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Why The U.S. Can’t End Poverty

Unprecedented Poverty Rates in America: The Costs of Inequality and COVID-19

  • 37.9 million Americans, accounting for 11.6% of the population, are currently living in poverty in America
  • Even though it is the richest nation in the world in terms of GDP
  • Poverty has been steadily improving until the pandemic changed its course
  • Economic security programs take up 11% of the federal budget and child poverty alone is estimated to cost the US over $1 trillion
  • Poverty leads to more anxiety, stress and health problems on an individual level
  • Income inequality is one of the main reasons why there is so much poverty in America and it has worsened due to COVID-19
  • A living wage for a family of four is $24.16 per hour but the federal minimum wage is set at $7.25 per hour, meaning that a typical family would need two full-time minimum wage jobs to make a living wage
  • People of color make up over half of those who are poor or low income
  • There are not many social safety nets protecting citizens from poverty in the US and if someone gets a job that brings them closer out of poverty, they lose all benefits immediately.

Closing the Gap: Understanding Poverty in the US and the Need for Targeted Social Programs

  • Poverty in the US is currently measured using an outdated, pre-tax income threshold system
  • This does not take into account many important factors along with geographical differences
  • The supplemental poverty measure was developed to close the gap in the original measure, but it still fails to include costs of food and childcare or account for variations between states
  • Policy is one of the most effective tools to eradicate poverty by accurately measuring its prevalence and implementing targeted social programs such as an expanded child tax credit, minimum wage increases and guaranteed access to a good paying job.

Universal Basic Income: A Solution to Poverty Explained Through Musical Analogy

  • Universal basic income is a solution to poverty by providing an income transfer
  • Analogy of musical chairs explains the structure of the game and why two people are destined to lose regardless of individual attributes
  • Focus shifts from individual-level factors to structural issues.

