Tags: Extreme | Poverty | US

'Extreme' Poverty in US Has More Than Doubled, Study Says

Tuesday, 06 Mar 2012 03:14 PM

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A combination of joblessness due to the Great Recession and welfare reform meant to encourage work has led to more than a doubling of “extreme” poverty in the United States, a new study has found.

Using a World Bank definition usually applied to developing countries, the National Poverty Center found that the number of households getting by on less than $2 per person, per day increased to 1.46 million households in 2011 from 636,000 in 1996, a climb of more than 129 percent.

Welfare reform in the late 1990s eliminated the sole cash entitlement program for poor families with children, replacing it with time-limited cash assistance that required able-bodied people to seek work. Children were the hardest hit: The tapering off of assistance has doubled the numbers of children in extreme poverty households, to 2.81 million from 1.38 million.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

“The prevalence of extreme poverty rose sharply between 1996 and 2011,” they concluded. “This growth has been concentrated among those groups that were most affected by the 1996 welfare reform.”

The study, done by researchers at the University of Michigan, considered only cash income. Once they took into account the impact of food stamps, the extreme poverty rate is still up by 67.4 percent, measured as homes that fell below the $2 per person daily threshold on a monthly basis.

The grindingly slow recovery is partly to blame. Unemployment is still high at 8.3 percent as investors wait with bated breath for new jobs numbers on Friday. An Associated Press survey of leading economists offers only slim hope: The economists estimate that employers added a net of 210,000 jobs in February, a result that is unlikely to change the headline number.

Part of the reason that the unemployment rate has improved so far, they noted, is that not many of those out of work are still actively looking. The government only counts people currently seeking work when calculating the widely reported unemployment rate.

If they are emboldened by good news to resume their search, the jobless rate could get worse or stagnate at a high level, even as jobs are created.

Accordingly, the economists said that they see the unemployment rate at 8 percent on Election Day, and only falling to 7.4 percent by the end of 2013.

The average U.S. jobless rate since 1948 is well under 6 percent, ranging from a low of 2.9 percent in 1953 to a high of 9.7 percent in 1987.

Nevertheless, the economy is likely entering a “self-sustaining” period of job growth, the economists said. "The economy is finally starting to gain some steam, with consumers and businesses more optimistic about prospects in 2012," Chad Moutray, chief economist at the National Association of Manufacturers, told the AP.

A separate study has found that things are not much better for older Americans. Increasingly, millions of older Americans cannot keep up with even basic living expenses, according to Washington, D.C. think tank Wider Opportunities for Women

Seniors in the Northeast and Southeast are the worst off, but in none of the 50 states do median incomes rise enough to meet the Elder Index, a comprehensive measure of what it takes to finance basic living costs, reports  Wider Opportunities for Women.

With a median income gap of $10,248, seniors in Massachusetts are more likely to face economic insecurity than in any other state, followed by seniors in D.C., New York, Hawaii, Connecticut and New Jersey.

Massachusetts seniors need $27,048 to get by, but the median earns $16,800 — or 62 percent of the statewide index. In comparison, a senior in Alaska has the best outcome, at 96 percent.

The Elder Index defines “economic security” as the income level at which seniors have sufficient incomes from Social Security, pensions, retirement savings and other sources to cover basic and necessary living expenses without public support, such as food assistance, energy assistance or subsidized housing.

The official U.S. poverty rate for all ages in 2010 was 15.1 percent, up from 14.3 percent in 2009. This was the third consecutive annual increase in the poverty rate, according to the U.S. Census. Since 2007, the poverty rate has increased by 2.6 percentage points, to 15.1 percent from 12.5 percent.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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