Changed Life of the Poor: Better Off, but Far Behind

Tammie Hagen-Noey, in her bedroom at a group home in Richmond, Va., earns $7.25 an hour at a local McDonald’s. Credit Drew Angerer for The New York Times        

N.Y. TIMES

Starkly different views on poverty and inequality rose to the fore again on Wednesday as Democrats in the Senate were unable to muster the supermajority of 60 votes needed to overcome a Republican filibuster of a proposal to raise the incomes of the working poor by lifting the national minimum wage to $10.10 an hour.

 

 Indeed, despite improved living standards, the poor have fallen further behind the middle class and the affluent in both income and consumption. The same global economic trends that have helped drive down the price of most goods also have limited the well-paying industrial jobs once available to a huge swath of working Americans. And the cost of many services crucial to escaping poverty — including education, health care and child care — has soared.

 

“Without a doubt, the poor are far better off than they were at the dawn of the War on Poverty,” said James Ziliak, director of the University of Kentucky’s Center for Poverty Research. “But they have also drifted further away.”

Democrats have generally argued that addressing this disjunction requires providing more support for the poor, raising the minimum wage, extending unemployment insurance benefits and making health care more affordable by expanding the reach of Medicaid and subsidizing private insurance for those who lack employer coverage.

 

Republicans, by contrast, have proposed reducing government regulations and overhauling existing programs to encourage more work, arguing that would allow Washington to decrease spending on the poor.

“The question isn’t whether the federal government should help; the question is how,” Mr. Ryan said at the hearing on Wednesday. “How do we make sure that every single taxpayer dollar we spend to reduce poverty is actually working?”

For many working poor families, the most apt description of their finances and lifestyle might be fragile. Even with a steady paycheck, keeping the bills paid becomes a high-wire act and saving an impossibility.

 

Ms. Hagen-Noey is trying to rebuild her finances, which have been decimated by divorce, government liens and addiction. At the top of her list of priorities is finding better-paid work. She produced a paycheck that showed her earnings so far this year: $2,938.51.

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Two broad trends account for much of the change in poor families’ consumption over the past generation: federal programs and falling prices.

Since the 1960s, both Republican and Democratic administrations have expanded programs like food stamps and the earned-income tax credit. In 1967, government programs reduced one major poverty rate by about 1 percentage point. In 2012, they reduced the rate by nearly 13 percentage points.

 

As a result, the differences in what poor and middle-class families consume on a day-to-day basis are much smaller than the differences in what they earn.

“There’s just a whole lot more assistance per low-income person than there ever has been,” said Robert Rector, a senior research fellow at the conservative Heritage Foundation. “That is propping up the living standards to a considerable degree,” he said, citing a number of statistics on housing, nutrition and other categories.

Decades of economic growth, however, have been less successful in raising the incomes from work of many poor families, prompting a strong conservative critique this year that hundreds of billions of dollars in antipoverty programs have failed to make the poor less dependent on government.

 

“That’s the crux of the problem,” Mr. Rector added. “What sort of progress is that?”

But another form of progress has led to what some economists call the “Walmart effect”: falling prices for a huge array of manufactured goods.

Since the 1980s, for instance, the real price of a midrange color television has plummeted about tenfold, and televisions today are crisper, bigger, lighter and often Internet-connected. Similarly, the effective price of clothing, bicycles, small appliances, processed foods — virtually anything produced in a factory — has followed a downward trajectory. The result is that Americans can buy much more stuff at bargain prices.

 

Many crucial services, though, remain out of reach for poor families. The costs of a college education and health care have soared. Ms. Hagen-Noey, for instance, does not treat her hepatitis and other medical problems, as she does not qualify for Medicaid and cannot pay for her own insurance or care.

 

Child care also remains only a small sliver of the consumption of poor families because it is simply too expensive. In many cases, it depresses the earnings of women who have no choice but to give up hours working to stay at home.

“The average annual cost for infant care in the U.S. is $6,000 or $7,000 a year,” said Professor Ziliak of the University of Kentucky. “When you look at the average income of many single mothers, that is going to end up being a quarter of it. That’s huge. That is just out of reach for many folks.”

