Poverty in the US

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0. Introduction

National poverty data are calculated using the official Census definition of poverty, under this definition poverty is determined by comparing pretax cash income with the poverty threshold, which adjusts for family size and composition. The federal government classified a family of four as poor if its cash income was less than $18,100; for a family of three, the poverty threshold was $15,00; for a married couple, $11,40; and for an individual, $8,860. . The number of poor families in America increased by more than 6% in 001, with 6.8 million families - one out of every ten - living below the poverty line in 001. In 00, according to the official measure, 1.1 percent of the total U.S. population lived in poverty .

There are many problems connected to the measure of poverty that the US Census Bureau uses. The definition was first calculated in the mid 160s as three times the minimum basket of food a family would need. Since then it has only been adjusted to inflation, and it has not taken into account that the spending pattern of American families have changed quite a lot since the 160s.

This means that these poverty data can easily be compared and used for measuring the progress against poverty. At the same time, it is at times difficult to find out and to decide what kind of benefits are taken into account when the poverty line is drawn. Benefits such as Earned Income Tax Credit (EITC) are excluded and costs such as child care are excluded. Because of this, the poverty rate could be as high as 0% or as low as 10%, all depending on what is included.

1. Evolution of the poverty in the USA

As we can see in Table 1 of the appendix 1, the US poverty's evolution has been very positive during the last 45 years. In 15 more than % of the US population, almost 40 million people, lived below the poverty line; but nowadays, this has changed so much that "only" 1,1% of their population is considered poor. We can see that in percentage the rates have halved while in total number the difference is not so much, the main reason is that the population of this North American country has increased so much that the percentage has decreased.

But if we look more carefully to the evolution of this rate we will notice that the decrease hasn't been a constant. At first, and until mid-70's, there had been a quite continuous and high decrease of poverty in the US, reaching the lowest rates of the analyzed period. After that, the rate has been up and down until 1, when it starts a quite long decreasing period, getting an 11% poverty rate in 000.

The last interesting conclusion of this graph is probably that the recession affects importantly to the poverty, making the rates go up during this years.

After that if we analyze the Table of the appendix 1, which show the incomes evolution for the top and lowest 5% of the US population, we can conclude that the incomes of the US society have increased during the last 5 years, specially of those top 5%. But this hasn't happened equally with the lowest 5%, whose upper income has increased few. This rates shows us that even the US society has become in general more rich, the distribution hasn't been proportional in the population, but with the richness of the people.

. The type of people that is poor

In 160 America's poor were much older, more rural and more overwhelming black than they are today. About 0% of the elderly were poor in 160 and four out of ten black families were poor. The public pension program, set up by Roosevelt in 15, helped to decrease the number of poor elderly, and today only one in ten of elderly are poor. There has also been a process in civil rights, migration to the cities and large-scale inward investment, which has reduced the rural poverty dramatically. Today close to 50 % of the poor live in the cities instead of the rural areas.

As before minorities continue to experience higher poverty rates than whites (see appendix ). But the new is that today the poor are younger than they were a generation ago, and the largest and fast-growing segment of the poor is families headed by single mothers. They make up over 50% of the poor compared to 0% in 160. The poverty rate is almost six times higher for single mothers than for families with two parents. Over 0% of all American children live in a single-parent family, and they account for 67% of the poverty. 6% of the mothers do work, but often the wages are so low that they are not capable to lift their family out of poverty. The single mothers are often low-skilled, they earn low wages and they have to pay for all the cost of raising a child. The poverty rate for high-school dropouts is 1 times the rate for college graduates, so there is a lot of low-skilled labour in America. This doesn't help the situation in America today; with increased competition from abroad, weaker unions and a minimum wage that is lower now in real terms than it was two decades ago. The main problem isn't the low wages as you would think, but the fact that only 1% of the poor work full-time. Normal working works is 000 hours a year, and a poor person works less than 1000 hours a year. If everyone worked 000 hours, the poverty rate would be hafted. So why don't they just work more? To answer this question we have to look at the other groups of poor, which are people that have mental illness, disability, drug and alcohol abuse, this which makes them either incapable of working or not wanted. The growing number of ex-convicts also has slim chances of finding a job.

. Poverty in the European Union

In many aspects, the EU is trying to get the same level of the US, with different instruments such as the common money (€) in some of the countries, opening of trade barriers, etc. But, what happens if we refer to the poverty in the EU? There are lots of analyses both for USA and EU's poverty situation, but it is really difficult to make a proper comparison between them, because there are lots of data for each region (USA and EU).

