New Year Likely To Ring In More Poverty

By Lisa Smith | September 18, 2009 AAA



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.)

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