Tuesday, September 21, 2010

Poverty and the Recession: Is The Worst Still Ahead?

Reports released over the last few days provide final dating for the 2007-2009 recession and data on U.S. poverty and income for 2009. How are they related? How did the recession affect poverty? Now that the recession is officially over, can we expect that the worse is behind us in terms of poverty and income?

The Census Bureau report showed the poverty rate rising from 13.2 percent in 2008 to 14.3 percent in 2009, the highest rate since the early 1980s. The figure that grabbed the headlines, however, was not the overall rate but that for working-age Americans, which climbed to 12.9 percent, its highest level since the Census Bureau's continuous data series began 35 years ago. The remarkable increase in working-age poverty is undoubtedly linked to the extreme rate of long-term unemployment, which has risen far above its levels of any previous recession. The economic distress of the working-age population is further indicated by the record numbers of people without heath insurance, also a subject of the Census Bureau report.

Is the worst behind us? Unfortunately, there is little reason to hope that it is. In recessions of the 1960s and 1970s, the peak rate of unemployment tended to coincide with the year in which the recession ended, but starting with the dual recessions of 1980-82, the picture changed. Since then, peak poverty has begun to lag farther and farther behind each recession.

The bottom line: We can expect even worse poverty data in 2010 and probably in 2011 as well.

Follow this link to download a free set of classroom-ready slides with charts and analysis based on the 2009 poverty report.

2 comments:

  1. Karthik-- One important source of the lag seems to be the fact that employment has been recovering more slowly after recent recessions than it did after earlier ones. You can follow this link to find an interesting chart that shows the increasing lag of employment. http://www.rtable.net/images/EmployRecessionJuly2010.jpg

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