United States: Poverty amidst the plentyby News WeeklyNews Weekly
, June 3, 2000
Despite stiff new legislation that has halved the number of people on welfare, the American economic miracle — which has mesmerised the world and cut the unemployment rate to around four per cent — the poverty rate is still higher than it was through the decade of the 1970s.
The structure of US poverty has changed. In the 1960s it was a problem predominately among the elderly. Today the problem is single-parent families, the result of social changes with the sexual revolution and what Harvard University’s William Julius Wilson says is the problem of unemployment, part-time work and low wages among unskilled males. This makes them less attractive as marriage partners, leaving women to have children alone.
Low skilled workers have been affected by technological changes which have seen an increased demand for skilled workers, together with weaker trade unions, a minimum wage that is much lower in real terms than 20 years ago, and the shift to part-time work.
In spite of the economic boom, only 13 per cent of poor adults were in full-time work in 1998.
The latest poverty figures (1998) show that 12.7 per cent of the population were in families living on less than $US16,600 p.a.
One in five children, and 40 per cent of black children, live in poverty.
Over half of all poor families are headed by single women, compared to only 21 per cent in 1960. One parent families — where 30 per cent of all children live — are six times more likely to be in poverty.
But for single parent families, the child poverty rate would have remained steady since 1970. Instead it rose by 25 per cent.
Since the early 1990s, the US welfare system has tightened. Welfare payments are cut off after five years and assistance to families with no one working has been slashed.
As a result, 62 per cent of never-married mothers now work, compared to 36 per cent in 1984. Twenty states now require mothers to work when their children are less than one year old.
The effect on children of this massive social engineering project are yet to be measured.
On the other hand, assistance to the working poor has jumped from $US6 billion in 1984 to $US50 billion last year.
An Earned Income Tax Credit, expanded Medicaid, tax credits for child care and a general child tax credit have been directed to working poor families, 60 per cent of whom now have at least one person in the workforce at any one time.
Despite this help, many poor single parent families have not risen above the poverty level. On average, poor families fell $US245 further behind the poverty line in 1998 than in 1995.
Single mothers are generally low skilled, don’t have a second male income, earn low wages and pay all the costs of child-rearing.
Higher rental costs, drastically reduced assistance for low income housing, and lack of public transport to link poor areas to job growth areas, all contribute to the problem.
Finally, while the working poor can earn more and still receive assistance, once earnings reach $US10,000 p.a., the marginal tax rate is 100 per cent. There they are caught in a poverty trap.
When it comes to family and social stability, the bottom line for the world’s richest nation is that welfare is no substitute for real full-time jobs, especially for low skilled men.