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37.9 million.That's the number ofAmericans currently livingin poverty, accounting for11.6% of the totalpopulation. That's despitethe fact that America ranksfirst as the richest nationin the world in terms ofGDP.The United States is knownfor having this greatabundance, and at the sametime, alongside thatabundance, there iswidespread poverty andeconomic insecurity.Sometimes you question, youknow, we're in the UnitedStates of America, how canthe citizens be goingthrough such an issue?We always boast that we'resuperpower, that we are therichest in the world andthings just don't makesense.Poverty in the US had beensteadily improving over thepast decade. From a heightof 48.8 million peopleliving in poverty in 2013to 34 million in2019. That was until thepandemic changed its course.COVID absolutely had a verydeep impact on the accessto employment and long-term employment for anumber of families thatwere already vulnerable forvarious reasons.Prior, it was myself and mytwo older brothers, alongwith my stepdad, thatconstantly worked to providefor everyone in the house.But after COVID 19 and thewhole lockdown, we were laidoff. And ever since then, we have had issues finding ajob.Poverty is expensive.About 11% of the federalbudget or $665 billiongoes to economic securityprograms.Child poverty alone isestimated to cost the USover $1 trillion based onthe latest research from2018.There are also really highcosts on an individual level. Poverty leads to moreanxiety.It leads to more stress.It leads to more healthproblems, all kinds ofthings that amplify theeffect of poverty.The feelings that you wouldusually encounter whenyou're in this position ismostly depression.Why can't I find a job?Why are we in thissituation? You know, we'retrying our best andsometimes it's just fallingback down on our face.So how did poverty becomesuch a big issue in theUnited States and why is itso difficult to end it?Income inequality is one ofthe big reasons why the USsuffers from such highrates of poverty.The income for the top 10%was more than 13 timeshigher than income at thebottom 10%, according to theUS Census.We unfortunately in theUnited States are at thevery high end in terms ofincome inequality.And so what happens is whenthe distance gets furtherand further away, the rungson the ladder get furtheraway and it's harder forpeople to climb those rungsout of poverty into themiddle and to the upperclass.The pandemic has madeinequality worse.The Gini index, whichmeasures the nation's incomeinequality, rose for thefirst time in a decade by1.2% in 2021.The reason the pandemic hasmade that worse is becausewhen you talk to largeorganizations, corporations,what they saw was thatstaff was leaving, but theyhad a response to that,right?Their response was, let'sgive bonuses.Let's give raises.Many organizations, manysmall businesses,government, they don't havethat luxury.So inflation has kept upwith the money that mostpeople in the 1% have made.But it has deepened andwidened the gap betweenthose that have money andthose that do not.Research by MIT estimatesthat the living wage in theUnited States is $24.16 perhour for a family offour. But the federalminimum wage is set at $7.25per hour. This means that atypical family of four needsto work more than two full-time minimum wage jobsto earn a living wage, and single-parent families needto work significantlyharder.We worked at a banquet hall.Any sort of party, we wouldset it up, come early, setthe tables, dishes, plates,silverware, everything, youname it. We worked for $15an hour.It was really bad.I would say we were reallyoverworked.13-hour shifts sometimes.We were really frustratedwith where we were, but atthe same time, it was like,what do we do if weleave? You know, we were atthat stage of like, yeah, wehate this job, but we haveto keep it to continuegoing.Problems with wages areespecially worse for workersof certain races.If we're looking at thebroader population of peoplewho are poor or low income,meaning one emergency awayfrom being poor, we'retalking about approximately140 million people.Out of the 140 million, wellover 70 million people, wellover half of thatpopulation are people ofcolor.The US also suffers from alack of social safety netsthat protect Americans frompoverty.If you look at, for example,the amount of cash thatpeople might get if they'relow-income, it's very, veryminimal.Right now we receive welfareand it's roughly around$250 for my household ofseven and it actually hashelped us a lot.Sometimes the numbersreally don't make sensebecause how can a largefamily just live off acouple hundred dollars,especially now in this dayand age where you go to thegrocery store, you spendand a few items are $100.Most countries, for example,European countries, havewhat's known as a childallowance, where if you havea child, you get a certainamount of monthly income tohelp raise that child.That's pretty common.But in the United States,we don't have anything likethat. And in the UnitedStates, we don't haveuniversal benefits, forexample, health care orchild care.It's also a system that manytimes ispervasive in actuallycreating poverty situations.So I'll give you anexample. If I'm eligible forMedicaid today and I'm alsoeligible for cash assistanceand I'm also eligible forSNAP, if I get a job thatprovides me even a littlebit closer out of poverty, Ilose all those benefitsimmediately, which meansthat I'm incentivized if Ineed health care for mychildren and I have a jobthat's not going to provideit right away to not lookfor employment that is goingto pay me an amount that'sgoing to make me ineligiblefor certain benefits,right?So while people are workingreally hard for upwardmobility, the systems thatwe have in place don't givethem the grace to be ableto come out of poverty andprovide their own agency toactually create theopportunity for upwardmobility.The official poverty measurein the US today is based oncalculations from the mid-1960s.It's calculated bycomparing pretax incomeagainst a threshold set atthree times the cost ofminimum diet In 1963.A large number of federalprograms still rely on thismeasure to figure out whois eligible for assistanceand welfare.The researcher, whose workbecame the basis of thatmeasure, never