 

 Child care was costing probably $350 a week,” said Ms. Beroid, who makes $10.70 an hour. “I would love to be in full-time work, if I could make enough to cover child care payments.”

And many poor families barely make it from paycheck to paycheck. For evidence, economists point to the fact that children living in families with food stamps eat more calories at the beginning of the month than the end of it.

 

Economists pointed out that many low-income families struggled to use even the assets they had: keeping gas in the car, paying for cable and keeping the electricity on. Many families rely on expensive credit. And even if those families sold their assets, often it would only provide them with a small buffer, too. 

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In the end, many mainstream economists argue, the lives of the poor must be looked at in light of the nation’s overall wealth and economic advancement.

 

 

II: PROGRESS IN THE WAR ON POVERTY

NICHOLAS KRISTOF, N.Y. TIMES

America’s war on poverty turned 50 years old this week, and plenty of people have concluded that, as President Reagan put it: “We fought a war on poverty, and poverty won.”

That perception shapes the right’s suspicion of food stamps, minimum-wage raises and extensions of unemployment benefits. A reader named Frank posted on my Facebook page: “All the government aid/handouts in the world will not make people better parents. This is why the ideas from the left, although always made with the best of intentions, never work. ... All of this aid is wasted.”

Yet a careful look at the evidence suggests that such a view is flat wrong. In fact, the first lesson of the war on poverty is that we can make progress against poverty, but that it’s an uphill slog.

The most accurate measures, using Census Bureau figures that take account of benefits, suggest that poverty rates have fallen by more than one-third since 1968. There’s a consensus that without the war on poverty, other forces (such as mass incarceration, a rise in single mothers and the decline in trade unions) would have lifted poverty much higher.

A Columbia University study suggests that without government benefits, the poverty rate would have soared to 31 percent in 2012. Indeed, an average of 27 million people were lifted annually out of poverty by social programs between 1968 and 2012, according to the White House Council of Economic Advisers.

 

The best example of how government antipoverty programs can succeed involves the elderly. In 1960, about 35 percent of older Americans were poor. In 2012, 9 percent were. That’s because senior citizens vote, so politicians listened to them and buttressed programs like Social Security and Medicare.

 

In contrast, children are voiceless, so they are the age group most likely to be poor today. That’s a practical and moral failure.

I don’t want anybody to be poor, but, if I have to choose, I’d say it’s more of a priority to help kids than seniors. In part, that’s because when kids are deprived of opportunities, the consequences can include a lifetime of educational failure, crime and underemployment.

Research from neuroscience underscores why early interventions are so important. Early brain development turns out to have lifelong consequences, and research from human and animal studies alike suggests that a high-stress early childhood in poverty changes the physical brain in subtle ways that impair educational performance and life outcomes.

 

 

A careful review of antipoverty programs in a new book, “Legacies of the War on Poverty,” shows that many of them have a clear impact — albeit sometimes not as great an impact as advocates hoped.

For starters, one of the most basic social programs that works — indeed pays for itself many times over — is family-planning assistance for at-risk teenage girls. This has actually been one of America’s most successful social programs in recent years. The teenage birthrate has fallen by half over roughly the last 20 years.

Another hugely successful array of programs involved parent coaching to get pregnant women to drink and smoke less and to encourage at-risk moms to talk to their children more. Programs like Nurse-Family Partnership, Healthy Families America, Child First, Save the Children and Thirty Million Words Project all have had great success in helping parents do a better job with their kids.

 

Early education likewise has strong evidence of impact. Critics note that in Head Start, for example, gains in I.Q. seem to fade within a few years. That’s true and disappointing. But in the last five years, robust studies from scholars like David Deming have shown that graduates of Head Start also have improved life outcomes: higher high school graduation and college attendance rates, and less likely to be out of school and out of a job.

 

Another area of success: Programs that encourage jobs, especially for the most at-risk groups. The earned-income tax credit is a huge benefit to the working poor and to society.

Likewise, a program called Career Academies has had excellent results training at-risk teenagers in specialized careers and giving them practical work experience. Even eight years later, those young people randomly assigned to Career Academies are earning significantly more than those in control groups.

