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Sunday, November 20, 2011

The Surprising Number of "Near Poor"

Given the shape of the job market, and the hollowing out of the middle class, is there any reason to think this will not get worse in the near future?:

Older, Suburban and Struggling, ‘Near Poor’ Startle the Census, NY Times: ...When the Census Bureau this month released a new measure of poverty, meant to better count disposable income, it began altering the portrait of national need. Perhaps the most startling differences between the old measure and the new involves data ... showing 51 million people with incomes less than 50 percent above the poverty line. That number of Americans is 76 percent higher than the official account... All told, that places 100 million people — one in three Americans — either in poverty or in the fretful zone just above it.
After a lost decade of flat wages and the worst downturn since the Great Depression, the findings can be thought of as putting numbers to the bleak national mood — quantifying the expressions of unease erupting in protests and political swings. They convey levels of economic stress sharply felt but until now hard to measure. ... The size of the near-poor population took even the bureau’s number crunchers by surprise. ...
Outside the bureau, skeptics of the new measure warned that the phrase “near poor” ... may suggest more hardship than most families in this income level experience. A family of four can fall into this range, adjusted for regional living costs, with an income of up to $25,500 in rural North Dakota or $51,000 in Silicon Valley.
But most economists called the new measure better than the old, and many said the findings, while disturbing, comported with what was previously known about stagnant wages.
“It’s very consistent with everything we’ve been hearing in the last few years about families’ struggle, earnings not keeping up for the bottom half,” said Sheila Zedlewski, a researcher at the Urban Institute...
The results scrambled the picture of poverty in many surprising ways. The measure shows less severe destitution, but a bit more overall poverty; fewer poor children, but more poor people over 65. ...
Perhaps the most surprising finding is that 28 percent work full-time, year round. “These estimates defy the stereotypes of low-income families,” Ms. Renwick said. ...
One group likely to gain attention is older Americans. By the official count, only 22 percent of the elderly are either poor or near poor. By the alternate count, the figure rises to 34 percent.
That is still less than the share among children, 39 percent, but it erases about half the gap between the economic fortunes of the young and old recorded in the official count. The likeliest explanation is high medical costs.
Another surprising finding is that only a quarter of the near poor are insured...

Medical costs are clearly a large part of the problem. But it's not the only difficulty middle and low income households face. Here's how Jeff Sachs describes the more general problem:

...The key to understanding the U.S. economy is to understand that we have two economies, not one. The economy of rich Americans is booming. Salaries are high. Profits are soaring. Luxury brands and upscale restaurants are packed. There is no recession.
The economy of the middle-class and poor is in crisis. Poverty and near-poverty are spreading. Unemployment is rampant. Household incomes have been falling sharply. Millions of discouraged workers have dropped out of the labor force entirely. The poor work at minimum wages to provide services for the rich.
There are two forces that account for this deep divide. The first is globalization. Manufacturing employment peaked in 1979, with jobs and factories increasingly shifting overseas. For a while, the housing bubble provided construction jobs that partly offset the loss of manufacturing jobs. Now the housing bubble has burst. Good jobs for young people with a high-school diploma or less have disappeared.
Unless you have a four-year college degree, you're struggling. Yet only one-third of young men ages 25-29 have a bachelor's degree. Most of the rest are holding on for dear life. Among young Hispanic men, only 11 percent have a bachelor's degree; among young African-American men, the figure is 16 percent. ... Yet with more cuts in state support for tuition and in federal Pell Grants, the situation is rapidly getting worse.
The second force is politics. When Obama has one of his many $35,800-a-plate fundraising dinners, he doesn't meet young people struggling to cover tuition payments. Obama has been separated from reality by the White House's campaign to collect between $750 million and $1 billion for Obama's re-election bid. The big money on the Republican side is even worse. Big Oil controls the party.
The upshot is that both parties champion the 1 percent, the Republicans gleefully and the Democrats sheepishly. Both parties have worked together to gut the tax code. Companies use accounting tricks approved by the IRS to shift their profits to foreign tax havens. Hedge-fund managers and recipients of long-term capital gains pay only 15 percent top tax rates. As a result of these irresponsible tax policies and rampant tax evasion, tax collections as a share of national income have sunk to 15 percent, the lowest in modern American history.
Americans are told daily that these low tax rates on the rich are the natural order of things, that the American economy would collapse if the top 1 percent were to pay more to help fund education, job training, infrastructure, and new technologies. This claim is absurd. ...

Anyone who thinks struggling households aren't trying hard enough, i.e. that social services cause people to be lazy so eliminating them will motivate these households to work harder, is nuts. You can find exceptions at all income levels, but for the most part these households are doing all they can to survive. It's a self-serving argument by those who are afraid that they might be asked to help the people who, when jobs are available, work so hard day in and day out for wages that do not even keep up with productivity so that they can accumulate their fortunes. Unfortunately, this group has the power to bring self-serving arguments to fruition and so long as the rich and powerful are doing okay, we shouldn't expect much to change.

    Posted by on Sunday, November 20, 2011 at 09:45 AM in Budget Deficit, Economics, Social Insurance, Taxes | Permalink  Comments (46)


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