US National Poverty Level :
Reading Between the Lines

Published Oct 2011 - Updated Apr 2012

US national poverty level

The US poverty line is a more and more irrelevant measure of the national poverty level – just like any other poverty line these days – and is increasingly criticized even by official agencies. Poverty lines are flawed and prone to manipulation for all sorts of political reasons; they’re also inappropriate at the national level because they do not account of the radical differences between different regions of a country, especially between cities and rural areas.

What’s more and especially in the US, a measure of poverty needs to evaluate relative rather than absolute poverty. Poverty in America is radically different than poverty in the poorest African countries. It’s funny to observe that the national poverty level is not determined using the World Bank’s poverty line – promoted worldwide – because it is completely unrealistic to use it for a country like the US. If the US doesn’t trust “its” own international institutions, why should other countries?

As of 2007, the federal poverty income guideline set the poverty line at basically $20,000 a year for a family of four. Does it seem reasonable to you? If not, then you should probably include a few millions more to your count of poverty in the United States (currently at 44 million Americans). That’s the problem with assessing the national poverty level: $20,000 is probably enough in a rural environment, where the cost of living is usually much lower, but that doesn’t apply to life in the cities, not to mention the huge differences between cities themselves.

The national poverty level since the crisis

Time line of US poverty rates by age - source: US Census Bureau 1960 - 2010

Since 2005 – 3 years before the economic crisis – the average household’s income has been slowly dropping and people have had to borrow more and more money to pay for college and health care among other things. Now that credit is harder to come by and many have had to downgrade several aspects of their lifestyles.

Here are a few facts showing how the national poverty level has changed since the crisis:

  • Over 10 % of children in poverty have a mother suffering from severe depression (most of the time she’s also the only parent in the household);

  • Child poverty rates increased by almost 10% in the last 10 years. It’s estimated that every additional percentage point will cost the economy $28bn a year (in lack of productivity, innovation, and business attractiveness). So in the last ten years you’ve accumulated $280bn due to child poverty. Of course welfare is part of the cost but technically it also reduces child poverty, at least when done properly (see the “US welfare” page);

  • The labor market is worse than since the 1930s and the effects of long-term unemployment will be felt over the whole decade to come as more people fall into poverty, suffer from a massive deskilling effect and lack of confidence that makes them unfit to return to work;

  • In poverty-stricken schools only 15% of kids in elementary school are able to pass the test of proficiency in reading;

  • Despite rising poverty levels there were less families receiving TANF cash assistance in 2009 than in 1996.

How US poverty is measured

Unacceptable poverty level wages

One of the most absurd things about how the national poverty level is measured is that the poverty threshold is based on the amount of money that people needed for goods and purchases for minimum living conditions… back in the 1960s!

Obviously prices are adjusted but you would agree that life and society have changed quite a bit in the last 50 years no? As a result, assistance packages (e.g. food stamp + earned income tax credit) provide on average $5000 a year for a worker making $12,000 with 2 kids at home. As mentioned in other articles on US poverty, that helps a bit when you’re a working couple but if you’re a single parent, even with welfare you’d still be below the poverty line. Not to mention those who have but to work part time because there’s either no job or no one to take care of their kids.

So of course experts from, say, the National Academy of Sciences have urged the government to adapt the poverty threshold to the diversity of poverty in the US and take into account social welfare, expenses such as “child care and transportation; and adjust income levels according to an area’s cost of living”. But nothing’s changed so far. And no one wants to talk about the fact that maybe the official poverty threshold doesn’t represent reality that well (not since the 1970s at least), and can even less be considered a realistic measure of the national poverty level.

Small anecdote about the 2008 great recession: for years before the crisis hit, the government has observed that there was a huge gap between poor households’ declared income and their annual expenditure. So, many people said it probably meant that the working poor were getting more and more indebted and that this debt could prove dangerous one day. But since the debts were then hidden by the banks in safe investment packages, the net worth of households wasn’t showing their precarious situation. No one thought about investigating further why no debt was appearing and how the poor could get by so much money. And then came the day it all exploded.

What measures of poverty should include

A serious measure of the national poverty level should take into account the multiple effects of poverty on people and consequently on the economy. Poor health and crime are among the most important elements that drive people away from the job market.

Bad health is not only induced by high levels of stress (depressions but also heavy smoking, binge drinking and drug use) but also by the places people live in. For instance, the poor often suffer more from lung diseases due to pollution, which is more intense in former industrial areas or near highways, among other places. There are thousands of factors out there that influence the degree of poverty (like the cost of living) and its effect on the people, their skills and capabilities to adapt, learn, survive, etc.

