Business | Economy

US poverty on track to hit highest since 1960s

Weak economy and fraying government safety net increases urban poverty

  • AP
  • Published: 20:06 July 23, 2012
  • Gulf News

Poverty in the US
  • Image Credit: AP
  • Poverty is spreading in the US at record levels across many groups, from underemployed workers and suburban families to the poorest poor.

Washington: The ranks of America’s poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections.

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 per cent in 2010, climbing as high as 15.7 per cent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965.

Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out. Suburbs are seeing increases in poverty, including in such political battlegrounds as Colorado, Florida and Nevada, where voters are coping with a new norm of living hand to mouth.

The predictions for 2011 are based on separate AP interviews, supplemented with research on suburban poverty from Alan Berube of the Brookings Institution and an analysis of federal spending by the Congressional Research Service and Elise Gould of the Economic Policy Institute.

The analysts’ estimates suggest that some 47 million people in the US, or 1 in 6, were poor last year. An increase of one-tenth of a percentage point to 15.2 per cent would tie the 1983 rate, the highest since 1965. The highest level on record was 22.4 per cent in 1959, when the government began calculating poverty figures.

Poverty is closely tied to joblessness. While the unemployment rate improved from 9.6 per cent in 2010 to 8.9 per cent in 2011, the employment-population ratio remained largely unchanged, meaning many discouraged workers simply stopped looking for work. Food stamp rolls, another indicator of poverty, also grew.

Demographers also say:

- Poverty will remain above the pre-recession level of 12.5 per cent for many more years. Several predicted that peak poverty levels — 15 per cent to 16 per cent — will last at least until 2014, due to expiring unemployment benefits, a jobless rate persistently above 6 per cent and weak wage growth.

-Suburban poverty, already at a record level of 11.8 per cent, will increase again in 2011.

-Part-time or underemployed workers, who saw a record 15 per cent poverty in 2010, will rise to a new high.

-Poverty among people 65 and older will remain at historically low levels, buoyed by Social Security cash payments.

-Child poverty will increase from its 22 per cent level in 2010.

Analysts also believe that the poorest poor, defined as those at 50 per cent or less of the poverty level, will remain near its peak level of 6.7 per cent.

“I’ve always been the guy who could find a job. Now I’m not,” said Dale Szymanski, 56, a Teamsters Union forklift operator and convention hand who lives outside Las Vegas in Clark County.

In a state where unemployment ranks highest in the nation, the Las Vegas suburbs have seen a particularly rapid increase in poverty from 9.7 per cent in 2007 to 14.7 per cent.

Szymanski, who moved from Wisconsin in 2000, said he used to make a decent living of more than $40,000 (Dh146,920) a year but now doesn’t work enough hours to qualify for union health care. He changed apartments several months ago and sold his aging 2001 Chrysler Sebring in April to pay expenses.

“You keep thinking it’s going to turn around. But I’m stuck,” he said.

The 2010 poverty level was $22,314 for a family of four, and $11,139 for an individual, based on an official government calculation that includes only cash income, before tax deductions. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps and tax credits, which were expanded substantially under President Barack Obama’s stimulus package.

An additional 9 million people in 2010 would have been counted above the poverty line if food stamps and tax credits were taken into account.

Robert Rector, a senior research fellow at the conservative Heritage Foundation, believes the social safety net has worked and it is now time to cut back. He worries that advocates may use a rising poverty rate to justify additional spending on the poor, when in fact, he says, many live in decent-size homes, drive cars and own wide-screen TVs.

A new census measure accounts for noncash aid, but that supplemental poverty figure isn’t expected to be released until after the November election. Since that measure is relatively new, the official rate remains the best gauge of year-to-year changes in poverty dating back to 1959.

Few people advocate cuts in anti-poverty programs. Roughly 79 per cent of Americans think the gap between rich and poor has grown in the past two decades, according to a Public Religion Research Institute/RNS Religion News survey from November 2011. The same poll found that about 67 per cent oppose “cutting federal funding for social programmes that help the poor” to help reduce the budget deficit.

Outside of Medicaid, federal spending on major low-income assistance programmes such as food stamps, disability aid and tax credits have been mostly flat at roughly 1.5 per cent of the gross domestic product from 1975 to the 1990s. Spending spiked higher to 2.3 per cent of GDP after Obama’s stimulus program in 2009 temporarily expanded unemployment insurance and tax credits for the poor.

The US safety net may soon offer little comfort to people such as Jose Gorrin, 52, who lives in the western Miami suburb of Hialeah Gardens. Arriving from Cuba in 1980, he was able to earn a decent living as a plumber for years, providing for his children and ex-wife. But things turned sour in 2007 and in the past two years he has barely worked, surviving on the occasional odd job.

His unemployment aid has run out, and he’s too young to draw Social Security.

Holding a paper bag of still-warm bread he’d just bought for lunch, Gorrin said he hasn’t decided whom he’ll vote for in November, expressing little confidence the presidential candidates can solve the nation’s economic problems.

“They all promise to help when they’re candidates,” Gorrin said, adding, “I hope things turn around. I already left Cuba. I don’t know where else I can go.”

Retail Gold Rate
Business Editor's choice
Quick Access

  1. Markets

  2. Economy

  3. Property

  4. Aviation

Business Top Stories

  1. ADX expects 2 IPOs by year-end

  2. Al Mansouri appointed new central bank governor

  3. Emirates sets sights on more US routes

  4. Cityscape offers platform for sales launches

  5. New supply to stem Dubai realty price spike