Poverty in the United States

by Jalees Rehman

The United States Census Bureau recently released the results from its 2012 survey of income, poverty and health insurance in the United States. One of the most disheartening results is the high prevalence of poverty in the United States.

1 Rates and Number of Poverty

The term “poverty” is of course a relative term. The poverty thresholds in the United States depend on the size of a household and are adjusted each year. Currently, poverty for a single person household is defined as an average monthly income of $995 or less– taking into account all forms of earnings including unemployment compensation, workers' compensation, Social Security, veterans' payments, survivor benefits, pension or retirement income, interest, dividends, alimony, child support as well as other sources. A four-person family consisting of two adults and two children is considered to live in poverty if they have to live on an average monthly income of $1,940 or less. This is still a far cry from the global definition of poverty used by the World Bank, which describes fellow humans who have to survive on an income of less than $1.25 per day (or $38 per month). But the US, a country which considers itself as being among the wealthiest in the world, has to face the fact that 15 percent of its population – 46.5 million people – live in a state of poverty!

We worry about the faltering economies of Greece, Cyprus, Spain and Portugal, but the US Census reminds us that the number of poverty-stricken people in the US is roughly equal to that of the total population of Spain, and more than twice the size of the combined populations of Greece, Portugal and Cyprus.

2 Poverty Ethnicity

Poverty does not affect all American communities equally. More than a quarter of African-Americans and Hispanic-Americans live in poverty, and sadly, as shown in the graph above, these are also the communities which have experienced the steepest increases in poverty rates in the wake of the recent recession.

3 Poverty Age

The common cliché is that “children are our future”, but if this is true, then Americans need to be especially worried about the fact that children have the highest rate of poverty in the US (over 21%) and that there has been no significant improvement in recent years.

Women are also disproportionately affected by US poverty. At every age range assessed by the US Census Bureau, females had higher poverty rates than their male counterparts.

4 Poverty Age and Gender

This gender inequality even holds true for single parent families headed by women. While single parent families have higher poverty rates than the families of couples, single women households fare much worse than single men households.

5 Percentage Families Poverty Gender

Nearly a third of families headed by single women live in poverty, whereas the poverty rate for single men households is half of that.

The Census Bureau also provided a statistical analysis of the income over the recent decades, adjusting each year's income to the value of $ in 2012. This allows us to analyze how the purchasing power of people in the US has changed during the past 30-45 years.

6 Income by Ethnicity

It becomes apparent that the income disparity between Americans of various ethnic backgrounds has not changed much, and that the disparity has perhaps even worsened in some cases. Non-Hispanic Caucasians, for example, earned 34% more than their fellow Hispanic citizens in the early 1970s. However, the median household income of Hispanic-Americans barely increased (when standardized to US-$ values of 2012) from the 1970s to today, while the income of non-Hispanic Caucasians increased by more than 12%.

7 Income by Gender

The income disparity between men and women has also not budged much during the past decade. The ratio of women's to men's earnings improved substantially and steadily from the 1970s to the 1990s, but it has unfortunately reached a plateau during the past decade, hovering around 77%.

One graph in the Census Bureau report sums up the worsening state of income inequality in the US:

8 Rich are getting richer

During the past 45 years, the median income (i.e. income of people at the 50th percentile) increased from $42,900 to $51,000 – a rather modest change of about 19%. This means that the American economic middle class today can afford to purchase 19% more than their counterparts in the late 1960s. On the other hand, earners at the 90th percentile (i.e. the top 10%) showed an increase of their income from $90,400 to $146,000 – an increase of more than 60% during the same time period!

The trends of increasing income disparity with the American society, the income disparity between people of different ethnic or racial backgrounds, the high poverty rates among women and children are in plain sight in this report. We can only hope that political and business leaders in the US will recognize the dangers that arise from the growing inequality and take the necessary steps to reign in the disparity.