The U.S. is a world superpower, but it has a less-than-sparkling underside. It is home to an increasing number of poverty-stricken families, according to a new report from the Census Bureau. The report, Income, Poverty, and Health Insurance Coverage in the United States: 2008, cites the percentage of Americans living in poverty at 13.2%. In more concrete terms, that's 39.8 million people.

Household Income Drops, Poverty Rises
The number of people living in poverty rose as the recession took its toll and unemployment soared. Median household income fell 3.6% in 2008, the steepest drop in 40 years, coming in at $50,303. (To compare this recession to past declines, read A Review Of Past Recessions.)

Falling incomes force families to make difficult choices, such as whether to have children. Taking into consideration that it now costs nearly $300,000 to raise a child for 18 years, lower earning power could certainly affect a family's ability to support one or more children.

Unfortunately, the New Year is likely to ring in even higher numbers of poor families, as unemployment is projected to continue to climb until it tops 10%. It currently hovers just below that number; it's the highest rate seen since 1983, when basic industries
including housing, steel and automobile manufacturing suffered severe declines.

How Poor Is "Poor"?
Just how is poverty defined? In the
United States, a family of four would need to earn more than $22,000 per year to remain out of poverty. However, as you can imagine, $22,000 does not go very far when it comes to a family of this size. Families living at or near this income level are often unable to afford health insurance or child care. Saving and investing aren't even considerations.

Global estimates of poverty are also on the rise. After declining for several years in a row, the global recession reversed the trend. The World Bank now estimates that 1.4 billion people in developing nations live in poverty. That's one person out of every four earning less than $1.25 per day. (For some additional insight into income distribution, read The Gini Index: Measuring Income Distribution.)

How It Affects You
Rising poverty rates detract from a nation's economic position, as those living in poverty must often rely on government subsidies from taxpayer funded programs, such as welfare and Medicaid, to meet their daily needs. Increasing poverty rates also tax non-governmental resources, as food banks struggle to meet rising demand and charities struggle as charitable giving falls when workers' incomes decline.

While there is little any single person can do to eliminate recessions, there are steps that can be taken to combat the chances that you'll end up poor. The first is to make sure your finances won't cave in if you miss a paycheck. The best way to do this is to live within your means, save as much as you can and build a sizable emergency fund to support you if financial disaster strikes. You can also help others who are struggling through charitable giving - it might even add more padding to your own pocketbook through tax breaks - plus it's sure to make you feel richer in spirit. ( It Is Better To Give AND Receive points out some of the potential personal financial benefits associated with charitable giving.)

Related Articles
  1. Mutual Funds & ETFs

    The Top ETFs For a Fast Recovery After a Recession

    Recession and recovery cycles are imminent in the markets. Here are the ETFs, which provide the best performance for a fast recovery after a recession.
  2. Savings

    The Worst Financial Problems Ultra-High-Net-Worth-Individuals (UHNWIs) Face

    Understand how the problems of ultra-high-net-worth individuals (UHNWIs) are different from ordinary problems, and identify the unique financial challenges they face.
  3. Investing Basics

    4 Iconic Financial Companies That No Longer Exist

    Learn how poor management, frauds, scandals or mergers wiped out some of the most recognizable brands in the finance industry in the United States.
  4. Investing

    The Enormous Long-Term Cost of Holding Cash

    We take a look into how investors are still being impacted by the memory of the tech bubble and the advent of the last financial crisis.
  5. Active Trading

    What Is A Pyramid Scheme?

    The FTC announced it had opened an official investigation of Herbalife, which has been accused of running a pyramid scheme. But what exactly does that mean?
  6. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  7. Economics

    4 Countries in Recession and Crisis Since 2008

    See which major world economies haven't recovered from the global recession in the early 21st century, including a long-stagnant industrial power in Asia.
  8. Economics

    What to Expect From Mortgage Rates in 2016

    Understand the factors that influence the direction of mortgage rates, and use this information to project what will happen with rates in 2016.
  9. Savings

    6 Ways to Save on Holiday Wine and Spirits

    Get started on your planning and spending now, so you are prepared when the holiday trifecta (Thanksgiving, Christmas and New Year) hits.
  10. Economics

    Why is Puerto Rico in So Much Debt?

    Learn about the origins and economic factors that led to the downfall of the Puerto Rican economy and what the U.S. government can do to fix the situation.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
  3. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  4. How does the risk of investing in the industrial sector compare to the broader market?

    There is increased risk when investing in the industrial sector compared to the broader market due to high debt loads and ... Read Full Answer >>
  5. How can I hedge my portfolio to protect from a decline in the retail sector?

    The retail sector provides growth investors with a great opportunity for better-than-average gains during periods of market ... Read Full Answer >>
  6. What is the correlation between term structure of interest rates and recessions?

    There is no question that interest rates have enormous macroeconomic importance. Many economists and analysts believe the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center