not yet acquired higher-wage skills and the old who are living off of social security and savings until death.

 
At 9/21/2010 2:13 PM, Blogger Sean said...

Jet Beagle,

Yes, that's mostly true. I suspect that at the very high end, things are a bit sticky because of networking, inside information, and capital requirements. But those aren't really wage earners, that's a pretty small portion of society, and you can break into that group if you're good and a little lucky.

For some of the low end, you have a similar problem: overcoming an inner-city education and culture to succeed wildly is something very few people can do in a single generation, and quite a few people never escape that trap.


But no, we don't have institutional class stability, and we're much better for that.
My point is the the mobility data largely don't reflect the stereotypical cases of rich people blowing off wealth and becoming poor or of the dirt poor lifting themselves up by their bootstraps and founding the next Google, because those cases are pretty rare.

 
At 9/21/2010 4:15 PM, Blogger morganovich said...

"For some of the low end, you have a similar problem: overcoming an inner-city education and culture to succeed wildly is something very few people can do in a single generation, and quite a few people never escape that trap. "

perhaps less that you might think anecdotally.

Only five percent of families in the bottom income quintile (lowest 20 percent) in 1975 were still there in 1991. Three-quarters of these families had moved into the three highest income quintiles. During the same period, 70 percent of those in the second lowest income quintile moved to a higher quintile, with 25 percent of them moving to the top income quintile.

5% is a pretty low number for persistent poverty.

 
At 9/21/2010 4:31 PM, Blogger Jet Beagle said...

Sean,

I agree that few in the bottom quintile will ever become fabulously wealthy. Of course, few in any quintile ever do so. But I think the majority of folks who start out poor in their 20s end up moving to at least the second quintile by the end of their working lives. Economic mobility is the norm in the U.S. That's probably not what is being taught in American schools, but many educators have no clue what they are talking about, IMO.

 
At 9/21/2010 8:21 PM, Blogger Sean said...

morganovich,

If those are the numbers, then yes, 5% is quite low for persistent poverty.

 
At 9/21/2010 8:25 PM, Blogger Sean said...

Jet Beagle,

"That's probably not what is being taught in American schools"
Actually, I don't think this is one of those things I learned in school.

"many educators have no clue what they are talking about, IMO."
There's quite a bit of variance there. I've had teachers who were idiots and those whom were excellent. But you have to be careful about standards. I'd rank any of them well above the typical commenter on the average blog (Present Company Excluded, of course). ;)

 
At 9/21/2010 8:43 PM, Blogger juju said...

Non-cash income is ignored when measuring poverty rates. Welfare benefits provided in-kind such as food stamps and public housing are excluded.
According to the Bureau of Labor Statistics’ 2008 Consumer Spending Survey, reported purchases by the poorest fifth of Americans are more than twice as much as reported income. Specifically, the poorest fifth of Americans reported $10,263 of income on average, but reported spending $22,304.[50] How this group could spend, on average, more than twice as much as it reported as income is unclear. Possible explanations include significant amounts of unreported income, borrowing, and the spending of previously accumulated wealth. A 1993 study of low income single mothers titled Making Ends Meet, by Kathryn Edin, a sociologist at the University of Pennsylvania, showed that the mothers spent more than their reported incomes because they could not "make ends meet" without such expenditures. According to Edin, they made up the difference through contributions from family members, absent boyfriends, off-the-book jobs, and church charity.
According to Edin: "No one avoided the unnecessary expenditures, such as the occasional trip to the Dairy Queen, or a pair of stylish new sneakers for the son who might otherwise sell drugs to get them, or the Cable TV subscription for the kids home alone and you are afraid they will be out on the street if they are not watching TV."[51]

 
At 9/21/2010 8:46 PM, Blogger happyjuggler0 said...

juju,

I am highly confident that you placed decimals in the wrong place in your post. Everything I have read on this subject suggests that you are off by at least an order of magnitude off in your "percentage of the poor who" stats.

To put it simply, the official poor in the US live radically better than what the average image is of them in the minds of most Americans, or in the minds of most foreigners for that matter.

 
At 9/21/2010 8:50 PM, Blogger happyjuggler0 said...

Crap. I could have sworn that juju listed a bunch of number like 1.5%, 3.7% etc. for percentage of poor Americans who owned things like cars and air conditioners.

I no longer see those stats. Did that post perhaps get deleted or something? Or am I losing my mind?

 
At 9/21/2010 9:05 PM, Blogger Mark J. Perry said...

Sorry, this comment from JuJu was deleted by mistake.

Overstating poverty

When you hear that someone is “poor,” it brings to mind images of a person who may be homeless and malnourished. Fortunately, however, that description is not reflective of the majority of individuals labeled as poor by the federal government. The 2000 Census indicates that:

1.73% of U.S. poor own automobiles, 2.76% have air conditioning, 3.97% own refrigerators, 4.62% have cable or satellite TV, 5.73% have microwaves.