As that example suggests, we increasingly have first-rate research — randomized controlled trials, testing antipoverty programs as rigorously as if they were pharmaceuticals — that give us solid evidence of what works or doesn’t.

So let’s drop the bombast and look at the evidence.

Critics are right that antipoverty work is difficult and that dependency can be a problem. But the premise of so much of today’s opposition to food stamps and other benefits — that government assistance inevitably fails — is just wrong. And child poverty is as unconscionable in a rich nation today as it was half a century ago.

 

I: THE WAR ON POVERTY 50 YEARS LATER

N.Y. TIMES

To many Americans, the war on poverty declared 50 years ago by President Lyndon B. Johnson has largely failed. The poverty rate has fallen only to 15 percent from 19 percent in two generations, and 46 million Americans live in households where the government considers their income scarcely adequate.

But looked at a different way, the federal government has succeeded in preventing the poverty rate from climbing far higher. There is broad consensus that the social welfare programs created since the New Deal have hugely improved living conditions for low-income Americans. At the same time, in recent decades, most of the gains from the private economy have gone to those at the top of the income ladder.

Half a century after Mr. Johnson’s now-famed State of the Union address, the debate over the government’s role in creating opportunity and ending deprivation has flared anew, with inequality as acute as it was in the Roaring Twenties and the ranks of the poor and near-poor at record highs. Programs like unemployment insurance and food stamps are keeping millions of families afloat. Republicans have sought to cut both programs, an illustration of the intense disagreement between the two political parties over the best solutions for bringing down the poverty rate as quickly as possible, or eliminating it.

For poverty to decrease, “the low-wage labor market needs to improve,” James P. Ziliak of the University of Kentucky said. “We need strong economic growth with gains widely distributed. If the private labor market won’t step up to the plate, we’re going to have to strengthen programs to help these people get by and survive.”

 

N.Y. TIMES: TABLE: EFFECT OF GOVT PROGRAMS ON POVERTY  

 

In Washington, President Obama has called inequality the “defining challenge of our time.” To that end, he intends to urge states to expand their Medicaid programs to poor, childless adults, and is pushing for an increase in the minimum wage and funding for early-childhood programs.

But conservatives, like Representative Paul D. Ryan of Wisconsin, have looked at the poverty statistics more skeptically, contending that the government has misspent its safety-net money and needs to focus less on support and more on economic and job opportunities.

“The nation should face up to two facts: poverty rates are too high, especially among children, and spending money on government means-tested programs is at best a partial solution,” Ron Haskins of the Brookings Institution wrote in an assessment of the shortfalls on the war on poverty:

 

What factors explain the difficulty we have faced in reducing the poverty rate? Some analysts think we could reduce poverty by spending more money on the poor. Of course, we could simply give money to the poor until they reach the poverty line, a strategy Johnson employed with the elderly. By increasing Social Security benefits, Johnson reduced elderly poverty to 25 percent in 1968 from 35.2 percent in 1959, a reduction of nearly 30 percent. Poverty among the elderly has continued to fall. In 2012, a year in which the overall poverty rate was 15 percent and the child poverty rate was nearly 22 percent, the poverty rate among the elderly was 9.1 percent. So giving money to the poor can reduce poverty rates.

 

We already spend more than enough money on means-tested programs for poor and low-income people to bring them all out of poverty. There were about 46.5 million people in poverty in 2012, a year in which spending on means-tested programs was around $1 trillion. If that money were divided up among the poor, we could spend about $22,000 per person. For a single mother and two children, that would be over $65,000. The poverty level in 2013 for a mother and two children is less than $20,000. So this strategy would work, but giving so much money to young, able-bodied adults would not be tolerated by the public. Besides, if government gave this much cash to non-workers, many low-wage workers would quit work so they too could collect welfare.

 

[BUT businesses would raise wages and keep their salaries above the government payments so as to maintain the attractiveness of their jobs. Yes, we would all pay more for our goods and services, but that would be offset by the increased growth of the economy created by eliminating poverty. --Esco]

 

Still, a broad range of researchers interviewed by The New York Times stressed the improvement in the lives of low-income Americans since Mr. Johnson started his crusade. Infant mortality has dropped, college completion rates have soared, millions of women have entered the work force, malnutrition has all but disappeared. After all, when Mr. Johnson announced his campaign, parts of Appalachia lacked electricity and indoor plumbing.

