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Friday
May042018

Is Low Unemployment the Answer to Poverty?

The jobless rate in America is below 4% for the first time since 2000. A good part of the most recent dip in the jobless rate is from people leaving the job market, but still, of the roughly 63% of the U.S. population that are seeking a job, 96.1% have found one. These improvements in unemployment rates have been shared with the African-American and Hispanic workers who are also at all-time lows in unemployment. Wages are still low for many of these jobs, relative to what is needed to live comfortably, and although wages have been increasing, much of the increase is due to the 18 states that raised their minimum wage this year, and increased salaries for higher paying jobs (or those dependent upon immigrant workers, who are entering the country at lower rates). On top of that, the inflation rate of 2.45% is nearly equal to the rate of increase in wages of 2.6%. So far there is little evidence that the tax cuts in the 2018 tax bill have led to increased wages, as opposed to stock buybacks for most large corporations. 

These numbers indicate a need to examine proposals for meeting the needs of the poorer section of our population. There are still pockets of high unemployment in the U.S. and some ethnicities have lower rates of employment and lower wages than others, but the differences are less stark than they have been in the past, although, as we saw in 2008, this situation could reverse itself at any time. Still, this may mean that proposals for a guaranteed minimum income or for continuing to raise the minimum wage may be more to the point than proposals for a guaranteed job (although most of such guaranteed job proposals have included an increased minimum wage).

There remains a wide discrepancy between the incomes of many Americans and the cost of living. Housing costs in some regions of the country and healthcare costs throughout the country continue to exceed the means of many Americans, and inability to pay medical bills remains the biggest reason for U.S. bankruptcies. More than half a million U.S. families are bankrupted by medical bills each year, affecting between 1-2 million individuals.

Income inequality is a fighting term for many Americans, either because they view it as the bane of our Western capitalistic system or because they view it as a red herring, which rests on a socialistic or communistic assumption that everyone should have the same amount of everything. A less controversial gauge of unfairness may be to examine how many Americans are living in conditions that are strikingly below what  most people would regard as an acceptable middle class existence, while still working as hard as they are able to support themselves and their families. Nearly 13% of Americans live below the official U.S. poverty level (roughly $25, 000/year for a family of four), and nearly half of those live in “deep poverty,” which is less than half of the income defining the poverty threshold. Two thirds of those who live below the poverty level receive no housing assistance, and 65% of them spend more than half of their income on rent. Poverty levels are defined uniformly for the 48 contiguous states although costs of living differ markedly between regions. Obviously, a family of four making 25,000 per year in coastal California has a very difficult time getting by, especially if they have no housing assistance. Furthermore, most families even at double the poverty level have no wealth (defined as what they own, such as a house or car, or available money in cash or investments), and would not be able to pay for food or housing if they were out of work for even three months.

Our slowly growing economy has almost no chance of meeting the needs of our poor, whose numbers, in terms of percentage of the population, have not appreciably declined for decades. Housing and healthcare remain the most problematic items for the poor, including those in the lower middle class brackets of even two to three times the poverty level. Increasing wages would help, but the current rate of increase is far too low to make a difference in their lives.

The only real chance to address the needs of those Americans who are in poverty or are too poor to be able to live safely and comfortably in our society is to raise wages dramatically and to reduce housing and healthcare costs (and of course, not cutting and actually fully funding safety-net social programs now in existence). Supplementing wages using tax credits (such as the earned-income credit) derived from increased taxes on the wealthy, would be one route, universal, government supplied or insured healthcare would be another, and deregulating building restrictions on dwellings, especially in our urban centers and their immediate peripheries, so that more affordable housing (and just plain more housing) could be built is another route. All of these measures may have to be pursued if we expect to have some chance of allowing a more satisfying life for more Americans. Conservatives are banking on tax breaks for corporations and the wealthy to pour more money into the economy so that wages increase, but this has not happened in the past and doesn't look as though it is happening now and would only address a portion of the problem. More dramatic proposals need to come from and be enacted by our politicians.

 

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