Poor ‘have’ more things, but don’t have a way out
The same global economic trends that have helped drive down the price of most goods also have limited the well-paying industrial jobs once available to a huge swath of working Americans.
The New York Times
Is a family with a car in the driveway, a flat-screen television and a computer with an Internet connection poor?
Americans — even many of the poorest Americans — enjoy a level of material abundance unthinkable a generation or two ago. That economic fact has become a subject of bitter political debate this year, 50 years after President Lyndon Johnson declared a war on poverty.
Different views on poverty and inequality rose to the fore again Wednesday as Democrats in the Senate were unable to muster the supermajority of 60 votes needed to overcome a Republican filibuster of a proposal to raise the incomes of the working poor by lifting the national minimum wage to $10.10 an hour.
House Republicans, led by Rep. Paul Ryan of Wisconsin, have convened a series of hearings on poverty, including one Wednesday, in some cases arguing that hundreds of billions of dollars of government spending a year may have made poverty easier or more comfortable but has done little to significantly limit its reach.
Indeed, despite improved living standards, the poor have fallen further behind the middle class and the affluent in both income and consumption. The same global economic trends that have helped drive down the price of most goods also have limited the well-paying industrial jobs once available to a huge swath of working Americans. And the cost of many important services crucial to escaping poverty — including education, health care and child care — has soared.
“Without a doubt, the poor are far better off than they were at the dawn of the War on Poverty,” said James Ziliak, director of the Center for Poverty Research at the University of Kentucky. “But they have also drifted further away.”
Democrats have generally argued that addressing this disjunction requires providing more support for the poor, raising the minimum wage, extending unemployment-insurance benefits and making health care more affordable by expanding the reach of Medicaid and subsidizing private insurance for those who lack employer coverage.
Republicans, by contrast, have proposed reducing government regulations and overhauling existing programs to encourage more work, arguing that that would allow the federal government to decrease spending on the poor.
“The question isn’t whether the federal government should help; the question is how,” Ryan said at the hearing Wednesday. “How do we make sure that every single taxpayer dollar we spend to reduce poverty is actually working?”
More help, but still falling behind
For many working-poor families, the most apt description of their finances and lifestyle might be fragile. Even with a steady paycheck, keeping the bills paid becomes a high-wire act and saving an impossibility.
Tammie Hagen-Noey, 49, of Richmond, Va., tapped at an iPhone as she sat on the porch of the group home where she lives; its proprietor is a friend of her daughter’s. She earns $7.25 an hour at a McDonald’s and makes a little extra money from planting small farms for neighbors who want to garden.
Hagen-Noey is trying to rebuild her finances, which have been damaged by divorce, government liens and addiction. At the top of her list of priorities is finding better-paid work. She produced a paycheck that showed her earnings this year: $2,938.51.
“It’s impossible,” she said. “Every cent of that goes toward what I need.” A few months ago, she sold her car for $500 to make rent.
Two broad trends account for much of the change in poor families’ consumption over the past generation: federal programs and falling prices.
Since the 1960s, Republican and Democratic administrations have expanded programs such as food stamps and the earned-income tax credit. In 1967, government programs reduced one major poverty rate by about 1 percentage point. In 2012, they reduced the rate by nearly 13 percentage points.
As a result, the differences in what poor and middle-class families consume on a day-to-day basis is much smaller than the differences in what they earn.
“There’s just a whole lot more assistance per low-income person than there ever has been,” said Robert Rector, a senior research fellow at the conservative Heritage Foundation. “That is propping up the living standards to a considerable degree,” he said, citing a number of statistics on housing, nutrition and other categories.
Decades of economic growth, however, have been less successful in raising the incomes from work of many poor families, prompting a strong conservative critique that hundreds of billions of dollars in anti-poverty programs have failed to make the poor less dependent on government.
“That’s the crux of the problem,” Rector added. “What sort of progress is that?”
The “Wal-Mart effect”
Another form of progress has led to what some economists call the “Wal-Mart effect”: falling prices for a huge array of manufactured goods. Since the 1980s, for instance, the real price of a midrange color television has plummeted about tenfold, and televisions today are crisper, bigger, lighter and often Internet-connected.
Similarly, the effective price of clothing, bicycles, small appliances, processed foods has followed a downward trajectory. The result is that Americans can buy much more stuff at bargain prices.
Many crucial services, though, remain out of reach for poor families. The costs of a college education and health care have soared. Hagen-Noey, for instance, does not treat her hepatitis and other medical problems, as she does not qualify for Medicaid and cannot pay for her own insurance or care.
Child care also remains only a small sliver of the consumption of poor families, because it is too expensive. In many cases, it depresses the earnings of women who have no choice but to give up hours working to stay at home.
“The average annual cost for infant care in the U.S. is $6,000 or $7,000 a year,” said Ziliak of the University of Kentucky. “When you look at the average income of many single mothers, that is going to end up being a quarter of it. ... That is just out of reach for many folks.”
In the end, many mainstream economists argue, the lives of the poor must be looked at in light of the nation’s overall wealth and economic advancement. “If you handpick services and goods where there has been dramatic technological progress, then the fact that poor people can consume these items in 2014 and even rich people couldn’t consume them in 1954 is hardly a meaningful distinction,” said Gary Burtless, an economist at the Brookings Institution.
“That’s not telling you who is rich and who is poor, not in the way that Adam Smith and most everyone else since him thinks about poverty.”