Many economists argue that the official poverty rate grossly understates the impact of government programs. The headline poverty rate counts only cash income, not the value of in-kind benefits like food stamps. A fuller accounting suggests the poverty rate has dropped to 16 percent today, from 26 percent in the late 1960s, economists say.

But high rates of poverty — measured by both the official government yardstick and the alternatives that many economists prefer — have remained a remarkably persistent feature of American society. About four in 10 black children live in poverty; for Hispanic children, that figure is about three in 10. According to one recent study, as of mid-2011, in any given month, 1.7 million households were living on cash income of less than $2 a person a day, with the prevalence of the kind of deep poverty commonly associated with developing nations increasing since the mid-1990s.

 

Both economic and sociological trends help explain why so many children and adults remain poor, even putting the effects of the recession aside. More parents are raising a child alone, with more infants born out of wedlock. High incarceration rates, especially among black men, keep many families apart. About 30 percent of single mothers live in poverty.

In some cases, government programs have helped fewer families because of program changes and budget cuts, researchers said. For instance, the 1996 Clinton-era welfare overhaul drastically cut the cash assistance available to needy families, often ones headed by single mothers.

“As of 1996, we expected single mothers to go to work,” Professor Ziliak said. “But if they’re shelling out most of their weekly pay in the form of child care, they can’t make sense of doing it.”

The more important driver of the still-high poverty rate, researchers said, is the poor state of the labor market for low-wage workers and spiraling inequality. Over the last 30 years, growth has generally failed to translate into income gains for workers — even as the American labor force has become better educated and more skilled. About 40 percent of low-wage workers have attended or completed college, and 80 percent have completed high school.

[BUSINESS WEEK: ...statistics suggest an incredible failure when it comes to America’s ability to convert economic dynamism into significantly improved quality of life and opportunities for the country’s least well-off. The output of the country has climbed from $3.9 trillion to $14.2 trillion. According to the World Bank, allowing for inflation, average gross domestic product per capita in the U.S. has climbed from $17,461 in 1964 to $45,336 in 2012. That’s more than double—an increase of about 159 percent. And yet looking at the numbers on either side of the absolute poverty line, the poorest households in the U.S. appear to have seen regression in pre-program incomes and only a small improvement in post-program outcomes.]
 

Economists remain sharply divided on the reasons, with technological change, globalization, the decline of labor unions and the falling value of the minimum wage often cited as major factors. But with real incomes for a vast number of middle-class and low-wage workers in decline, safety-net programs have become more instrumental in keeping families’ heads above water.

The earned-income tax credit, for instance, has increased employment among single mothers and kept six million Americans above the poverty line in 2011. Food stamps, formally known as Supplemental Nutrition Assistance Program benefits, kept four million Americans out of poverty in 2011.

Above all, the government has proved most successful in aiding the elderly through the New Deal-era Social Security program and the creation of Medicare in the 1960s. The poverty rate among older Americans fell to just 9 percent in 2012 from 35 percent in 1959.

But for working-age households, both conservatives and liberals agree that government transfer programs alone cannot eliminate poverty. The answer, the White House has said, is in trying to improve households’ earnings before tax and transfer programs take effect.

 

“Going forward, the biggest potential gains that could be made on poverty would be in raising market incomes,” said Jason Furman, the chairman of Mr. Obama’s Council of Economic Advisers. “In the short run, that means things like the minimum wage, and in the long run, things like early education.”

If Congress approved a proposal to raise the federal minimum wage to $10.10 an hour from its current level of $7.25, it would reduce the poverty rate of working-age Americans by 1.7 percentage points, lifting about five million people out of poverty, according to research by Arindrajit Dube of the University of Massachusetts, Amherst.

 

But in the meantime, the greatest hope for poorer Americans would be a stronger economic recovery that brought the unemployment rate down from its current level of 7 percent and drew more people into the work force. The poverty rate for full-time workers is just 3 percent. For those not working, it is 33 percent.