Extreme Poverty on the Rise in the United States

A new study from the National Poverty Center finds that 1.65 million American households are living in “extreme poverty,” and these households include 3.55 million children. Using a World Bank definition, the research defines “extreme poverty” as surviving on less than $2 per day, per person, each month. This measure is roughly 13% of the official U.S. poverty threshold. The study utilizes data from the Survey of Income and Program Participation (SIPP) between 1996 and 2011. Between 1996 and 2011, the period directly after welfare reform ended cash entitlement for poor families for children, the number of families living on $2 or less in cash income (per person, per day) rose from 636,000 to 1.65 million. This represents a growth rate of 159%. In 1996, households in extreme poverty made up just 1.7% of all households. This figure increased to 3% by 2010 and reached 4.3% by mid-2011. The researchers also assessed the impact of federal transfer benefits on extreme poverty. When including Supplemental Nutritional Assistance Program (SNAP) benefits in income calculations, the number of extremely poor households increases at a slower place, by 80%, from 475,000 households in 1996 to 857,000 households in 2011. When refundable tax credits and housing subsidies are counted as income, the rate of extreme poverty growth slows even further, with the number of households living in extreme poverty grows from 409,000 in 1996 to 613,000 in 2011. Overall, the existence of major means tested aid programs prevented an estimated 2.38 million children from experiencing extreme poverty. In mid-2011, about 47.5% of households living in extreme poverty were white non-Hispanic, and 46% were African-American or Hispanic. However, when adjusting for means-tested subsidy programs, the proportion of households living in extreme poverty and headed by white non-Hispanics rises to 61.2%. A higher percentage of households living in extreme poverty in 2011 were headed by a single female (50.8%), compared to married couples (36.5%). However, when adjusting for means tested programs, the proportion of extremely poor households headed by a single female drops to below one-third of all households in extreme poverty. According to study authors, the loss of a cash safety net is a contributing factor to the increase of extreme poverty across the country, combined with slow economic growth and major job losses throughout the Great Recession. Further research is needed to identify the extent to which these factors have contributed to the rising incidence of extreme poverty at the household level. The working paper, Rising Extreme Poverty in the United States and the Response of Federal Means-Tested Transfer Programs, is available on the National Poverty Center’s webpage: http://bit.ly/10eBzgg