Poverty in America: Trends and Explanations

O ver the past 45 years, the United States has experienced a rising standard of living, with real GDP per capita more than doubling between 1959 and 2004. In contrast, living standards among some groups seem to have stagnated. The nonelderly poverty rate declined from 1959–1969, but then rose from 10.7 percent in 1970 to 12.7 percent in 1980 and remained at 12.8 percent in 2003. Figure 1 illustrates the trends in GDP per capita and poverty over this period. Although a number of studies have documented a correlation between macroeconomic conditions and poverty, Figure 1 makes clear that the relationship is not as simple, or as strong, as one might think. What additional factors can explain the starkly different trends in economic well-being that are measured by overall GDP growth and the poverty rate? Consideration of additional factors only adds to the puzzle. First, the fraction of women ages 25 to 64 participating in the labor force and contributing to household money income skyrocketed during this period, increasing from 57 percent to 76 percent between 1970 and 2000 according to data from the Current Population Survey. At the same time, average levels of education grew substantially. In 1970, 48 percent of individuals over age 25 had less than a high school education; by 2000 this figure had fallen to 17 percent (U.S. Bureau of the Census, 2004). Finally, the stickiness in the nonelderly poverty rate does not exist for all demographic groups in the United States: poverty rates among the elderly