Poverty and the Great Recession Study Notes

Authors: Sheldon Danziger, Koji Chavez, and Erin Cumberworth.
Title: "Poverty and the Great Recession"
Source: Recession Trends Report, pp. 1–5.
Copyright: © 2012 by the Russell Sage Foundation, 112 East 64th Street, New York, NY 10065. Reprinted with permission.

Poverty in History: A belief exists among the American populace that economic growth benefits all socioeconomic classes, summarized by the phrase, "a rising tide lifts all boats."
Economic Performance (Post-WWII to 1970s):
- Inflation-adjusted earnings of both less-educated and more-educated workers rose significantly.
- Family incomes increased across all quintiles, leading to a rapid decrease in poverty rates.
- Official poverty rate fell from 22.4% in 1959 to 11.1% in 1973.
- This period is often referred to as the “golden age” of poverty reduction.

Decline of the Golden Age (1970s Onwards):
- The closure of this golden age marks the beginning of stagnation in real wage growth.
- Poverty rates have never returned to the 1973 lows post-golden age, indicating an enduring economic challenge.
- Growth rates became insufficient to diminish poverty significantly, even with low unemployment.

Economic Changes Post-1973: Several factors caused stagnant poverty levels despite rising Gross National Product per capita:
- Labor-saving technological advancements.
- Globalization affecting labor and product markets.
- Immigration of low-education workers.
- Decline in the real value of minimum wage.
- Decreased influence of labor unions.
21st Century Economic Trends:
- The first decade saw slow economic growth and rising poverty rates despite a mild recession in 2001.
- There was no wage growth for less-educated or median workers even during economic recovery phases.

Definition & Timeline:
- The Great Recession officially occurred from December 2007 to June 2009.
- Poverty rose to 15.1% by 2010, with sustained unemployment above 9% post-recession.
Poverty Comparisons with Past Recessions:
- Compared with the early recessions of 1980s and 1990s, which experienced faster recoveries and higher poverty rates (15% in 1982 and 1993).
Impact of Government Responses:
- The American Recovery and Reinvestment Act of 2009 bolstered unemployment insurance and other safety net programs, preventing further poverty spikes.
- However, key programs expired and deficit reduction took precedence over extended support for the poor.

Analysis by Age Groups:
- Historical poverty rates indicate children (under 18) are more vulnerable to economic downturns than adults.
- From 2007 to 2010, child poverty rose by 4.0 percentage points, compared to a 2.6 percentage points increase for all persons.
Comparative Rates for the Elderly:
- Elderly poverty has decreased since 1967, showing resilience against economic downturns due to robust safety net policies.
- In 1966, elderly poverty was at 28.5%, contrasting with a 2010 rate of 9%.
Working Age Adults (18-64):
- Experienced most significant fluctuations across economic cycles, with young adults particularly affected.
- In 2007, poverty rates for young adults (18-24: 17.3%) and (25-34: 12.3%) rose sharply post-recession.

Trends by Educational Attainment:
- Poverty rate for individuals over 25 with no more than high school education rose dramatically.
- Rates between 2007 and 2010: less than high school degree increased from 28.1% to 33.6%, high school graduates from 11.7% to 15%, while college graduates displayed marginal increase from 3.4% to 4.3%.
Impact on Young College Graduates:
- Despite discussions around college-educated individuals during the recession, poverty rates for less-educated young adults were significantly more impacted.

Poverty Rates by Demographics:
- Black non-Hispanics and Hispanics experienced higher poverty rates and greater increases during the Great Recession.
- Poverty rates from 2007 to 2010: Black non-Hispanic rose by 3.7 percentage points, Hispanics by 4.5 percentage points, while white non-Hispanics rose by only 2.2 percentage points.

Welfare Reform Outcomes:
- The transition of welfare recipients, particularly single mothers, to work did not necessarily equate to improved financial conditions during the recession.
Employment Trends 2007-2010:
- Proportion of working individuals in poor families decreased from 66.6% to 63.5%, with notable declines in single-mother families.

Critiques of Official Poverty Measure:
- Based on pre-tax money income, failing to consider government benefits, taxes, or variable living costs.
Supplemental Poverty Measure (SPM):
- Launched in November 2011, aims to address these flaws and offers a more accurate representation of poverty that includes non-cash benefits and reflects geographical living cost disparities.

Forecasts and Challenges:
- Current trends indicate that poverty is projected to remain high, potentially around 14.5% by 2016.
- Emphasis on the need for enhanced public policy focused on poverty reduction as economic recovery evolves.