The Truth About the Poverty Crisis

It's official: There are now more poor people in America than at any other time in the 52 years records have been kept. We knew that the 2010 poverty numbers, released by the Census Bureau on Sept. 13, weren't going to be good. They turned out to be, in the words of Brookings senior fellow Ron Haskins, "extraordinarily bad." More than 15% of Americans live below the poverty line. The total rose for the fourth consecutive year. For a family of four, poverty means scraping by on roughly $22,000 a year.
The new poverty crisis has emerged in part out of the other economic crisis we are facing: unemployment. The fastest way to poverty is job loss, and 6.5 million jobs were lost in the recession. Today, a full two years into the "recovery," more than 9% of Americans are still out of work. But a fact that may be buried in the copious coverage of these new figures is that the poverty problem didn't start with the financial crisis and the subsequent downturn. Its roots go much deeper, possibly to the recession of 2000, after which poverty levels didn't drop back to their prerecession numbers as they typically do after a recovery.

Though it's difficult to tease out statistically, that turning point is undoubtedly a legacy of the previous two decades of hyperglobalization, when tens of millions of middle-income jobs were lost to outsourcing or replaced by technology and salaries became more and more compressed. The average real weekly earnings of a typical blue collar worker are lower today than in 1964.

But the poverty problem is also about the fracturing of the American Dream, specifically the dream of upward mobility. It's become increasingly hard for Americans to rise above the socioeconomic status of their birth, particularly compared with their peers in other rich nations. "Poverty is in many ways about a lack of social mobility," says Erin Currier, who studies these topics at the Pew Charitable Trusts. And research shows that even before the current crisis, Americans had much less mobility than people in many European nations. "We have a belief system and an idea about ourselves that don't always align well with the facts," notes Isabel Sawhill, a co-director, with Haskins, of the Center on Children and Families at Brookings.

Now, in a world of high unemployment, lower wages and growing poverty, the fiction is becoming ever more difficult to sustain. This downturn marks the first period in 20 years in which employment as a percentage of population in the U.S. has fallen below the rate in countries like the U.K., Germany and the Netherlands. Indeed, downward mobility is so much a part of youth culture today that the Census Bureau has come up with a whole new lexicon for it, including the term doubling up, which describes households in which adult children who can't afford life on their own return to live with their parents. An additional 3 million of them would be below the poverty line if they couldn't crash with Mom and Dad.

That's unlikely to change soon. Most U.S. job growth since the 1990s has been in sectors like education and government, which are facing big cuts. Meanwhile, 9 out of 10 of the biggest occupations in America offer less than the mean hourly wage. (Think salesclerks and home health aides.) Indeed, the Boomerang Generation is likely to become as demographically defining in the next few decades as the baby boomers have been. The two groups may very well end up in a political war for dwindling government benefits, as the elderly fight to keep entitlements like Social Security that ward off poverty and younger people push for spending on education and retraining to avoid falling into it.

While there's no doubt that investment in education, which creates jobs and improves worker competitiveness, is a long-run solution, the key short-term weapon in the fight against poverty is tax policy. Poverty numbers would be far higher without tax breaks for the poor. The Obama Administration should keep fighting to extend initiatives like the earned-income tax credit, the largest and most effective antipoverty program. (Ronald Reagan used it to take millions out of poverty.) President Obama should also continue the pressure on the richest Americans to carry a larger share of the load. Despite congressional resistance, many wealthy people see it's in their interest to foster a less divisive society. While Americans historically haven't been as inclined as Europeans to riot over inequity (witness the protests that have taken place from London to Athens), it's hard to rule that out in a world in which the American Dream is increasingly becoming a myth.