Immigrants, ethnics and the national poverty level

What average numbers fail to show as well is how poverty is spread across the population. As far as immigrants are concerned, their situation is often changing and thus harder to monitor. But it seems they follow a certain pattern, despite huge differences from one city to another. In general the first place they arrive are those where the American poor live – often areas with other ethnic minorities too – so they face the same challenges of crime, gangs, shabby infrastructure and public services.

However when things change is that once there are enough immigrants in one place to create a sub-community, they’re able to organize themselves and set up parallel institutions that help them support one another in everyday challenges: finding a job, day care, pooling resources to help somebody or solve a situation, and also maintaining their culture. Over time many of them end up moving from high to low poverty areas. Even though in the case of Mexicans it seems to take more time than usual as they face more problems to integrate the society. No finger pointing, there isn't enough conclusive data yet.

So the picture is very mixed, with immigrant communities not only fighting poverty by themselves but also therefore revitalizing areas abandoned by the local authorities (that the native-born poor usually strive to escape as soon as they can). Of course they slow down the process of assimilation but seriously it’s not like all ethnic groups in the US always used to live that peacefully anyway. And the advances in technology, from cable TV to the Internet, has made it easier to stay in contact with your original culture all while learning about a new one. There shouldn’t be anything wrong with that. Quality public schools should be here to teach whatever they have to know. Then again if “quality” isn’t part of the deal then what makes you feel at home in this new segregated society? In any case it’s not like the whole first generations of immigrants have always fared that well, and if immigration does raise the level of poverty in many cities, in many others it also does exactly the opposite.

Black poverty in America

Poverty level & black poverty in the US

The black community (all right, “African American” if it makes you feel better) is by far the one that’s the worst hit by poverty. On average any black citizen is 4 times more likely to live in a poor neighborhood than a white one (and black families are 3 times more likely to be poor than white ones). The thing about these ghettos is that they suffer from a “poverty concentration effect”: poverty breeds poverty and also more crime, poor health, lack of education etc.

Nearly ¾ of black kids in the US are growing up in a single parent family and half of those ¾ below age of 10 live in a poor household. There’s a persistent gap economically but obviously socially as well, with blacks becoming some sort of 2d class citizens with less entitlements than the “normal” citizens (e.g. public services). There's no doubt that seeking more equality for the black community will solve a huge part of the skyrocketing national poverty level. And kids of course suffer from all the problems children in poverty usually have: abuse, neglect, poor access to education and aggressive environment that affect brain development, health issues (from lung diseases to aggressiveness, inability to socialize) etc… That’s pretty good citizens you’re fostering there. And it’s certainly not their fault.

gap in black poverty vs national poverty level

Case study: South workers & the national poverty level

There are many different groups of low income workers that are the reason behind the US’s high national poverty level. Let’s see how South workers are doing so that you get a better picture of what problems the working class in the US is typically going through. This group represents a specific problem because there are proportionally more low income workers in the South than elsewhere in the US (not to say that they’re only in the South of course). One main reason there’s so many of them there is that the region relies heavily on small-ish industries such as retail, agriculture and construction that don’t offer the same benefits and wage levels as other high-end manufacturing or services companies do.

So obviously, just like throughout the whole website, the most fundamental thing to do to increase wages is to provide quality training and education. It probably sounds like a broken record by now but since it seems that education is becoming less and less accessible in the US, you’ll just keep on seeing this point being repeated throughout these pages. But education is not everything; countries like Tunisia and Cuba have an educated workforce but no industries, no infrastructure. The United States need a coherent economic plan that spans welfare and market reforms to improve its economy and cut that national poverty level for good. Because as it is now, our overworked South workers lack from retirement plan to decent housing and health care (well, until Medicare) because their wages are too low for them to afford any of that.

The rise of women in the job market also means that the region needs to promote child care in order to support this trend and so that households can increase their total income. But for now things such as day care – not to mention affordable one – are far from common in the smaller businesses of the South. Better childcare would make the economy more dynamic, reduce employee turnover, other absences at work or prolonged maternity leaves.

More and more companies in Southeast Asia have started having integrated child care centers in their offices in order to attract more women to work as well as creating a deeper bond with the company. If they can do it over there, would it be so hard in the US? Anywhere in the world, (clever) companies have come to understand that this is actually more profitable for them and for their employees who are also less stressed. Likewise developing retirement plans or health insurance is very attractive for companies but just like child care those services are more widespread in richer sectors of the richer regions of the US. And in these times of crisis, anyone who can get a job just jumps on the occasion. Best time to make people agree to any conditions. Unless we all work hard to uphold our pride and dignity as well.

Companies should understand that more often than they think, what’s in the interests of their employees is in their own best interest as well. There is plenty enough research on that, balancing costs and revenues on this or that investment. But as usual such knowledge is too rarely shared and publicized. Until this day comes, the national poverty level in the US is likely to remain pretty high. Not to mention the dim perspectives for the economy in general. Fingers crossed.


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