5 Reasons Why the War on Poverty Feels Like a Losing Battle

Source: Thinkstock

Source: Thinkstock

Poverty does not appear to be waving the white flag anytime soon. While the official poverty rate in the United States recently declined for the first time in seven years, the war on destitution is far from over, and feels like a losing battle for millions of Americans.

The progress being made in the war on poverty leaves much to be desired. According to the U.S. Census Bureau., the nation’s poverty rate declined to 14.5 percent in 2013 compared to 15 percent in 2012. In total, there were an estimated 45.3 million people living at or below the poverty level last year. However, the Census Bureau notes that for the third consecutive year, the poverty rate did not represent a statistically significant change from the previous year’s estimate.

Poverty declined in all four major regions of the country. Yet the year-over-year change was less than one percentage point in each region. The Northeast poverty rate fell by 0.90 percentage points, while the Midwest and West posted declines of 0.50 percent and 0.40 percent, respectively. The South experienced the smallest decline at 0.30 percentage points. As defined by the Office of Management and Budget and updated for inflation using the consumer price index, the weighted average poverty threshold for a family of four in 2013 was $23,834.

Let’s take a look at five reasons why the war on poverty feels like a losing battle.


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1. Real median household income

While the recession technically ended more than five years ago, household income levels for all races are still playing catch up. The Census Bureau reports that the inflation-adjusted median household income in the U.S. was $51,939 in 2013, not significantly different from $51,759 in 2012. This is the second consecutive year that the annual change was not statistically significant, following two consecutive annual declines.

In 2013, real median household income was 8 percent lower than in 2007, the year before the Great Recession. The Census Bureau notes that, “Annual increases in median household income were last experienced in 2007 for family households and in 2009 for non-family households.”


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2. Wealth accumulation, or lack thereof

A brutal combination of falling stock and home prices has decimated wealth gains over the past decade. Net worth at the 50th percentile (median) totaled $56,335 in 2013, down 36 percent from $87,992 in 2003, according to a recent report from the Russell Sage Foundation. In fact, the 90th and 95th percentiles were the only groups to report wealth gains between 2003 and 2013. Although, as the chart above shows, wealth inequality was increasing prior to the Great Recession.

“The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near-term,” the report states. “It is possible that the very slow recovery from the Great Recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace.”

3. Employment-to-population ratio

The labor market has been under a barrage of negative news for at least the past five years. The headline unemployment rate reached as high as 10 percent in 2009, and has been painfully slow to return to a more normal rate of around 5 to 6 percent. Unemployment recently matched its lowest level since 2008 at 6.1 percent, but the labor market remains sluggish.

As the chart above shows, the percentage of working-age Americans with a job is only 59 percent, relatively unchanged over the past five years and near levels not seen since 1984. This ratio will likely have difficulty improving significantly in the short-term. The adult population increases by about 200,000 people each month, while the economy has only averaged a monthly gain of about 219,000 jobs in 2014.

4. Food stamps

Despite progress being made in certain areas of the economy, an alarming amount of money is still being spent on the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. In 2013, the U.S. Government and taxpayers provided $74.7 billion in assistance via food stamps, almost unchanged from $74.9 billion in the prior year. In comparison, SNAP payments only totaled $30.9 billion in 2007, and $16 billion in 2001.

On the positive, the number of individuals on food stamps peaked nearly two years at 47.8 million. According to the latest data from the Department of Agriculture, there are about 46.5 million individuals currently receiving food stamps.

5. Wages

The Commerce Department reported last month that America’s gross domestic product, the broadest measure of goods and services produced in the economy, expanded at a seasonally adjusted annual rate of 4.2 percent in the second-quarter. That was more than expected and the best growth rate since the 4.5 percent seen in the third-quarter of  2013. However, the growth is not trickling down to paychecks.

Wages and salaries as a percentage of GDP have been declining for over four decades. As the chart above shows, wages as a share of GDP have failed to gain momentum to the upside, making lower highs in 2000, 2008, and 2012.

Follow Eric on Twitter @Mr_Eric_WSCS

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