Why Aren't We Winning the War on Poverty?
The "war on poverty" turns 50 this week. Judging by the official rate, which has only edged down from 19 percent to 15 percent in that time, poverty is winning the war.
Why?
In Annie Lowrey's excellent overview, the experts blame low wages. The University of Kentucky's James P. Ziliak and the Obama administration's Jason Furman agree that "the biggest potential gains that could be made on poverty would be in raising market incomes."
There's no question that lower-income wages have fallen behind inflation and productivity growth. But poverty isn't entirely a crisis of McJobs and minimum-wage workers. In fact, the vast majority of people who earn the minimum wage or work cheap jobs on a full-time basis aren't in poverty. In households with at least one fully employed person, the poverty rate just 4.6 percent—two-thirds below the national average. The poverty rate among all full-time workers is even lower, at 2.9 percent—scarcely a fifth of the national figure.
Low wages should be a national concern, as globalization and technology have tag-teamed to devastate the buying power of families who struggle annually to pay the bills and raise their children. But the pesky poverty rate isn't just a measure of low wages. It's sticky high partly because the government's best efforts to get cash to working families have been offset by the fact that Americans are—for a variety of reasons—working less.*
The first reason we're working less is that we just suffered a huge recession, and Washington all but abandoned its efforts to heal the labor market. Even with jobless benefits, unemployment stresses poverty in a straightforward way. The poverty rate for full-time workers is very low: 3 percent. For those who don't work, it's very high: 33 percent...
... as you could guess, when more people move from working to not working—that is, when they move from the left column in this graph to the right—it naturally raises the poverty rate. Today, even with unemployment falling, the share of working-age people who are actually working (a.k.a.: the labor force participation rate) has retreated to its lowest point since the 1970s, partly because America is aging and partly because people have dropped out of the workforce.
The second reason we're working less is that family arrangements—in particular, the rise of single-parent households—make it all but impossible for many parents to work full-time.
The poverty rate among married couples is quite low: 6 percent. The poverty rate among single-dads/moms is quite high: 25/31 percent. Since the share of single-parent households doubled since 1950, we should expect it to stress the poverty rate, especially since low-income people closer to the poverty line are less likely to marry, in the first place.
Things get really interesting when you zoom into the marriage picture. Among what you might consider "modern families" (e.g. the 61 million people married and living together, both working), there is practically no poverty. None. Among marriages where one person works and the other doesn't (another 36 million Americans) the poverty rate is just under 10 percent.
But take away one parent, and the picture changes rather dramatically. There are 62 million single-parent families in America. Forty-one percent of them (26 million households) don't have any full-time workers. This is something beyond a wage crisis. It's a jobs crisis, a participation crisis—and it's a major driver of our elevated poverty rate. [In the graph below, FTRY=full-time, year-round worker; PT=part-time]
Poor, single-parent family households are, above all, starved for time. So they only work part-time. Of the 46 million families led by a woman with no husband present, only 52 percent percent have even one full-time, year-round worker. (For married couples of all ages, it's 76 percent. No surprise, then, that these families are five-times less likely to be in poverty than the national average.)
One thing that economists (and Lowrey) point out is that government policies have been more effective at helping families escape poverty than we think. Indeed, one study found the growth of government benefits since 1967 has cut poverty by 40 percent. But it's more precise to say that Washington has been effective at helping working, two-parent families escape from poverty. The problem is that there are fewer people working and fewer two-parent families. Both the great recession and the surge of single-family households have made it harder for people, today, to work full-time. And families cobbling together a life from part-time gigs, or unemployment, are much more likely to dip into poverty.
It's not realistically (or desirably) in Washington's power to force parents to get married and stay together. But raising employment during a slack economy is precisely within its power. It's just a power Congress chose to stop using.
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*Not all poverty programs are for workers. In fact, the government's most successful anti-poverty program is arguably Social Security, at least as measured by the amount it reduces poverty among seniors.
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