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Why poverty is rising in America
The poverty rate had its largest one-year increase ever and the child poverty rate more than doubled
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The US poverty rate saw its largest one-year increase in history. 12.4% of Americans now live in poverty according to new 2022 data from the US census, an increase from 7.4% in 2021. Child poverty also more than doubled last year to 12.4% from 5.2% the year before.
The US poverty level is now $13,590 for individuals and $23,030 for a family of three. The new data shows that 37.9 million people lived in poverty in 2022.
America had previously experienced tremendous improvements in poverty reduction over the last two years. Safety net programs including expanded child tax credit lifted millions out of poverty and provided direct aid to low-income households. However, as programs like this were allowed to expire, the data shows that those programs were a short-lived lifeline. The Supplement Poverty Measure (SPM), which has now largely replaced the “official” poverty rate, calculates the poverty rate after accounting for many of the governments’ most important anti-poverty programs as well as differences in the cost of living.
The expiration of government support wasn’t the only reason poverty rose dramatically. Inflation and an overall increased cost of living created new financial challenges for families. SPM is based on the cost of essential items like food and housing, which rose sharply last year. In 2021, a family of four was considered poor if their income was $31,453. In 2022 though, that number increased nearly 10% to $34,518, capturing more households under this higher bar.
While low-income households struggled disproportionately, the average American household took hits as well. Median household income adjusted for inflation fell 2.3% last year to $74,580, The fastest rising inflation rate since 1981 dominated the gains of increased employment and rising wages.
Where poverty lives
California, Florida, and Mississippi are the three states with the highest percent of residents living in poverty. These represent an interesting mix of regions that economists don’t typically see together.
Much of California’s poverty occurs in Northern counties which are home to farming, mining, and manufacturing communities. High costs across the state have also led to higher poverty rates as often seen in San Francisco and Los Angeles, with 4.5 million living in poverty.
Florida’s higher poverty rates largely occur across the state’s panhandle. In Gadsden County, for example, one in four people live in poverty while two in five children do as well. Residents of Gadsden graduate high school at only half the rate as their peers in the rest of Florida. For decades, these low levels of educational attainment have plagued the region with high levels of unemployment and corresponding higher rates of poverty.
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Poverty in Mississippi is not concentrated in one area but spreads far across the state. The regions with the highest poverty rates are concentrated around the Mississippi River, which are also the regions with the highest Black populations. Mississippi’s Black residents are three-times more likely to live in poverty than White residents, one of the worst ratios of any state in America. In Tunica County, right where the Mississippi river meets Tennessee, 68% of Black families live in poverty and 23.8% are unemployed according to a US Commission on Civil Rights, versus 12% of White families in poverty and 2% unemployed.
The highest increases in poverty occurred in the South, where research has shown the Child Tax Credit had the greatest effect in helping low-income families get the support they needed.
Percy Parker lives in poverty in California and struggles with two deep dilemmas as a fast food worker. First, she explained that when she hasn’t eaten all day, she’ll pour leftover smoothie from someone else’s order into a cup and let that sustain her for my shift. She fears that management will call it ‘stealing’ and she’ll be fired or prosecuted, despite the fact that it’s going to be thrown out anyways. A previous fast food job allowed her to take food that was already expired. Second, she sees how fast food can be part of the poverty problem. Percy knows that her customers aren’t eating well when they consumer her giant sugary drinks, and she knows how much food is wasted, despite the demand for migrant workers to bring them fresh fruit. She dreams that big companies will “share their abundant resources with the many of us who contribute to their successes, and with those of us who are simply struggling to survive”
Fast food workers make up 6% of California’s homeless population and 11% of the state’s homeless workers.
The White House’s response to rising poverty
The White House was quick to jump in after the Census data release, blaming the rise in child poverty on congressional Republicans. President Biden derided “Republicans’ refusal to extend the enhanced Child Tax Credit” and went further to say that “The rise reported today in child poverty is no accident.” Economists found that child poverty would have been nearly 50% lower in 2022 if the expanded Child Tax Credit had remained in place.
We have also found that the Earned Income Tax Credit (EITC) has had a profound impact in poverty reduction. The number of children living below the poverty line would have been 25% higher without the EITC and the program also decreased poverty severity for another 17 million people. President Biden’s 2024 budget proposed expanding this tax credit, though Republicans remain opposed.
Current poverty rates though are still below historic levels, and look most similar to rates seen in 2019. While financial hardship has decreased for Black and Hispanic Americans, poverty rates have now returned to pre-pandemic levels. A tremendous influx of funds to low-income households during the pandemic actually improved poverty in America.
For Americans over 65, support has not arrived. The poverty rate rose to 14.1% for these older Americans, reaching levels not seen since 2016. This happened despite the 8.7% cost-of-living adjustment in social security payments, largely because labor force participation among older people has remained low as pandemic job losses have made it harder for this group to re-enter the workforce.
The Path Forward
Poverty in America reflects the inequality that plagues US households. While certain regions have endured this pain much more than others, this new rising trend may spell ongoing challenges for even more communities. The federal support over the last 3 years showed just how much progress communities can make to reduce poverty, but the data now reveals what happens when those resources dry up.
Expand the EITC and CTC: The EITC and Child Tax Credit together lifted 10.6 million people above the SPM poverty line and made poverty less severe for 17.5 million others in 2018. These initiatives have been some of America’s most successful poverty alleviation programs ever, and have been particularly helpful for Black and Hispanic communities. The EITC and CTC are as close as America gets on a consistent basis for direct cash-payments to low-income communities, which have similarly proven to be deeply impactful for poverty reduction. State-specific programs in regions with higher poverty can be essential for making an impact.
Wage support for workers - Of the 37.9 million people who live in poverty, 6.3 million are working full-time jobs. That means that about one in twenty five people in the workforce are actually living in poverty. In California, one in three people who lived in poverty reported having at least one family member working a full-time job for the entire year. Employers simply are not paying their employees enough to live. We need to increase minimum wages in states, particularly in the fifteen states that have a $7.25 minimum wage. Restaurant workers are more likely than any other profession to live in poverty, according to the Economic Policy Institute, which would be a great place to start for addressing wage poverty.
Address intergenerational poverty - Three-generation poverty is a uniquely Black problem. Researchers from Brookings analyzed the incomes of grandparents, parents, and children and found that one in five Black Americans are experiencing poverty for the third generation in a row, compared to just one in a one hundred White Americans. The challenge of upward mobility for Black Americans is deeply interwoven with so many social challenges like housing, education, healthcare, incarceration, and much more.
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