intended itto be used in the way thatit currently is, both as awidespread measure ofpoverty, but then as thebasis of all of thesedifferent social welfareprograms and allocations ofresources towards those programs.It doesn't take certain veryobvious indicators intoconsideration. To start, itlooks at pre-tax income,which is not what I'mtaking home every day sothat doesn't make sense. Italso doesn't look atdifferent familycompositions, whichabsolutely impacts how afamily may spend money.If I am the type of familythat has both of my parentsliving with me, I'm goingto spend more.It doesn't look at expensesaround food or child care.So in many ways, it'sincredibly out of datebecause it has not kept upwith the way life haschanged for most Americans.As a response to thesecriticisms, the supplementalpoverty measure wasdeveloped in 2011 as animprovement over theexisting measure.It incorporates into themeasurement both the cost ofbasic needs like food,clothing, utilities, butalso government transfersand programs.So you could see the effectof government programs inaddressing poverty andeconomic insecurity.It also takes into accountgeographical differences.So the supplemental povertythreshold is more of a rangedepending on where youlive, your household sizeand what your housingstatus is.So it is more comprehensive.In that way, it's animprovement on the officialpoverty measure.But some experts argue thateven the supplementalpoverty measure isn't aperfect method.While it looked to close thegap on certain indicatorsthat the original povertymeasure was not taking intoconsideration, it did notgo far enough.Food is one of those placeswhere we are still nottaking into account whatfood may cause in a statelike New York versus astate like Mississippi.So if you have a universalbrush for the whole country,you're going to miss anumber of people that areeither at risk of fallinginto poverty or are alreadytechnically living inpoverty but are not countedby the measure.The Census Bureau told CNBCthat both the officialpoverty measure and the supplemental poverty measureprovide a consistent dataof poverty measurement andthat the Bureau continuallystrives to innovate andimprove the design andmeasurement of theirwell-being statistics.This difficulty inmeasuring poverty has alsoled some experts to arguethat poverty isn't asserious of an issue as it'smade to believe.Poverty in the United Statesand the way it's normallyunderstood is not a bigissue at all.It's deliberatelymiscounted.So the reality is that wehave poverty in the UnitedStates because the CensusBureau ignores the entirewelfare state when it goesto count poverty.You count poverty bysaying, well, a householdhas an income, say lessthan $26,000 a year, but allthe welfare benefits or 95%of the welfare benefits arenot counted, and they alsoundercount earnings by about50%. Therefore, you have alot of poverty basicallybecause most of theresources that these folkshave are not counted.Unless we can get anaccurate number of just howprevalent poverty is in theUnited States, attempting toeradicate it is close toimpossible.When we don't have thosenumbers. A lot of folks whoare making policy decisionsare flying blind.Whether I'm a largecorporation that is lookingto invest in anorganization or in a city,or whether I am a publicofficial that is trying tofigure out how much SNAP isenough SNAP.If I don't have a baseline,there's no way I'm evergoing to be solving theproblem.If COVID has provenanything.Poverty is an issue thatcan be resolved with theright policy.Government assistance ledto a significant decline inthe supplemental povertymeasure, lifting 45.4million Americans out ofpoverty during the height ofthe pandemic.Policy, I would say, is oneof our strongest tools infully addressing anderadicating poverty.It is where we can definewhat the problems are,accurately measure what theproblems are, and thendesign and implement theprograms we need to addressthe true extent of poverty.A really good example thatI'll use is that of theelderly. This is the onereal success story in theUnited States as we'vereally been able to reducethe poverty rates amongstthe elderly as a result ofprimarily social securityand Medicare.So if we didn't have thoseprograms today, povertyrates for the elderly wouldgo from about 10% to 40%.And that shows you thedramatic impact thatgovernment programs andpolicies can have onreducing poverty.Figuring out a more accuratemethod of measuring povertyis a vital step ineradicating the issue.I would begin with changinghow we define and measurepoverty to include the fullextent of economicinsecurity.Another way of measuringpoverty, and this is a waythat European countries andother countries use iswhat's known as a relativemeasure.And so they say if you fallbelow 50% of median income,then we're going to countyou in poverty.So if the median income was$70,000 and you fell below$35,000, you'd be countedas being in poverty.More targeted socialprograms could also have asignificant impact on theimpoverished community.Some of those programs mayinclude an expanded childtax credit, the kind ofwhich we saw in 2021 when itwas expanded during thepandemic, raising theminimum wage immediately toat least $15 an hour, butthen moving towards aliving wage and guaranteeingthat everybody who wants towork can work as aguaranteed ability andaccess to a good paying job.I think a reallystraightforward solutionthat people have beentalking about more recentlyis the idea of a universalbasic income.So here the idea is that ifpoverty is a lack of income,then a very straightforwardway is to transfer someincome. Here's the analogyI would use to get people toshift their way ofthinking, and it's theanalogy of musical chairs.Let's say we have tenpeople playing and eightchairs available.Now, who's going to win andlose at that game?Well, if we focus on theindividual level factors,people that were in a badposition when the musicstopped and so on.But if we focus on thestructure of the game, thentwo people are going tolose out regardless of theindividual attributes.And that's what's going onhere in the United States.We're focusing on, peoplearen't working hard enough.They're not doing this.They're not doing that.When really the problem isthat there aren't enoughchairs in the game.