SOCIAL INDICATORS 2007
Poverty Trends
We now shift back to the income measures of economic status and the most frequently referenced indicator with regard to economic health: The poverty rate. Here is the percentage of persons living below the poverty level.
The poverty rate for families dropped by half between 1960 (22.2%) and 1973 (11.1%). It stayed below the 12% level until 1980. From then until the early 1990s, the rate remained mainly in the 13-15% range. The rate has stayed in the 11-13% range since then.
Remembering that the poverty rate is a snapshot of society at a given time is critical. Many people listed in the poverty statistics are in temporary circumstances. Periodically, studies have measured poverty over several months. For instance, one study done over 48 months in 1996 to 1998 discovered that of those who were counted in poverty statistics during that timeframe, "...51% were in poverty for two to four months; 5.7% of those who experienced poverty were in poverty more than thirty-six months." (1) As noted in the previous post, people in the lowest quintile of society experienced on average a 90% increase in inflation-adjusted income from 1996-2005. The number of people living in chronic poverty is only a few percent.
An important development in the poverty rate is the increasingly "younger face" poverty has. It was common to think of older Americans a generation ago when one thought of poverty. About 35% of seniors were in poverty in 1960. That number dropped to less than 15% in 1974. The rate for seniors dropped below the overall rate in 1982. Since then it has continued on a steady decline, with minor fluctuations, to a rate of 10.1% in 2004.
The rate for children declined from 26.9 in 1960 to 14.0 in 1969. The rate climbed slightly over the next decade but climbed steeply to 22% in 1983. It stayed at or above 20% for the next ten years. After 1993, the child poverty rate declined to a level in the mid-teens, but it has risen in the past couple of years to 17.8%. The child poverty rate is almost 150% of the overall rate. What is the reason for the increase in child poverty?
The answer to that question becomes apparent when we begin to look at changes in household configurations. The chart below compares four types of households: Male headed households, female-headed households, independent males, and independent females. Independent households are adults living alone or with others to whom they are not related. (Male-headed households include families without a mother. I could not devise a way to disaggregate this information from the data I used, but they are a relatively small percentage of the total.) I compared 1974 poverty data to 2005 data.
Looking at the poverty rate by household arrangement, we see that some significant headway has been made against poverty, particularly in the traditional husband-and-wife household arrangement. But how could the poverty rate decline for each type of household, and yet the overall rate went up? The answer is quite simple. The percentage of people living in various household arrangements has changed.
If the same percentage of people lived in each household arrangement as in 1974, the present poverty rate would be 8.9%! People have shifted into household arrangements with higher levels of poverty. This shift also explains why poverty among seniors is very low, but poverty among children has slowly increased in recent years. An increasing number of children are being reared in single-parent homes, and these homes are more susceptible to poverty. Social scientists have been telling us for many years now: The two most important things you can do to avoid poverty are to live in a household with a husband and wife and have at least a high school education. We have been making progress on the education front, but as we saw in the family formation post, the number of children living in two-parent homes has declined from 85.4% to 67.4% between 1967 and 2006. There are complex dynamics involved, but divorce and the increasing number of children born to single mothers appear to be major inhibitors toward making progress against poverty.
Conclusions:
- Unemployment and inflation rates are just barely above thirty-year lows.
- Income disparity, as measured by the GINI Index, has been rising since the late 1960s, but household configuration changes may be exaggerated per capita.
- Median household income has grown 30% since 1967 in inflation-adjusted dollars.
- Tracking income of specific individuals from 1968 to the present shows a 52% increase in inflation-adjusted income for top quintile families and 18% for bottom quintile families. (However, if family size and non-cash transfers to the poor were factored into the calculation, the difference would narrow considerably.)
- From 1996-2005, 58% of bottom quintile earners moved one quintile or more, while 57.4% of the top 1% dropped one quintile or more, illustrating high economic mobility.
- Consumption levels of individuals in the wealthiest quintile are only about twice as much as the poorest quintile. The middle quintile consumes only 29% more than the lowest. When it comes to basic amenities of life, only a small few are without.
- Since the mid-1990s, the poverty rate has fluctuated in the 11.5-13.5% range. Just slightly above the historic lows of the early 1970s.
- The percentage of seniors living in poverty has dropped below 10%, but poverty for children is nearly 18%.
- Transitioning away from two-parent homes is a major obstacle in addressing poverty, especially child poverty.
The economic indicators suggest an overall improvement in quality of life where most folks have the basic amenities of life, significant economic mobility, and improved economic status throughout their lives. The overall economic picture is one of improvement, though it may be less than we might wish.
1. David Schmidtz. Elements of Justice. New York: Cambridge University Press, 2006. 132.
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