So, first of all, and after having talked in the previous paragraphs about the poverty in the US, we are going to explain what really happens in the European Union. We will choose four different indicators which indicate the (human) poverty in the EU and we will make a comparison between different European countries

Income the % living below 50% of national median income

Length of life % of people not expected to live to age 60

Education the % of 16 to 65 year olds classified as illiterate

Social inclusion long term unemployed in the labour force

The Scandinavian countries and the Netherlands top the table, with Germany, France and Spain falling in the middle. No functional literacy data are available for France and Spain, however, and this potentially affects the rankings.

Just mention The UK's performances they are perhaps the most polarised, comparing favourably on life expectancy and unemployment, but badly on poverty and illiteracy. Finland, Denmark and Germany all do relatively well on illiteracy, poverty and unemployment, but have shorter life expectancy than neighbouring member states.

After having talked about some indicators, we are going to show another table which apart from comparing poverty rates, compares as well as comparing some other "curious" rates .

Self-reported bad health is more common among the poor than the non-poor in every country but the table shows that only in Portugal does the figure for the poor get quite high. The last indicator, social contact, seems a convincing measure of one aspect of social exclusion. Although there are reasons why it could relate to income poverty, the Eurostat report does not show large differences between the poor and non-poor for this indicator within each country.

As far as the differences across countries are concerned, Table shows that social networks appear in general to be stronger in countries with higher poverty rates. Portugal is the oddball here one in eight poor Portuguese claims to go for one month without meeting friends or relatives, separating them from the norm for Southern Europe.

So, in conclusion, if we would have to compare both European and US's poverty situation, we could confirm that poverty situation in USA (1,1) is apparently better than in the UE but not as good as we could have thought, because poverty does exists in every wealthy country.

The potential impact of enlargement

The question of whether poverty in Europe should be measured using a single EU standard is particularly important when the prospective enlargement of the Union to include new members from Central and Eastern Europe (CEE) is considered. Disparities in national income per head, among current member states, are small compared to those between members and applicants. GDP per capita in the ten CEE countries being considered for membership ranged, in 17, from per cent (Bulgaria) to 68 per cent (Slovenia) of the EU average. Slovenia falls just behind Greece, the back-marker among the current members.

By extension, enlargement will mean dramatic shifts in where poverty is found if a single EU poverty line is used, common to all members old and new. The majority of people in most of the applicant countries will classify as poor.

If a single EU-wide standard is used as the measure, enlargement would also result in a drop in measured poverty in existing EU member states. Average incomes in the EU as a whole would fall with the accession of the CEE countries

APPENDIX 1 Evolution of the poverty in the US

Table 1

Table

APPENDIX The type of people that is poor

(http//www.usccb.org/cchd/povertyusa/)

• 4.5% of American Indians and Alaska natives (more than three times the rate of "whites")

• .7% of all African Americans

• 1.4% of all Hispanics

• 10.% of all Asian and pacific islands

• 7.8% of all Causasions

APPENDIX Poverty in the European Union

Table 1

Human Poverty Index- (%) Poverty

(%) Short life

(%) Illiteracy

(%) Long-term

Unemployment (%)

Sweden 7.6 8.7 8.5 7.5 .7

Netherlands 8. 6. . 10.5 1.

Finland 8.6 . 11.1 10.4 .1

Denmark . 6. 1.7 .6 1.5

Germany 10.4 5. 10.5 14.4 4.

Luxembourg 10.5 4.1 10.4 n.a. 0.

France 11.1 8.4 11.1 n.a. 5.

Spain 11.6 .1 . n.a. 10.

Italy 11. 1.8 8.. n.a. 8.1

Belgium 1.4 5.5 . 18.4 5.5

UK 14.6 10.6 .6 1.8 .1

Ireland 15.0 .4 .8 .6 4.4

Table

Percent of poor who

Income

Poverty

rate cant afford a weeks holiday away have bad or very bad health who meet friends or relatives less than once a month

Denmark 1 4 10 7

Netherlands 1 8 6 4

Luxembourg 1 44 16 14

Austria 1 4 14 1

Germany 16 10 8

France 16 67 11 1

Belgium 17 47 10

Ireland 18 68 4 1

Spain 18 80 14

UK 1 64 1 6

Italy 1 70 15 n.a.

Greece 1 85 15

Portugal 86 40 1

EU 17 5 15 8

USA 1,1 - - -

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