Ranks of the Poor Keep Growing

The number of Americans living in poverty climbed from 11% of the population in 1973 to 14% in 1985, and my research projects that it will increase to 17% by 1995. Rising poverty would mean more people in U.S. society experiencing serious economic and psychological deprivation. A higher poverty rate also would saddle the economy with sizable new expenses.

Besides the cost of direct assistance to the newly impoverished, the economy would have to bear the expense of dealing with the likely consequences of poverty--increased crime, drugs and disease, as well as further disruption of public education. Central cities, which along with the rural South are already beset with heavy poverty burdens, might be overwhelmed by the additional costs.

Poverty measures set by the Census Bureau range from $6,498 for a two-person family whose head is older than 65, to $23,926 for a nine- or more person family with one child under 18. For individuals, the threshold is $5,593 for those under 65 and $5,156 for those 65 and older. Poverty thresholds are adjusted by changes in the consumer price index.

Admittedly, measuring the extent of poverty can be difficult. For example, some argue that limiting household income to money income overstates the incidence of poverty. A Census Bureau study estimated that the inclusion of non-cash benefits such as food stamps, school lunches, subsidized housing and Medicare would have reduced the 1982 poverty rate from 15% to 10%-14%. The government rebuts this, claiming that poverty thresholds assume that all poverty households receive some non-cash benefits to supplement their money income.

Since these benefits have been cut back in recent years, they argue that current yardsticks actually understate the incidence of poverty. In any case, government poverty statistics are generally accepted as reasonable indicators of poverty trends and relative differences in the incidence of poverty among demographic groups.

The poverty rate has been increasing since 1973. The proportion of the population below the poverty line does tend to decline as the overall economy improves during the recovery period of the business cycle. But if we compare 1985 to peak years in the cycle--1973 and 1979--we see, overall, a steady rise in the rate.

Blacks, Latinos and residents of central cities and the rural South bear the brunt of the poverty burden. In 1985, 31% of blacks and 29% of people of Latino origin lived in poverty, compared to 14% of whites. About 19% of central city dwellers and 22% of those in the rural South were below the poverty line. But whites have borne the brunt of increased poverty since 1973, and if this trend remains in force, I calculate that black poverty rates in 1995 would actually be lower than their 1985 levels.

A significant increase in poverty rates seems inevitable. Moreover, the social impact of any increases will be intensified by unprecedented income gains on the part of upper-income groups. Not only will the percentage of U.S. households with income of $60,000 or more rise from 9% to 13% of all households between 1985 and 1995, but this relatively small group will command 50% of total personal income in the latter year. In contrast, households with incomes of under $20,000, which are projected to grow from 42% to 50% of total households in the same period, are expected to account for only 14% of total personal income in 1995.

If this income distribution/demographic scenario is correct, 42 million Americans would be living in poverty in 1995. The 1995 poverty rate for family households would be 16%, while that for individuals would be 21%. In stark contrast to the upper-income group, the entire poverty population--17% of the national total--would receive only 2.5% of total personal income in 1995, compared to the 2.4% share they received in 1985, when they constituted 14% of the total population.

Fully a quarter of the projected increase in the poverty rate comes about because of increases in family size. As the baby boomers mature, the number of households in the 25-to-54 age range grows dramatically. Because this is the prime family-rearing age range, it means that a bigger share of the lower-income population will be made up of large-sized households. Thus, a higher percentage of the households at a given income level would fall into the poverty zone.

The projected increase in poverty rates means that the incidence of poverty in 1995 would be higher than at any time since the mid-1960s, when the Great Society programs were being launched.

However, in assessing the potential social and economic ramifications of increased poverty, one should keep in mind that poverty has been on the rise since 1973, when the American dream began to run into serious trouble, and that the 1985-95 trends are very much in line with these developments. The poverty rate rise for all households from 11% in 1973 to 14% in 1985 constituted an increase of 2% annually. From 1985 to 1995, the projected increase is 1.7% per year.

The continuation of the rather gradual growth in the general level of poverty probably will not prompt any significant new poverty initiative. The consequences might be very different, however, if the bulk of the growing poverty burden were to fall on the already beleaguered central cities. But this seems unlikely.

Better-paying blue collar jobs are being lost through a combination of cost control, import penetration and the shift toward a service-type economy. Under such circumstances, central city minorities that tend to get the lower-paying service-sector jobs should fare better than the white workers losing higher-paying manufacturing positions.