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Why Has the Poverty Rate Not Fallen Since the Early 1970s? |
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Between the end of World War II and 1973, the percentage of Americans living in poverty fell by half. Since then, however, the overall poverty rate has remained largely unchanged. In the 25-year period following the end of World War II, earnings marched steadily upward. By 1973, the real weekly earnings of private sector, nonfarm, nonsupervisory production workers stood at $650, more than 60 percent higher than in 1947. It was as if all of America was on an up-escalator, each year higher than the previous. As earnings rose, the poverty rate plummeted --- falling from 22 percent in 1960 to 11 percent by 1973. The causes of the decline in earnings over the last 30 years include sweeping technological and globalization changes that have placed a premium on higher education, demographic changes that have produced a generation less prepared for college than the previous one, the decline of collective bargaining and unionization, and the erosion of the value of the minimum wage. In the short term, enhancing the Earned Income Tax Credit (EITC), especially for single individuals, and indexing the minimum wage to inflation could be an effective strategy for boosting employment and earnings and reducing poverty. In the long term, evidence-based investments in educational reform --- from pre-kindergarten classes to community colleges --- should equip the next generation with the skills they need to obtain high-paying jobs. Of course, we still have much to learn about how to scale up even the most promising short- and long-term interventions. Would earnings supplements, which have been tested mostly with women, have long-term employment effects on men?
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