Divided State of America

A significant and growing portion of the population lives in poverty. In 2007, the rate was 12.5 percent. By 2010, it was 15.1 percent.


www.washingtonpost.com/opinions/the-poor-are-the-americans-no-one-wants-to-talk-about/2012/01/18/gIQADZM5BQ_story.html

Third world America: Bodies driven to a pauper’s burial in a U-Haul as tough economic times lead to more mass graves

article 2088709 0F85BCB200000578 201 634x421 Divided State of America
Mass burial: Workers fill a pauper’s grave at Homewood Memorial Gardens with remains from the Cook County, Illinois morgue


www.dailymail.co.uk/news/article-2088709/Third-world-America-Pics-paupers-grave-Chicago.htmlhttp://www.dailymail.co.uk/news/article-2088709/Third-world-America-Pics-paupers-grave-Chicago.html

Guest Column: What happened to the American Dream


news.cincinnati.com/article/20120115/EDIT02/301150046/Guest-Column-What-happened-American-Dream-?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE%7Cs

Study of Retail Workers Finds $9.50 Median Pay


www.nytimes.com/2012/01/16/nyregion/study-offers-a-look-at-new-yorks-retail-workers.html

While watching a regional sports show, host Bruce Drennan commented: “We are the divided states of America.”

Income inequality, because the middle class is dying due to lack of upward mobility, represents one of the most lethal structural threats to our republic. Like illegal immigration, the Iraq War with its concomitant loss of life and futile spending, and the absence of a coherent energy policy, these problems are self-inflicted by lack of leadership: sound judgment and vision.

19krugman2.533 Divided State of America

03campaign 337 395 articleLarge Divided State of America Democrats are looking to 1984, when President Ronald Reagan won re-election after the unemployment rate peaked at 10.8 in late 1982, fell to 8.5 percent a year from Election Day — about where it is now — and declined to 7.4 percent by the time voters went to the polls.

The press for government de-regulation and leveraged buy-outs, which consolidated companies and cut thousands of jobs, accelerated during the Reagan era. Paul Volcker, the Fed, tamed inflation with high interest rates for the good of bond-holders, which caused deflation. Energy producers, real estate, labor, miners, family farms that folded, were collateral damage.

 Divided State of America

p. 668-717

Forget inflation: Is deflation the real threat?

Ask most investors what they worry about, and they’ll tell you it’s inflation — specifically, a period of soaring prices that destroys the value of the dollar.

But a growing number of economists and money managers are starting to worry about the opposite of inflation: deflation, a period of falling prices and declining incomes.

www.floridatoday.com/usatoday/article/52457310

Economic mobility that once meant a comfortable middle class life: vacations, medical insurance, a pension, children to college, is gone with the wind. Call center jobs and associates who move merchandise in warehousese from foreign suppliers for box stores to sell do not translate into incomes that allow families to prosper. Revitalizing manufacturing in our country can ease but will not solve the problem of the declining middle class.

A study by the Keystone Research Center, “State of Working Pennsylvania 2006,” as well as other studies, showed that “the benefits of the increase in national wealth created by productivity growth are flowing to a relatively small number of privileged people who are amassing great fortunes while wage earners’ standard of living declines or at best stagnates….As in Latin America, the concentration of income and economic power is bad for the middle class, for upward mobility and, ultimately, for American democracy.” Concentration of wealth in fewer hands, the top ten percent of the richest Americans, using data from 2005, has approached levels not seen since the 1920s. Income for the bottom 90 percent declined slightly while income gains for the top one percent increased on average $1.1million. The top ten percent, who make six figure salaries or better, “collected 48.5 percent of all reported income in 2005.” Economist, Emmanuel Saez, a professor at the University of California, Berkeley, cautioned: “If the economy is growing but only a few are enjoying the benefits, it goes to our sense of fairness…It can have important political consequences.”

Mark Widoff, The Sunday Patriot – News, December 24, 2006; David Cay Johnston, The New York Times, March 29, 2007.

