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. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  2. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  3. Investing News

    U.S. Recession Without a Yield Curve Warning?

    The inverted yield curve has correctly predicted past recessions in the U.S. economy. However, that prediction model may fail in the current scenario.
  4. Investing

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  5. Economics

    The 2007-08 Financial Crisis In Review

    Subprime lenders began filing for bankruptcy in 2007 -- more than 25 during February and March, alone.
  6. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  7. Fundamental Analysis

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
  8. Fundamental Analysis

    Gloom and Doom for Global Markets in 2016?

    Learn about the volatility in global markets during the beginning of 2016. See why famous investors are saying some economies could see recessions.
  9. Economics

    Lehman Brothers: The Largest Bankruptcy Filing Ever

    Lehman Brothers survived several crises, but the collapse of the U.S. housing market brought the company to its knees.
  10. Investing News

    Is it the Right Time to Raise Interest Rates?

    Warning signs have started to emerge that point to a potentially dismal 2016 for the U.S. economy.
RELATED FAQS
  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 >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center