Poverty: Past, present, and future
Poverty can seem like a daunting and intractable problem. After all, the official poverty rate in 2014 (the last full year for which data are available) stood at 14.8 percent, virtually the same level as in 1966. Child poverty is even higher now than it was then. There are many more dimensions to poverty than simply a lack of income in any particular year, but a broader look at history and data, like the analysis in this new brief, tells us that we have done better, we are doing better than we think, and we could be doing even better.
We have done better. Since 1966, the US poverty rate has fluctuated between 11 and 15 percent, while child poverty ranged from 14 to 23 percent. Today’s relatively high rate reflects the legacy of the Great Recession, but in 2000, as the economic expansion of the 1990s was coming to a close, the poverty rate was 11.3 percent. The 3.5 percentage-point difference between 2000 and 2014 may not sound like much, but if we had 2000’s poverty rate today, 11 million fewer people would be poor. And if we could reduce 2014’s child poverty rate from 21.1 percent to 1969’s 14.0 percent, 5.2 million fewer children would be poor.
We’re doing better than we think. The official poverty rate fails to consider the effects of some of our most significant antipoverty programs. The official rate is calculated by comparing pretax cash income to a standard of basic need that was defined in the 1960s and simply adjusted for inflation ever since. Because it only considers pretax cash income, the official measure does not count the value of the earned income tax credit (EITC), child tax credit (CTC), or Supplemental Nutrition Assistance Program (SNAP) benefits. In 2014, the federal government paid over $50 billion in refundable EITC benefits and $70 billion in SNAP benefits to low-income families.
The failure to account for these programs and other shortcomings in the official poverty measure led to the development of the Supplemental Poverty Measure, used for research purposes, that better captures both the resources available to families and the needs of those families. Using the measure, the Census Bureau calculates that the EITC and CTC reduced the poverty rate by 3.1 percentage points in 2014. Similarly, SNAP benefits reduced the poverty rate by 1.5 percentage points. The major public programs we use to fight poverty do, in fact, reduce poverty, if we bother to count them.
We could be doing even better. One of the best antidotes to poverty is work, but a job alone is not enough. When the economy expanded during the 1990s and the unemployment rate fell below 4 percent, the poverty rate declined from 15.1 percent in 1993 to 11.3 percent in 2000. A thriving economy makes our battle against poverty much, much easier.
But while sound public policy can help the economy grow, it can’t guarantee growth in the face of larger macroeconomic and demographic forces. And even as the economy grows, an increasing number of jobs pay low wages, offer few benefits, and have irregular hours. Entry-level jobs in the service sector or gig economy may not lift workers and their families out of poverty, and the unstable employment they offer may exacerbate the consequences of poverty for both adults and children.
We need to do a better job of making work work for low-income families. That means judiciously increasing the minimum wage and ensuring that workers have access to health insurance and that they have some minimum amount of paid time off to take care of their own or their family members’ health needs. Workers should also have some say in or advance notice of scheduling so they can arrange for child care and balance their time at second jobs or at educational and training activities.
Confronting poverty is daunting. But we can make real progress if we choose to.
With funding from the Bill & Melinda Gates Foundation, the Urban Institute is supporting the US Partnership on Mobility from Poverty, a collaborative aimed at discovering permanent ladders of mobility for people experiencing poverty.
The views expressed in this blog post are those of the author and should not be attributed to the organizations represented by the 25 members of the Partnership or to the Urban Institute, its trustees, or its funders.