Deep poverty undermines our economic potential

http://www.cbsnews.com/news/deep-poverty-undermines-our-economic-potential/

By Mark Thoma May 12, 2015

Poverty has declined from around 26 percent in the 1960s to around 16 percent in 2012. But the range of change has been relatively flat since 2000, and a closer look at the numbers reveals a substantial and growing number of these households have incomes that are less than half the official poverty level.

According to a recent report from the Brookings Institution, a Washington-based think tank, more than six percent of the U.S. population, including 7.1 million children, lived in deep poverty in 2011. Deep poverty is defined as having a cash income less than half of the federal poverty level (for example, the threshold in 2015 is an annual cash income of $12,125 for a married couple with two kids). In addition, over 1.5 million households in the U.S. lived in extreme poverty in 2011, defined as surviving on $2 or less in cash income per person per day.

Both types of poverty have been growing recently, extreme poverty in particular

What is the cause of the rise in deep and extreme poverty? The Brooking report notes that while there is some disagreement in the literature, the 1996 welfare reforms are often cited by researchers as a primary cause. The work requirements in the measures along with time limits on benefits induced many households to begin working and they ended up better off. But many households were unable or unwilling, and when the cash assistance dried up these households "became reliant on a hodgepodge of government support, such as SNAP, housing subsidies, Medicaid/CHIP" that left them worse off overall.

The report also asks who is in deep poverty:

Over 10 percent of children younger than six live in families in deep poverty.

10 and 12 percent of black Americans and Hispanics, respectively, are in deep poverty as compared to only five percent of whites.

Individuals and single-mother families are at greatest risk of falling into deep poverty.

Deep poverty has a detrimental impact on the future of children who live in these households. According to the report, "There is reason to believe that even a short amount of time in deep poverty damages the prospects of children's success." That is one of the reasons why deep poverty persists across generations, "14 percent of those who were born deeply poor will be in deep poverty at age 40, about three times as many as those who were not born in deep poverty."

This is a huge waste of human potential, and points to the need for increased social investment in the children living in these conditions. Providing pre-school programs, health and dental care, housing, adequate nutrition, after-school care, and so on will all pay future dividends. As these children grow up to be healthier and more productive adults, they will work more, pay more in taxes, and consume less in social services, making us all better off.