 Divided State of America

From Three Quarter Cadillac

The Occupy Wall Street movement is a symptom of diminished expectations and frustration with the system, embodied by the excess of investment bankers who sold toxic paper to suckers.

Americans recognize that equal outcome is baloney but we know that the opportunity to succeed with sweat equity and enjoy life has faded from the realm of probability for much of the 99 percent. Free trade is one of the reasons.

“The Wall Street economists knew it wasn’t so. The free market itself was always a fiction.”

p. 666

Tax breaks and assorted incentives for companies that relocate is not the free market at work.

“Such deals are hardly unusual. Companies routinely seek tax breaks to relocate or to stay put. But the new report found that many states lack safeguards to make sure that the money they give companies creates long-lasting jobs that pay well.“


www.dispatch.com/content/stories/business/2011/12/19/states-incentives-carry-few-strings.html

When are tax breaks corporate welfare?


www.dispatch.com/content/stories/local/2011/12/04/when-are-tax-breaks-corporate-welfare.html

www.minneapolisfed.org/publications_papers/studies/econwar/media.cfm

Tax breaks for jobs: Half fall short

In Southwest Ohio, 12 of the 20 largest projects failed to meet hiring commitments – four even closed down and moved out. Only 4,804 jobs were created out of 6,534 promised. In return, Ohio has awarded tax breaks worth at least $19 million to the 20.

…Short-term, states are giving up millions in tax dollars while cutting programs to schools, child welfare and senior health care. Cities and townships are committing public funds as well, spending millions to build roads, sewers and other infrastructure to support private offices and manufacturing plants.

Long-term, states risk losing business to competing states if they fail to offer the best incentives. And the ripple effects are substantial: People with good jobs pay higher individual taxes, buy nice houses, support schools and spend money in their communities.

http://news.cincinnati.com/article/20120113/BIZ/301130131/Tax-breaks-jobs-Half-fall-short?odyssey=tab|topnews|text|Business

Is the American Dream over? Gap between rich and poor gets ever wider as U.S. citizens struggle to climb wealth ladder


Nearly two thirds of Americans stay on bottom pay bracket throughout their whole lives
International comparisons show U.S. is one of worst in the Western world for social mobility

article 2083165 0F5C566B00000578 629 468x400 Divided State of America

By DAVID GARDNER
Last updated at 1:44 AM on 7th January 2012

For years millions flocked to the United States eager to make their fortune, but now it seems the American Dream is over.

The idea – to rise from humble origins to become part of the wealthy elite – has become outdated as the rich become richer and the poor more mired in poverty, it is claimed.

Turning conventional wisdom on its head, the studies claim that Americans enjoy much less economic mobility than their peers in Britain and the rest of Western Europe.

The idea of the American Dream – to rise from humble origins to become part of the wealthy elite – has become outdated as the rich have become richer and the poor more mired in poverty.

According to the New York Times, at least five studies have found the US to be less mobile than comparable nations.

Denting claims that the US has a classless society, about 62 per cent of Americans raised in the top fifth of incomes stay in the top two-fifths, according to researchers from the Economic Mobility Project of the Pew Charitable Trusts.

Similarly, 65 per cent born in the bottom fifth stay in the bottom two-fifths.

In a recent project led by Swedish economist Markus Jantti, it emerged that 42 per cent of American men raised in the bottom fifth of incomes stay there as adults. That compares with 30 per cent in the UK and 25 per cent in Denmark.

Just 8 per cent of American men at the bottom rose to the top fifth, compared to 12 per cent of the British and 14 per cent of Danes.

John Bridgeland, a former aide to George Bush, said he was ‘shocked’ by the international comparisons.

‘Republicans will not feel compelled to talk about income inequality,’ he said of the upcoming presidential challenge. ‘But they will feel the need to talk about a lack of mobility – a lack of access to the American Dream,’ he told the Times.

‘It’s becoming conventional wisdom that the US does not have as much mobility as most other advanced countries,’ added Isabel Sawhill, an economist at the Washington-based Brookings Institute.

