Why are so many women, children, and racial and cultural minorities still poor?
William E. Spriggs | April 22, 2007
"Water, water everywhere, nor any drop to drink."
-- Samuel Taylor Coleridge, The Rime of the Ancient Mariner
in 1960 american workers produced a gross domestic Product of $13,847 (in year 2000 dollars) for every man, woman, and child in the country. By 1969, GDP per capita rose to $18,578. In that period, the poverty rate for American children dropped almost by half, from 26.5 percent to 13.8 percent. The most recent data, for 2005, show child poverty has risen again, to 17.1 percent, while the GDP per capita stood at $37,246, roughly double the value in 1969. How did the nation become twice as wealthy but its children become poorer?
In 2000, the number of poor Americans reached an 11-year low at 31.6 million, and the poverty rate stood at a 26-year low at 11.3 percent. While the nation again became richer after the post-2001 recovery, more than 5 million Americans fell into poverty, and the latest figures put the number of poor Americans at 36.9 million people.
To put a face on American poverty, it is important to first put that poverty in context -- to understand not just who is poor today but to examine how poverty changes over time. With that perspective, we can appreciate that in a nation as wealthy as the United States, poverty is not intractable.
"The federal government declared war on poverty, and poverty won."
-- Ronald Reagan
that line from president reagan's 1988 state of the Union address, was used to ridicule Lyndon Johnson's efforts to fight poverty. President Johnson launched that fight in March 1964, submitting the Economic Opportunity Act to Congress and saying these words: "Because it is right, because it is wise, and because, for the first time in our history, it is possible to conquer poverty &"
Johnson believed that a wealthy nation produces enough for each individual citizen to live above poverty. This was a question of political and moral will, not an economic constraint. So, he differentiated between the day's global struggle to end poverty in countries like Mali and Haiti, where there was a real economic constraint to be overcome, and the situation in America, a land that was not poor in resources but that lacked moral conviction. The Johnson legacy chart on the following page shows the path of poverty for black children, a primary beneficiary of LBJ's programs. In 1965, almost 66 percent of black children lived below the poverty line. In four short years, that share was cut to 39.6 percent, a tremendous accomplishment. By contrast, the Reagan legacy chart shows the path of poverty for black children from 1981 to 1989, the era of Reagan and George Bush Senior. In 1980, 42.1 percent of black children lived below the poverty line; and by 1988 that share had risen to 42.8 percent. Yes, poverty won.
How Policy Influences Poverty
The face of poverty in America is the result of policy choices, of political will, and of moral conviction -- or its absence. The incidence of poverty is heavily concentrated in the United States across the South and the Southwest. The legacy of slavery is part of that story. Forty percent of America's poor live in the South. Four of today's five poorest states were ones that existed in the old Confederacy. Of the onetime Confederate states, only two -- Florida and Virginia -- do not rank in the current 20 states with highest poverty levels.
Why do some people lack the income to rise above poverty? For many, the reason is that they do not work; for others, the reason is that they work but do not earn enough money. Nonworkers include the elderly, the disabled, and children, as well as the unemployed. And public policy treats different groups differently.
The Social Security old-age program insures virtually all retired workers against the risk of outliving their savings. The old-age benefit formula is tied to the rising productivity of current workers, indexing the benefits to the average national wage. The shared risk, and the insured shared prosperity, explain why the poverty rate for those over 65 has declined from more than 28 percent in 1966 (nearly double the national poverty rate of 14.7 percent) to 10.1 percent today (below the national rate of 12.6 percent). In 1974, the poverty rate for the Census category of white non-Hispanic seniors, at 12.5 percent, was double the poverty rate for working-age (1864) white non-Hispanics, at 5.9 percent. Today, the poverty rate for the two age groups is virtually equal, at 7.9 percent for seniors and 7.8 percent for working-age white non-Hispanics.
Another group of people who do not work, by law, are children. But their income is derived mostly from their parents. The rise in child poverty, therefore, reflects the rise in the inequality of their parents' earnings. So, while 9.8 percent of the poor are seniors, 33.5 percent of the poor are children. Children make up a much higher share of the poor among blacks (41.9 percent of poor blacks) and Hispanics (42.6 percent of poor Hispanics) than among whites (24.5 percent of poor whites). And while the poverty rate of seniors has shown a steady trend downward as national income has risen, child poverty rates are as intractable as the growing inequality in working families' earnings.
