Economic Crisis Leads to Big Spike in Extreme Poverty

Extreme Poverty in America Rises Considerably in 10 Years

On Nov. 3rd, the Brookings Institution, a research authority located in Washington D.C., released a new report announcing that in the past 10 years, poverty has risen greatly in America, erasing most of the advances in eradicating poverty made in the 1990s.

According to the report by the Brookings Institution, the number of people living in extreme poverty (defined as communities where poor people make up at least 40 percent of residents) has risen nearly one-third from 2000 to 2005-2009. There were 7 million people living in neighborhoods of extreme poverty in 2000, while that figure rose by 2.2 million in 2005-2009. The greatest recession since the 1970s has caused several million people to lose their jobs. These unemployed people are unable to pay their mortgages and usually lose their homes. Elizabeth Kneebone, one of the authors of the report, said that due to the decline of household income, “the 2000s took an economic toll.” The American Midwest and the South were especially hard hit, due to job losses in manufacturing and a large number of foreclosures.

As of 2010, poverty is defined as a family of four with an annual income of under $22,300. The lowest level of poverty is defined as an income of $5,570 or less for an individual and $11,157 for a family of four. Currently, 46.2 million people are living below the poverty line and approximately 20.5 million people are living in extreme poverty. Those living in extreme poverty made up almost half of the number of people living below the poverty line, and 6.7 percent of the U.S. population. This spike of 6.7 percent is the highest level in the past 35 years, breaking previous records in 2009 and 1993 when the percentage of people living below the poverty line barely broke 6 percent.

This report has demonstrated the impact of the economic recession, proving that the U.S. economy is still recovering. Last year, the average American income reached a 10-year low, and the poverty rate hit a 17-year high. This year, nearly 46.2 million Americans are receiving food stamps from the government, a new record.

The Structure of Poverty in America Is Changing

The number of extreme poor has already climbed to historic levels — nearly one in every 15 Americans live in extreme poverty. After the real estate bubble burst, the poor communities spread from metropolitan areas to urban areas and rural areas where the unemployment rate was high. The latest economic data suggest that the demographics of poverty in America are changing.

According to the Associated Press, Hispanic people, the elderly and working age people are more likely to join the ranks of the poor. All of the figures point to the fact that the U.S. recession has affected mainstream American society to a greater degree. Robert Moffit, a professor of economics at Johns Hopkins University, said, “There now really is no unaffected group, except maybe the very top income earners. Recessions are supposed to be temporary, and when it’s over, everything returns to where it was before. But the worry now is that the downturn — which will end eventually — will have long-lasting effects on families who lose jobs, become worse off and can’t recover.”

Inner-city areas, which were traditionally African American neighborhoods, are changing, and they now include poor Hispanic people who have low incomes or are unemployed. Areas where poor people make up at least 40 percent of residents are expanding, and poverty rates are increasing twice as fast in suburban areas as in urban areas. Poor areas in the previously prosperous Sun Belt are growing very rapidly. Signs of the gap between the rich and the poor are becoming more and more distinct.

Extreme Poverty Is Expanding

Broken down by states, 40 states and the District of Columbia had increases in poverty-stricken areas since 2007, while the remaining states showed no change. The District of Columbia ranked highest at 10.7 percent, followed by Mississippi and New Mexico. Nevada experienced the greatest increase, from 4.6 percent to 7 percent.

According to the Brookings Institution, after the economic boom of the 1990s, the proportion of high poverty areas in metropolitan areas jumped from 11.2 percent in 2000 to 15.1 percent last year. These poverty areas have reached the highest levels since 1990 thanks to 10 years of high unemployment rates and a rise in energy costs. In 2010, America’s largest and richest city, New York City, experienced a skyrocketing increase in poverty to 20.1 percent. New York’s extreme poverty rate reached 16 percent, which is higher than over 200 other areas of extreme poverty.

As a result of the decline of the manufacturing sector, the spread of high poverty areas in Midwestern industrial areas is becoming more common, including in Detroit, Michigan; Grand Rapids, Michigan and Akron, Ohio. Moreover, after the real estate bubble caused housing prices to plummet and unemployment in the construction sector remained high, many high poverty areas appeared in the Sun Belt, including Las Vegas, Nevada; Riverside, California and Cape Coral, Florida. Overall, the number of high poverty communities in suburban areas increased 41 percent since 2000, roughly 20 percent faster than the rate of increase in urban areas.

Ms. Kneebone of the Brookings Institute described the consequences of the changes in the high poverty population. Poor areas often lack good schools, hospitals and government services. Residents in areas of extreme poverty previously were more likely to be white, native-born and without a high school or college degree. As high poverty spreads into new areas, residents of extreme poverty are no longer limited to high school dropouts or single mothers, as was traditionally assumed. Furthermore, many working class and middle class blacks moved to the South and to suburban areas, which helped explain some of the changing trends in poverty.