‘I don’t think you’ll find too many people who will argue with that.’

With rising jobless figures, the sheer depth of poverty in some areas is one of the chief reasons for the growing gap. Another is said to be the high importance US employers put on university degrees.

Through tradition or finances, parents from poorer homes tend to put less priority on schooling and consequently, their children have less opportunities for bettering themselves.

‘The bottom fifth in the US looks very different from the bottom fifth in other countries. Poor Americans have to work their way up from a lower floor,’ said Scott Winship, a researcher at Brookings Institution.

The middle classes remain the fluid buffer between higher and lower income groups.

About 36 per cent of Americans raised in the middle fifth move up as adults while 23 per cent stay on the same level and 41 per cent move down, according to the Pew Research figures.

Until recently, there has been very little data to challenge America’s idea of itself as a class free nation.

In 2006, a University of Ottawa economist, Professor Miles Corak, reviewed studies from nine countries and ranked Canada, Finland, Norway and Denmark as the most mobile with the US and Britain tied at the other end of the scale. Germany, Sweden and France were in the middle.

‘Family background plays more of a role in the US than in most comparable countries,’ Professor Corak told the Times.

‘If America is so poor in economic mobility, maybe someone should tell all these people who still want to come to the US,’ said Stuart Butler, an analyst at the Heritage Foundation.


www.dailymail.co.uk/news/article-2083439/Is-American-Dream-Gap-rich-poor-gets-wider-U-S-citizens-struggle-climb-wealth-ladder.html

Harder for Americans to Rise From Lower Rungs

By JASON DePARLE
Published: January 4, 2012

WASHINGTON — Benjamin Franklin did it. Henry Ford did it. And American life is built on the faith that others can do it, too: rise from humble origins to economic heights. “Movin’ on up,” George Jefferson-style, is not only a sitcom song but a civil religion.

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.

Former Senator Rick Santorum of Pennsylvania, a Republican candidate for president,warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America.” National Review, a conservative thought leader, wrote that “most Western European and English-speaking nations have higher rates of mobility.” Even Representative Paul D. Ryan, a Wisconsin Republican who argues that overall mobility remains high, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

Liberal commentators have long emphasized class, but the attention on the right is largely new.

“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”

One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent) — a country famous for its class constraints.

Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.

By emphasizing the influence of family background, the studies not only challenge American identity but speak to the debate about inequality. While liberals often complain that the United States has unusually large income gaps, many conservatives have argued that the system is fair because mobility is especially high, too: everyone can climb the ladder. Now the evidence suggests that America is not only less equal, but also less mobile.

John Bridgeland, a former aide to President George W. Bush who helped start Opportunity Nation, an effort to seek policy solutions, said he was “shocked” by the international comparisons. “Republicans will not feel compelled to talk about income inequality,” Mr. Bridgeland said. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.”

While Europe differs from the United States in culture and demographics, a more telling comparison may be with Canada, a neighbor with significant ethnic diversity. Miles Corak, an economist at the University of Ottawa, found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

“Family background plays more of a role in the U.S. than in most comparable countries,” Professor Corak said in an interview.

Skeptics caution that the studies measure “relative mobility” — how likely children are to move from their parents’ place in the income distribution. That is different from asking whether they have more money. Most Americans have higher incomes than their parents because the country has grown richer.

Some conservatives say this measure, called absolute mobility, is a better gauge of opportunity. A Pew study found that 81 percent of Americans have higher incomes than their parents (after accounting for family size). There is no comparable data on other countries.

Since they require two generations of data, the studies also omit immigrants, whose upward movement has long been considered an American strength. “If America is so poor in economic mobility, maybe someone should tell all these people who still want to come to the U.S.,” said Stuart M. Butler, an analyst at the Heritage Foundation.

The income compression in rival countries may also make them seem more mobile. Reihan Salam, a writer for The Daily and National Review Online, has calculated that a Danish family can move from the 10th percentile to the 90th percentile with $45,000 of additional earnings, while an American family would need an additional $93,000.