The wide divergence in how public policy treats different groups was not Congress' original intent. The Social Security Act of 1935 sought to protect the incomes of those who did not work because of age or a poor economy by establishing a federal framework for unemployment insurance, old-age benefits, and assistance to women with dependent children. In 1939, the old-age benefit structure was fully federalized to produce consistent benefits. But, Aid to Families with Dependent Children (AFDC) and the unemployment-insurance system were put in state hands. And in the 1990s, AFDC was transformed from its Social Security Act roots into a state block grant. The mostly state-run unemployment-insurance system, meanwhile, is strained by the transformation of the economy from one in which workers could expect to be laid off in recessions and then rehired into one based on the structural creation and destruction of whole industries and occupations.
Children in our antipoverty system are oddly split. Today, more children receive a check from the Old Age, Survivors and Disability Insurance (OASDI) Program than are helped by the new Temporary Assistance for Needy Families (TANF) program that replaced AFDC. Some children, therefore, enjoy their parents' protection against the loss of income from disability, untimely death, or old age, and receive benefits that are based on the same formula used for the old-age benefit. Low-income black children are especially helped by the disability benefits their parents receive, or by the survivor benefits that the child receives -- because the benefit formula is national and intended to alleviate poverty.
By contrast, children receiving TANF aid are subject to the whim of their state. In 2004, a widowed mother and two children, on average, received a monthly OASDI survivors' benefit of $1,952. Those two children would live above the federal poverty line. The TANF benefit for the same family, however, could range from $170 a month in Mississippi to $215 in Alabama to $240 in Louisiana to $625 in New Hampshire, leaving children in all of those states far below the poverty line. Adjusting for inflation, the survivors' benefit has been increasing since 1970, while the average benefit under AFDC (and now TANF) has been falling. While the OASDI benefit level is set by a federal formula, policy-makers in states with higher shares of black TANF recipients choose lower benefit levels.
Like TANF recipients, unemployed workers are also at the mercy of their state; the average weekly benefit can range from $179 a week in Mississippi to $320 in New Jersey. In the 1950s, close to half of the nation's unemployed workers received benefits; today, only about 35 percent do. This varies widely by state, from 21 percent in Wyoming to 24 percent in Texas to 58 percent in Pennsylvania to 71 percent in New Jersey. And the percentage of earned income replaced by unemployment benefits has steadily fallen as well.
Diligent and Still Poor
An ongoing topic of debate is the relationship of child poverty and parents' income to the increase in single-parent households. Other things being equal, two parents in a household usually earn more than one, but they are not assured of earning their family's way out of poverty. Hispanic and black children have roughly similar levels of poverty -- 33.2 percent for black children, and 27.7 percent for Hispanic children. Yet 41 percent of black families with children are married, whereas 68 percent of Hispanic families with children are married. In 1974, when the poverty rate among black children was at 39.6 percent, 56 percent of black families with children were married. Two-income families today are less likely to be poor, but much is at work besides family structure.
To be poor is to lack income, so the core issue is earnings. In 1962, on the eve of the March on Washington for Jobs and Justice in 1963, the median income of black men was below the poverty threshold for a family of three, but by 1967 it was above that level (not until 1995 did it get above the poverty level for a family of four). Because of the rise in the earnings of black women, poverty among black children fell in the 1990s, just as the rise in the earnings of black men helped lower black children's poverty level in the 1960s. By 1997, the median income of black women rose above the poverty level for a family of three.
Among the poor, 11.4 percent work full time, year-round. These 2.9 million Americans are directly hurt by minimum-wage laws that have lagged behind costs of living. This problem is especially acute for Asians and Hispanics, where 18 percent of the working poor worked full time, year-round.
Recent immigrants who are not citizens have a poverty rate of 20.4 percent. Like all groups, noncitizen immigrants had falling poverty rates in the 1990s as the labor market expanded: Their poverty rate fell from 28.7 percent in 1993 to a low of 19.2 percent in 2000. Then, following the national trend, their poverty rate started to climb. During the Reagan administration, the United States suffered its highest national unemployment rates since the Great Depression. In the black community, the effects were devastating: The unemployment rate for adult (over age 20) black men peaked at more than 20 percent in December 1982; during the entire Reagan presidency, the unemployment rate for adult black men remained in double digits. The highest recorded unemployment rate for adult white men was 9 percent in November and December 1982. But for black men, the unemployment rate remained above that mark for 182 straight months (15 years), from October 1979 to November 1994. Because children do not work and need working adults to support them, it is hardly surprising that during that period, black child poverty rates remained intractable above 40 percent.
