Poverty in the Recession

Sometime this week, the Census Bureau will release figures on poverty in the United States in 2009. The Associated Press asked some demographers to sketch out the probable results — and they are grim.

The demographers estimate the poverty rate will increase year-on-year from 13.2 percent to about 15 percent. That means one in seven Americans, some 45 million people, lived in poverty last year, the “highest single-year increase since the government began calculating poverty figures in 1959.” The rate is already above the previous high of 13 percent, which came during the energy crisis in 1980. From The AP’s report:

• Child poverty increased from 19 percent to more than 20 percent.
• Blacks and Latinos were disproportionately hit, based on their higher rates of unemployment.
• Metropolitan areas that posted the largest gains in poverty included Modesto, Calif.; Detroit; Cape Coral-Fort Myers, Fla.; Los Angeles and Las Vegas.

To classify as impoverished last year, a family of four needed income of less than $22,025 — $17,163 for a family of three, $14,051 for a family of two and $10,991 for individuals.

This spring, the Obama administration decided to update how the government defines poverty, to give a clearer picture of how many families and individuals are really in need. In March, the Census Bureau started developing a new poverty measure, to go alongside the standard rubric. (The government plans to use the supplemental measure starting next year, with 2010 data.)

The current poverty yardstick, in place since the 1960s, gauges poverty by a family’s cash income. The new measure will take into account cost-of-living differentials, as it is much more expensive to live in, say, New York than Omaha. It also weighs the cost of utilities, child care and health care, and the amount of federal and state assistance — such as SNAP benefits (formerly, food stamps) — a person or family receives.

Even by the old yardstick, the data the Census Bureau will release this week should look grim, with more than 40 million individuals living in families with income below the poverty line.

Rebecca Blank, undersecretary for economic affairs in the Commerce Department, expanded on the rise in poverty in the recession in congressional testimony (PDF) last year. She noted that poverty did not fall during the economic expansion of the 2000s, as economists would have expected — more evidence of the 2000s as a “lost decade” for most working Americans.

“[T]he poverty rate always rises steeply during recessions, but falls during expansions,” she said. “[P]overty fell by 1.5 percentage points during the expansion of the 1980s and by almost 3 percentage points during the expansion of the 1990s. In the recession of 2001, poverty went up as anticipated, but never really came down. Rather than falling, poverty rose by eight-tenths of a percentage point during the expansion of the 2000s, so that a higher share of the population was poor in 2007 than in 2001.”

That means poverty increases during the great recession came on top of an elevated base.