Even by measures of relative mobility, Middle America remains fluid. About 36 percent of Americans raised in the middle fifth move up as adults, while 23 percent stay on the same rung and 41 percent move down, according to Pew research. The “stickiness” appears at the top and bottom, as affluent families transmit their advantages and poor families stay trapped.

While Americans have boasted of casting off class since Poor Richard’s Almanac, until recently there has been little data.

Pioneering work in the early 1980s by Gary S. Becker, a Nobel laureate in economics, found only a mild relationship between fathers’ earnings and those of their sons. But when better data became available a decade later, another prominent economist, Gary Solon, found the bond twice as strong. Most researchers now estimate the “elasticity” of father-son earnings at 0.5, which means if one man earns $100,000 more than another, his sons would earn $50,000 more on average than the sons of the poorer man.

In 2006 Professor Corak reviewed more than 50 studies of nine countries. He ranked Canada, Norway, Finland and Denmark as the most mobile, with the United States and Britain roughly tied at the other extreme. Sweden, Germany, and France were scattered across the middle.

The causes of America’s mobility problem are a topic of dispute — starting with the debates over poverty. The United States maintains a thinner safety net than other rich countries, leaving more children vulnerable to debilitating hardships.

Poor Americans are also more likely than foreign peers to grow up with single mothers. That places them at an elevated risk of experiencing poverty and related problems, a point frequently made by Mr. Santorum, who surged into contention in the Iowa caucuses. The United States also has uniquely high incarceration rates, and a longer history of racial stratification than its peers.

“The bottom fifth in the U.S. looks very different from the bottom fifth in other countries,” said Scott Winship, a researcher at the Brookings Institution, who wrote the article for National Review. “Poor Americans have to work their way up from a lower floor.”

A second distinguishing American trait is the pay tilt toward educated workers. While in theory that could help poor children rise — good learners can become high earners — more often it favors the children of the educated and affluent, who have access to better schools and arrive in them more prepared to learn.

“Upper-income families can invest more in their children’s education and they may have a better understanding of what it takes to get a good education,” said Eric Wanner, president of the Russell Sage Foundation, which gives grants to social scientists.

The United States is also less unionized than many of its peers, which may lower wages among the least skilled, and has public health problems, like obesity and diabetes, which can limit education and employment.

Perhaps another brake on American mobility is the sheer magnitude of the gaps between rich and the rest — the theme of the Occupy Wall Street protests, which emphasize the power of the privileged to protect their interests. Countries with less equality generally have less mobility.

Mr. Salam recently wrote that relative mobility “is overrated as a social policy goal” compared with raising incomes across the board. Parents naturally try to help their children, and a completely mobile society would mean complete insecurity: anyone could tumble any time.

But he finds the stagnation at the bottom alarming and warns that it will worsen. Most of the studies end with people born before 1970, while wage gaps, single motherhood and incarceration increased later. Until more recent data arrives, he said, “we don’t know the half of it.”

http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html

The danger in a declining middle class

By David Ignatius, Published: January 4

It’s a sign of these unsettled times that the analyst who famously announced “the end of history” in 1989, when the Soviet empire was crumbling and liberal, free-market democracy seemed inevitable, has published a new essay with the provocative title “The Future of History.”

Francis Fukuyama’s article in the January edition of Foreign Affairs offers a good introduction to what may be the biggest political issue of 2012 — the decline of the middle class in the United States and around the world. Without this middle class, Fukuyama argues, liberal democracy loses its anchor.

“Protect the middle class” is a rote slogan for both parties in this presidential election year. But Fukuyama argues that the danger comes not from particular tax or spending policies of either party but from the very dynamic of the modern, global economy. This new world may be flat, but it’s also tilted — with the benefits flowing disproportionately toward the elites.