Poverty for women is disproportionately higher than for men, 14.1 percent compared to 11.1 (in 2005), primarily because of higher rates of poverty among female-headed households, gaps in poverty for the elderly (7.3 percent for men over age 65 compared to 12.3 percent for women in 2005), and for single women (24.1 percent) compared to single men (17.9 percent) living alone. The gap reflects persistent gaps in earnings between men and women, though that gap is falling. White non-Hispanic men, age 25 and over, with a high-school diploma have a median income of $35,679, while women, age 25 and over, need a college degree to have a similar median income ($36,532 in 2005). And, while the median income of white males has been above the poverty line for a family of five since 1959, the median income for women only broke above the poverty line for a family of three in 1990. The persistent gap is best reflected in differences in poverty among the elderly, where the life-long earnings of women mean they have lower assets in Social Security benefits than do men, despite the progressive structure of the benefit formula. The gap among the elderly also reflects issues of access to jobs with pensions for women.
Women who are the single head of household face the extra burden of earning enough to raise dependent children out of poverty. This risk a woman faces of helping non-working dependents is not shared by society, as would be a woman's efforts to care for her elderly parents. The result is that female-headed households, harmed by the significant earnings gap between men and women, have a poverty rate of 31.1 percent compared to male-headed households (with no wife present) of 13.4 percent, while the overall poverty rate for families is 10.8 percent.
Full Employment and its Limits
It took the presidency of Bill Clinton, with its expansive labor market and increases in the minimum wage and the Earned Income Tax Credit, to dramatically improve the incomes of poor and minority families. As job creation reached a record pace, the unemployment rate for black men plummeted, reaching a recorded low of 6 percent in March 1999. With work comes income, and poverty for black families fell. This history suggests something about the proper way to view responsibility and poor people as agents in their own fate: Usually they are not victims of themselves, but of bad economic policies and barriers to opportunity.
Under Reagan, who ridiculed antipoverty efforts, the number of black children living below the poverty line increased by 200,000, from 3.9 million in 1980 to 4.1 million in 1988. During the Clinton years, the black child poverty rate fell steadily, from 46.3 percent to a record-low 30 percent, lifting about 1.6 million black children out of poverty. For all children, the poverty rate fell annually during the Clinton's presidency, reaching a 30-year low of 15.6 percent when he left office. But those reduced poverty rates may be the best we can achieve simply by getting jobs for parents. While lower than during the Reagan years, they do not equal the lows America has achieved for its senior citizens, or the general population. And those gains reversed course when George W. Bush became president.
Because of record job creation in the 1990s, the number of people who worked and were poor declined from 10.1 million in 1993 to 8.5 million by 2000; greatly increased working hours and higher wages meant higher incomes. But during the current expansion, a record 48 months was required to get payroll employment back to the level preceding the employment downturn that began in late 2000, a lag not matched since Herbert Hoover. So while full employment is necessary to alleviate poverty, it is far from sufficient.
In short, America knows how to address poverty. Its great success in lowering the poverty level of those over 65 has changed the face of poverty. But for those subject to the whims of state differences and the correlation of race with state policies to address poverty, there have been great intractable issues that have left the face of poverty disproportionately young, black, Hispanic, and female. Growing inequality in the labor market, moreover, has increased the share of the poor who are of working age, and stagnant federal minimum-wage laws have increased the oxymoron of full-time, year-round working poor people.
In a nation with a per capita GDP above the poverty line for a family of four, it is appalling that almost 3 million people work full time, year-round and are poor, and that more than 12 million American children are living in poverty. Lyndon Johnson proposed to fight poverty "because it is right, because it is wise." In a land of vast wealth, twice as rich as America in the 1960s, can today's leaders to rise to the occasion?
William E. Spriggs chairs the department of economics at Howard University. He is a senior fellow at the Economic Policy Institute and former executive director of the National Urban League Institute for Opportunity and Equality.