6.46% own their own homes with most of the rest renting their homes.

On average a poor person in this country lives in a home with 1228 square feet which they often own, and as noted the home is likely air conditioned, with a refrigerator, cable or satellite TV, a microwave not to mention many other comforts.[47]

Cox and Alm[48] conclude that if the American poor formed a country of their own, they would be as well-off or even slightly better-off than the typical family in most European countries.

 
At 9/22/2010 8:26 AM, Blogger juandos said...

Again pseudo benny repeats another one of his delusional mantras: "Let's see, we have spend $3 trillion in Iraqistan..."...

Prove it pseudo benny...

Did you get that number from lefty Stiglitz and MoveOn.Org?

Maybe this Peter Orszag piece in the CBO blog might shed some light on the real costs...

 
At 9/22/2010 9:16 AM, Blogger morganovich said...

sean-

the data come from cox and alms.

The authors analyzed University of Michigan Panel Study of Income Dynamics data that tracked more than 50,000 individual families since 1968.

if you'd like to parse it some.

happy-

you are correct about the decimal points.

 
At 9/22/2010 10:48 AM, Blogger Junkyard_hawg1985 said...

Let's see. Poverty was dropping sharply up until we declared war on poverty and started shooting money at it. If you look at all government spending on anti-poverty programs at the state and federal level (medicaid, AFDC, WIC, school lunches, etc), we spend an average of $16,000 per person ($72,000 per family of 4) living in poverty. Since the government pays up to 200% of the poverty level, it comes out that we spend $28,000/family of 4 for people we are "helping". The 200% of poverty level is an income of $44,000/yr for a family of 4.

Can we surrender in the war on poverty?

 
At 9/22/2010 11:01 AM, Blogger juandos said...

"Poverty was dropping sharply up until we declared war on poverty and started shooting money at it..."...

From Michael Tanner at the Cato Institute: More Proof We Can't Stop Poverty By Making It More Comfortable

On Jan. 8, 1964, President Lyndon Johnson delivered a State of the Union address to Congress in which he declared an "unconditional war on poverty in America." Then, the poverty rate in America was around 19% and falling rapidly. Last week, it was reported that the poverty rate this year is expected to be roughly 14.3%, and is climbing.

Between then and now, the federal government spent more than $13 trillion fighting poverty, and state and local governments added another couple of trillion. Yet the poverty rate never fell below 10.5%.

The federal government now has 122 separate anti-poverty programs (defined as either means-tested programs or programs whose legislative language specifically refers to their purpose as combating poverty).(there's more)

 
At 9/22/2010 11:13 AM, Blogger happyjuggler0 said...

I think I see what juju did; he made a list that was numbered 1, 2, 3 etc., then placed a period after those numbers, then listed the percentages without leaving a space. It therefore looked like a decimal point instead of a period.

It should read something like this, assuming I am right:

1) 73% of U.S. poor own automobiles.

2) 76% have air conditioning.

3) 97% own refrigerators.

4) 62% have cable or satellite TV.

5) 73% have microwaves.

6) 46% own their own homes with most of the rest renting their homes.

 
At 9/22/2010 12:16 PM, Blogger morganovich said...

hawg-

you may be missing an issue in the poverty analysis:

grants like food stamps and public housing don't count toward poverty levels.

so, it's quite possible to have more people in "poverty" who are actually better off if you count free housing and food.

this might explain the hike in reported poverty from the "war on poverty".

it seems totally disingenuous to me to not include the effects of the anti poverty program in the poverty numbers...

 
At 9/22/2010 3:09 PM, Blogger Junkyard_hawg1985 said...

morganovich,

Since the official poverty income is $22,000/yr for a family of four and we are spending $28,000/yr on means tested programs, the real poverty rate should be zero.

Of course, if we are spending this kind of money for those in poverty, what is the motivation to get out of poverty?

 
At 9/22/2010 3:10 PM, Blogger Junkyard_hawg1985 said...

morganovich,

Since the official poverty income is $22,000/yr for a family of four and we are spending $28,000/yr on means tested programs, the real poverty rate should be zero.

Of course, if we are spending this kind of money for those in poverty, what is the motivation to get out of poverty?

 
At 9/23/2010 10:28 AM, Blogger morganovich said...

JH-

agree completely about these programs having perverse incentives.

in many cases, getting a job suddenly wipes out your medical benefits and food stamps. you might even lose subsidized housing.

as a result, almost no job a lot of these people are qualified for can possible pay them more than they are getting.

you work, you lose.

that's no way to run a railroad.

 

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