“Inequality has always existed, as a result of natural differences in talent and character,” writes Fukuyama. “But today’s technological world vastly magnifies those differences.” The fortunate few “can become financial wizards or software engineers and take home ever-larger proportions of the national wealth.”

Fukuyama is a useful bellwether. “The End of History” was widely cited as the apogee of post-Cold War optimism and then derided after Sept. 11, 2001, when history seemed to have returned with a vengeance.

Fukuyama isn’t revising his enthusiasm for liberal democracy, which he still sees as “the default ideology around much of the world today.” Instead, he’s questioning whether the global market may be the enemy of liberal democracy, rather than its handmaiden. In 1989, he saw the technology-driven global marketplace — and its ever-spreading wealth — as a crucial reason for “the end of history” and the universal embrace of democratic values. Now, he worries that globalization is eroding the middle class that is, historically, the bulwark of a liberal political order.

“What if the further development of technology and globalization undermines the middle class and makes it impossible for more than a minority of citizens in an advanced society to achieve middle-class status?” asks Fukuyama.

He notes that this process is already beginning in the United States, where real median incomes have been flat since the 1970s. And he cautions: “The kind of work done by the old middle class in the developed world can now be performed much more cheaply elsewhere.”

Fukuyama sees rising anger among middle-class Americans toward Wall Street. But he notes the paradox that the chief beneficiary has been the Tea Party movement that endorses the corporate status quo, rather than the Occupy Wall Street protesters who challenge it. That dynamic is apparent in Europe as well, where, Fukuyama says, “the left is anemic and right-wing populist parties are on the move.”

This critique is well displayed by Foreign Affairs, as a centerpiece of its 90th anniversary issue. As part of this package, the editors include excerpts from articles since the magazine’s founding — including many that discussed the rise of communism and fascism in response to the economic crisis of the 1930s.

It makes for disturbing reading, as in this 1932 article that sought to explain Adolf Hitler’s growing appeal in Germany: “Fundamentally it is a question of the hard times which have settled over Germany.. . .As regards the middle classes, which used to be Germany’s backbone, the standard of living is far below the pre-war level.”

As Campaign 2012 begins for real this week, the core question is the economy. The public is angry at Wall Street elites who seem to be gaming the system, but it’s a testimony to the health of American politics that neither President Obama nor his leading Republican opponents are demagoguing this issue. Every candidate has a multitiered plan for economic renewal. What’s missing is a formula for breaking the national political deadlock so that any such program can be enacted.

In a passage that is eerily similar to some of what appeared in Foreign Affairs in the 1930s, Fukuyama notes: “Many people currently admire the Chinese system not just for its economic record but also because it can make large, complex decisions quickly, compared with the agonizing policy paralysis that has struck both the United States and Europe in the past few years.”

That’s a warning sign — when people look to a totalitarian state for a system that works.


www.washingtonpost.com/opinions/the-danger-in-a-declining-middle-class/2012/01/03/gIQAgwyPbP_story.html

No longer the land of opportunity

By Harold Meyerson, Published: January 3

“Over the past three years, Barack Obama has been replacing our merit-based society with an Entitlement Society,” Mitt Romney wrote in USA Today last month. The coming election, Romney told Wall Street Journal editors last month, will be “a very simple choice” between Obama’s “European social democratic” vision and “a merit-based opportunity society — an American-style society — where people earn their rewards based on their education, their work, their willingness to take risks and their dreams.”

Romney’s assertions are the centerpiece of his, and his party’s, critique not just of Obama but of American liberalism generally. But they fail to explain how and why the American economy has declined the past few decades — in good part because they betray no awareness that Europe’s social democracies now fit the description of “merit-based opportunity societies” much more than ours does.

The best way to measure a nation’s merit-based status is to look at its intergenerational economic mobility: Do children move up and down the economic ladder based on their own abilities, or does their economic standing simply replicate their parents’? Sadly, as the American middle class has thinned out over recent decades, the idea of America as the land of opportunity has become a farce. As a paper by Julia Isaacs of the Brookings Institution has shown, sons’ earnings approximate those of their fathers about three times more frequently in the United States than they do in Denmark, Norway and Finland, and about 1 1/2 times more frequently than they do in Germany. The European social democracies — where taxes, entitlements and the rate of unionization greatly exceed America’s — are demonstrably more merit-based than the United States.

