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Despite rosy data, millions of Americans languish in poverty

Despite rosy data, millions of Americans languish in poverty
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A Census Bureau report last week provided numerous headlines about increases in median household income in 2016 and a second-straight year of significant reductions in the poverty rate. A few weeks before, the federal jobs report indicated the number of jobs in the economy finally returned to demographically adjusted pre-recession levels. These are welcomed signals that the economic recovery, in its seventh year at the time these data were collected, has started to trickle down to the majority of working households in America.

Behind these signs of economic hope, however, are reasons to be cautious in our optimism and aware that a protective social safety net remains critical for tens of millions of Americans who have not seen their economic circumstances appreciably improve in nearly 20 years. Three red flags should move us to consider policies that support families still struggling to keep up with rising costs of living and make ends meet.

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First, the recoveries following the two recessions since 2000 have been far slower in pace than other recessions in the post-war era. Many economic indicators remain at or behind late-90s levels. Take the recent figures on median income: It is only since 2015 that median household income has grown at a rate consistent with the income growth during the 1990s. For most years in the last two decades, the typical household has seen no or very low income growth.

 

Second, income inequality also remains a persistent concern, despite recent income growth. The bottom 40 percent of American households — those earning roughly $45,000 or less — receive just 11.4 percent of the aggregate income in the U.S. economy today, and that percentage has been falling steadily for 50 years. By comparison, the top 5 percent of households receive 22.6 percent of aggregate income today, and that gap has widened over time.

Third, economic circumstances have not improved for many workers at the bottom of the income distribution. Poverty rates today remain a full percentage point higher than in 1999. About one in five Americans live in households with income less than 150 percent of the poverty threshold — about $36,000 for a family of four — a share of the population that has remain unchanged in the past 20 years. The number of people living in deep poverty — those living on approximately less than $12,000 a year — has increased by nearly 50 percent since 2000.

These economic circumstances reflect the realities of contemporary job opportunities. Of most significance are falling employment and earnings opportunities for less-educated workers and job-seekers. Employment and earnings for adults without a college degree have fallen in the last several decades, with gaps amplified by the last two recessions. For example, employment rates among adults with a high school degree or less remain well-below pre-recession levels.

Median weekly earnings for men and women with a high school degree or equivalent have fallen by more than 10 percent since 1979 and still lag behind weekly earnings before the 2001 recession. Earnings and employment remain even more depressed for those without a high school degree. Inflation-adjusted wage rates for men without a high school degree have fallen steadily for 50 years and now are about half that for men with a college degree.

Particularly troubling is that in this context, much of the current federal budget conversations in Washington, D.C. focus on how to rollback programs that we know help low-income families. Congress is weighing cuts to funding of the Supplemental Nutrition Assistance Program (SNAP) and Medicaid, both of which are proven to reduce poverty and address barriers to greater well-being.

Efforts to block grant safety net programs and impose work requirements are intended to further reduce access to programs critical to working poor Americans. Even one of our most successful anti-poverty programs — the Earned Income Tax Credit (EITC) — is being targeted by congressional Republicans seeking unnecessary and costly audits of low-income tax filers.

Rather than abandon the millions of families striving to grab the next rung on the ladder, now is the time for policymakers to maintain public investments in programs and policies we know support workers in low-wage jobs. If the economy slows down in the coming months, cuts to the social safety net would be a double-whammy for low-income households, pulling the rug out from under millions of families.

We should be seeking ways to ensure access to programs like SNAP, the EITC and Medicaid. We also should maintain — not dramatically reduce, as the current GOP budget proposals threaten — federal funds for social service programs that operate mostly through community-based nonprofits.

Such programs provide critical help to millions of low-income families, addressing basic needs and barriers to employment. It also is essential we maintain a safety net for those who can’t find a job or are working to get a better job, if we are to extend the momentum of recent economic reports and build resilience against the next downturn.

Scott W. Allard is a professor of public affairs at the Evans School of Public Policy and Governance at the University of Washington. Allard is a nonresident senior fellow at the Brookings Institution’s Metropolitan Policy Program and co-primary investigator of the Family Self-Sufficiency Data Center at the University of Chicago.