Notes on inequality — poverty update

Poverty in the United States is at the high end of its recent cyclical range — in 2011, 46.2 million lived in poverty, 15.0 percent of the population.   In major cities, the poverty rate is higher, at 20%.  Poverty is deepest in the Southern states.

Even through the great recession, overall poverty appears to have remained within its recent historical range, achieving but not surpassing previous highs in 1983 and 1993.  What is surprising is the steady rise of poverty among working age people.   Since 1966, social security has lifted most elderly incomes above the poverty line — poverty among the elderly has declined steadily from almost 30% in the 60s to an historic low of 8.7% in 2011.     One child in five lived in poverty in 2011  and this number has moved sharply upwards since 2000, but the child poverty rate is still lower than previous peaks in the 60s, 80s and 90s.   While elderly poverty declined and child poverty fluctuated,  poverty among working age people trended upward, reaching 13.8% in 2010, the highest level since measurement began in 1966.

The traditional poverty rate numbers are hard to interpret for a number of reasons, among them the exclusion of non-cash benefits from the traditional measure of income and the failure to account for medical-out-of-pocket (“MOOP”) costs.   Economists have studied this problem and the Census Bureau has developed a more comprehensive “Supplemental Poverty Measure”.  The SPM offers a little comfort on child poverty, which is diminished a few points by food stamps and housing subsidies, but heightens concerns about elderly poverty, which is almost doubled by MOOP costs (see Table 5a at page 15; see also, the Urban Institute).   MOOP costs have been rising over time, so the apparent drop in elderly poverty as measured traditionally may be misleading. On the other hand, a full accounting for historically-rising MOOP costs would probably further elevate the striking upwards trend in working age poverty.

The combination of high poverty rates with financial pressure on state budgets has squeezed poverty programs.  In almost every state, the inflation-adjusted value of benefits for families in poverty has declined substantially.  See this national study of benefit levels by the Center for Budget and Policy Priorities for an overview.   It indicates that inflation-adjusted benefits in Massachusetts have declined 23% since 1996.  The Massachusetts affiliate of the CBPP offers a local picture of poverty, which is a little more encouraging the national picture.

Poverty would have been more widespread without government action during the recession, most notably the extension of unemployment benefits.  It remains to be seen whether the economy will come back fast enough to prevent a further expansion of poverty as the stimulus programs expire.

I found Paul Krugman’s course notes on poverty helpful in identifying some of these sources.


Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.