That’s hardly the only measure by which Europe’s social democracies demonstrate more dynamism than our increasingly sclerotic plutocracy. Unemployment rates in Northern European nations — as of October, Germany’s unemployment rate was 6.5 percent; the Netherlands, 4.8 percent; Sweden 7.4 percent — are substantially lower than ours (9 percent then). Denmark, Sweden, Finland and Germany in particular have sizable trade surpluses, while the United States runs the largest trade deficits in human history.

There are, of course, a multitude of reasons the nations of Northern Europe are outperforming us. But if entitlements and social democracy were anywhere near the impediments to enterprise that Romney claims, Germany would hardly be the most successful economy in the advanced industrial world, with those of Scandinavia close behind.

The secrets of social democracy’s successes are in plain view. In Scandinavia, government commitment to worker retraining and job relocation mean that there is no major political pressure to keep failing firms in business; it’s a policy that favors innovative start-ups. In Germany, management and unions cooperate to upgrade their products and their processes — partly because corporate boards consist of equal numbers of management and worker representatives. Germany’s surge in exports may be partly attributable to its union workers agreeing to hold their wages flat (at levels still well above those of their U.S. counterparts). But their workers’ willingness to sacrifice in order to stay competitive is surely increased by the fact that their CEOs on average make just 11 times as much as their workers. In the United States, chief executives make roughly 200 to 300 times (choose your survey) as much as their average employees’ salary.

Which brings us back to Romney’s characterization of our country as a merit-based society and his failure to notice the huge changes in economic rewards over the past three decades. During the 30 years after World War II, the average American family’s income doubled, while chief executives’ income was restrained, increasing by less than 1 percent annually, according to a 2010 paper by economists Carola Frydman and Raven Saks. Beginning around 1980, however, as unions were smashed, industry moved offshore and executive pay skyrocketed, the incomes of most Americans began to flatten or decline, while financiers and corporate leaders were able to claim more and more of the nation’s income for themselves.

Corporate leaders have been rewarded with huge payouts even when their corporation’s performance has been disappointing. Conversely, millions of Americans have maintained or upgraded their skills yet seen their jobs shipped abroad or downgraded. Is this a description of a merit-based society? How does it compare with that of mid-century America, when the rewards for work were distributed more broadly?

Romney and his Bain Capital buddies may view their wealth as the just rewards endemic to successful people in a merit-based society. But why are so few Americans sharing in those rewards today while so many Americans shared in them 40 years ago? Are most Americans no longer meritorious? Or has our country ceased to reward any but the rich and powerful?


www.washingtonpost.com/opinions/no-longer-the-land-of-opportunity/2012/01/02/gIQAOJVDZP_story.html

Democrats and G.O.P. Seize on Competing Narratives


www.nytimes.com/2011/12/03/us/politics/jobless-numbers-spur-competing-political-narratives.html

Poverty in America likely to get worse, report finds
Indiana University study says 46 million Americans are living below the poverty line – up 27% since start of recession

Chris McGreal
guardian.co.uk, Wednesday 11 January 2012 11.12 EST

Detroit soup kitchen US p 007 Divided State of America
A soup kitchen in Detroit. The report said Michigan had one of the highest rates of poverty, with minorities among the hardest hit. Photograph: Mark Blinch/Reuters

Millions of Americans will be forced into poverty in the coming years even as the US hauls itself out of the longest and deepest recession since the second world war.

A study from Indiana University, released on Wednesday, says the number of Americans living below the poverty line surged by 27% since the beginning of what it calls the “Great Recession” in 2006, driving 10 million more people into poverty.

