Poverty Rates Highest in Years

14.3% of Americans now live in poverty, defined as $21,954 annually for a family of four (or a comparable level of income for larger or smaller families), according to numbers released today by the Census Bureau. This marks the highest percentage living in poverty since 1994 and the largest absolute number of Americans in poverty (43.6 million) since 1959 (the headline writers at the USA Today seem to have some difficulty figuring out the difference in an article entitled: "USA's Poverty Rate Reaches Highest Level in 51 Years"). The rate of child poverty -- usually higher than adult poverty -- passed 20% for the first time since 1996, an increase that Brookings Institution and University of Michigan demographer William Frey notes was largely driven by a substantial increase in white child poverty: from 10.6% to 11.9%.

Stephen Gandel at Time magazine attempts to explain why poverty has gone up so quickly in this recession given that poverty rates have only increased marginally in previous recessions. He argues that in addition to the fact that this recession is steeper than most, it builds on long-term economic trends. The first is increasing inequality: the broadest measure of inequality in the US, the gini coefficient, has gone up 22% since the early 1980s. Thus more people are more vulnerable to cyclical downturns that might force them into poverty. The second is that more of the unemployed have been unemployed for longer; 42% of the unemployed for August (and 46% in July) had been unemployed for more than six months, a much higher percentage than normal. Thus the economic pain of unemployment is concentrated on fewer more vulnerable households. As the graph below shows, term of unemployment is largely cyclical but has shown a secular upward trend over the past thirty years. Thus Gandel argues that even after recovery begins, the United States may struggle with long term poverty.

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