Facts of the poverty problem
1. No matter how one measures “poverty” there is a great deal of it.
Using a simple, but crude, measure --annual family money income under $3,000 and under $1,500 for unrelated individuals -- there are 35 million Americans who are poor (1962), more than 10 million of whom are children under 18.
Using a measure that adjusts for family size -- $3,000 for a family of 4, and adding or subtracting $500 per person for smaller or larger families (with a maximum of $4,000) -- there are 36 million poor, and a larger number than the 10 million mentioned above are children.
Using the definitions of “need” that are used in establishing eligibility for public assistance in various states, there are 23 million poor.
Even using an income concept which includes not only money income, but also the estimated rental value of owner occupied housing, food produced and consumed on the farm, and other non-money income, there are some 20 million poor (6.1 million families with total 1962 “personal” incomes under $3,000 -- containing perhaps 18 million people -- and 2-3 million unattached individuals with personal incomes under $1,500).
Families with low money incomes also are generally poor in terms of net worth. The Federal Reserve Board’s Survey of Financial Characteristics of Consumers -- most of the details of which have not yet been made public -- showed that of all families with 1962 money incomes of less than $3,000, 43 percent also had net worth under $1,000, and 59 percent had net worth under $5,000 - but 25 percent had $10,000 or more.
(8 percent actually had $25,000 or more. This underscores the incompleteness of a simple money-income measure of poverty, but this has been recognized all the time.)
2. Although the problem is substantial, real progress against poverty has been made.
In 1947 -- at the end of World War II -- 32 percent (11.9 million) of our families had money incomes below $3,000 (in 1962 prices).
Now (1962) just under 20 percent have incomes under $3,000, and the number of such low income families is down to 9.3 million, even though there has been a 25 percent increase in the total number of families.
Between 1947 and 1962 median money income of all families climbed from $4,100 to $6,000 (in 1962 prices).
Progress against poverty has been slowed since 1957 by the chronically high rate of unemployment accompanying the reduced rate of economic growth.
- Between 1947 and 1956, when incomes were growing relatively rapidly, and unemployment was generally low, the number of “poor” families (under $3,000) declined from 11.9 to 9.9 million, or from 32 percent to 23 percent of all families.
- But between 1957 and 1962, with slower economic growth and unemployment rates higher, the number of families in poverty fell less rapidly, to 9.3 million, or 20 percent of all families.
- Thus, the $12 billion tax cut is a vital weapon in the war on poverty, because it will expand employment opportunities (2-3 million additional jobs), increase business investment, and incomes.
Who Are The Poor
- The poor are by no means simply the unemployed. In 1962, 70 percent of poor families had at least one income earner, and 23 percent had 2 or more. Their problem is not lack of jobs, but lack of skills and productivity (and the Economic Opportunity Act is directed at these).
- Lack of education is a significant correlate of poverty. Of all families with incomes under $3,000 in 1962, 61 percent were headed by persons with 8 years or less of schooling. A family headed by a person with so little education has more than one chance in 3 of being poor. This is more than 3 times the likelihood that a family headed by a high school graduate will be poor, and nearly 5 times the likelihood that a family headed by a person with some college education will be poor.
- Discrimination in employment and education contributes to poverty. Even when non-whites have the same number of years of schooling as whites, the odds are twice as high that the non-whites will be poor. Even with the same occupation and the same amount of schooling non-whites earn significantly less than whites. Among elementary school graduates non-whites earn 72 percent as much as whites in the occupations of craftsmen, foremen, and kindred workers. 68 percent as much in the occupation of truck and tractor drivers. 62 percent as much in the occupation of farm laborers and foremen.
- Some other facts on “Who Are the Poor?”
- One-third are headed by a person over 65
- One-fourth are fatherless
- One-sixth live on farms
- One-third of the poor are children
The Costs of PovertyWe pay twice for poverty: once in the production lost in wasted human potential:
- More than 6 million (of the total of 9.3 million) poor families have at least one-earner. If the productivity of only 1 person in each of those families were raised by only $1,000 per year, $9 billion would be added directly to GNP each year (64 billion divided by 0.7, since wages are about 70 percent of national income). $2 billion or more would probably be added to tax revenues, relieving tax burdens on the non-poor.
- Military rejections among the poor are very high, for they frequently have poor health and poor education.
And we pay for poverty again in the resources diverted from other uses to coping with poverty’s social by-products:
- Much juvenile delinquency and adult crime have their roots in poverty. As poverty shrinks, so will the need to expand police, fire, and health departments, which cost the nation $8 billion annually.
- Public (not to mention private) assistance currently costs over $4 billion a year. The effective elimination of poverty would sharply reduce it. (This amount, which represents “transfer payments,” should not be added to any of the quantities above.)