The report warns that the numbers will continue to rise, because although the recession is technically over, its continued impact on cuts to welfare budgets and the quality of new, often poorly paid, jobs can be expected to force many more people in to poverty. It is also difficult for those already under water to get back up again.

“Poverty in America is remarkably widespread,” concludes the study, At Risk: America’s Poor During and After the Great Recession. “The number of people living in poverty is increasing and is expected to increase further, despite the recovery.”

The white paper, drafted by the university’s school of public and environmental affairs, which is among the best ranked schools of its kind in the US, says that six years ago, 36.5 million Americans fell below the poverty line. By 2010, the number of people living in poverty rose to 46.2 million and continued to grow over the past year.
“The Great Recession has left behind the largest number of long-term unemployed people since records were first kept in 1948. More than 4 million Americans report that they have been unemployed for more than 12 months,” said the report.

John Graham, dean of the school and one of the authors of the report, said that the numbers of “new poor” will continue to rise.

“One of the big surprises is that poverty in the United States is likely to continue to increase even as the economic recovery unfolds,” said Graham. “The unique feature of the great recession is not just the high rate of unemployment, but the long duration of unemployment that millions of Americans have experienced. [For] a lot of these long-term unemployed, the job that they had won’t exist when they go back in to the labour market.”

Graham said that many of those who once held well-paid jobs will be forced to settle for lower paying work, trapping some in a permanent cycle of poverty.

“As a consequence they will be poor or near poor for a substantial period of time,” he said.

The latest census data shows that nearly one in two of the US’s 300 million citizens are now officially classified as having a low income or living in poverty. One in five families earns less than $15,000 (£9,600) a year.

The Indiana University study says that the numbers of people falling into poverty is also likely to grow because of severe cuts to state and federal welfare budgets.

“The states by their constitutions all have to have a balanced budget each year. A lot of states are already in the process of cutting back their safety net programmes at the same time that poverty is increasing,” said Graham. “Their needs are going up but the programmes are receiving less support. It’s going to continue because the revenues of state governments are not increasing as rapidly as is needed and the federal government will be under a lot of pressure because of its large deficit to decrease funding given to the states.”

The report warns that the situation is likely to become even worse if the long-term unemployed lose their jobless benefits. Congress extended them for two months at the end of the year, but it is unlikely they will be continued indefinitely.

Among the most severely affected states are Florida, Nevada and Arizona, which have been particularly badly hit by the housing foreclosure crisis, and Michigan and Ohio, which have seen the collapse of traditional manufacturing.

Minorities are among the hardest hit. More than one in four African Americans and Hispanics is officially recorded as living in poverty. About one in 10 white Americans fall below the poverty line.

“We can expect to find that the most vulnerable parts of our society are the ones who will recover most slowly from a deep recession like this. More have gone in to poverty and they’ll be slower coming out of it,” said Graham. “If you look at the educational levels and skill levels of African Americans and Hispanics, they are more vulnerable as the job market tightens. They don’t have either the extra edge in education or skills that white Americans do.”

The report says that the situation would have been much worse had it not been for the Obama administration’s 2009 federal stimulus package, which increased child health insurance for poorer families, and cut taxes for low income workers.

Still, the study says that although unemployment is officially falling, that may not be the whole story. Some workers give up looking for jobs and are no longer counted in the unemployment rate.

“Although the official rate of unemployment is declining, much of this apparent progress is attributable to the fact that many adults are giving up on the search for a job,” it said.

The report argues that a better measure of how well an economy is creating employment is the “jobs-to-people ratio”. It says that in a healthy economy the range is between 0.60 and 0.70. The US fell within that range until it fell to 0.582 at the end of 2009. It had risen only to 0.585 in November 2011.

“These data suggest that the reported progress in reducing the rate of unemployment may not be as encouraging as we think since increasing numbers of the unemployed may simply be giving up on the search for a job,” the report said.


www.guardian.co.uk/business/2012/jan/11/poverty-america-likely-worse-report

Divided State of America

Posts



About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
This entry was posted in Economics and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*


2 − = one

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>