The war on poverty

Most of the 'poor' in the US are not poor for long.

By

Four decades after President Lyndon Johnson declared war on poverty in 1964 it remains a compelling need in America. The US Census Bureau still measures poverty in great detail, and the total number of people living in poverty during each of the past 40 years has remained stubbornly high. After hundreds of billions of dollars have been spent to aid impoverished Americans, the conventional wisdom is that more than 35 million are still without adequate income.

Conventional wisdom describes the "poor" as a large and persistent group of families and individuals left out of the economic success of America. Enduring debilitating poverty, the poor - a group of individuals larger than California's entire population - are entitled to political advocates, specially funded programs, and government bureaucracies to coordinate benefits.

Fortunately for America, the basic description of the poor is wrong. And therefore public policy based upon an aggregate view of poverty is inherently misinformed. A closer look at the facts shows a different picture.

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The Census Bureau and other researchers have been studying people and their families as they enter poverty, cope with the difficult challenges of poverty, and rise out of poverty as successful wage earners.

There are two basic areas of knowledge that offer the greatest illumination to our understanding of poverty in America: (1) The dynamics of poverty - how people enter poverty and exit poverty and how long people remain in poverty; and (2) the trigger points that cause people to become poor and the additional trigger points that enable people to rise out of poverty.

The basic facts are that while millions of people enter poverty (primarily because of a loss of a job or a family breakup) each year, most people remain poor for less than 5 months, and millions of people reenter the labor force and earn enough to rise above poverty. For two-thirds of people in poverty the transition in and out of poverty is relatively quick. For others, especially single parents with small children and the elderly beyond the work force, poverty is persistent for a number of years.

The Panel for the Study of Income Dynamics has shown that the number of people who enter and leave poverty each year from the mid-1970s through the mid-1990s was about 8 million. Sometimes this number rose to nearly 20 million people entering and rising out of poverty in a single year. The description of a stable group of people who are poor, with a few becoming poor and a few rising out of poverty each year, is wildly wrong.

Every five years during the past three decades, between 30 million and 40 million Americans have risen out of poverty. This is an enormous accomplishment for the individuals, their families, and the caring society that has supported them. Unfortunately, every five years during the past three decades almost as many people have entered poverty for one or more reasons. But unlike most other developed nations, poverty in America is a transitional process - from acceptable income levels into poverty and back to acceptable income again. Typically, this is a quick transition.

In a 1998 report, the Census Bureau carefully studied a sample of individuals who were poor from October 1992 through 1995. During this time, the overall annual poverty rate was 12.6 percent to 12.9 percent, almost identical to the 12.7 percent annual poverty rate in 2004. In 1994, 6.9 million people who were not poor in 1993 became poor sometime during the year. During the same year, 7.6 million people who were poor at the end of 1993 rose out of poverty during 1994. The net change was 700,000 fewer people in poverty at the end of 1994 than at the end of 1993, resulting in a small reduction in the annual poverty rate.

In addition to observing that 10 times as many people actually rose out of poverty than the net change in the poverty level in 1994, the Census Bureau also measured the actual number of months each person earned less than the poverty level of income. The mean period that all individuals who were poor sometime in 1993 or 1994 actually lived below the poverty level was 4.5 months. Half of all individuals who were poor at any time in 1993 or 1994 were poor for less than 4.5 months. Yes, children were poor longer: 5.3 months at the median. And households headed by females were poor longer: 7.2 months.

About one-third of individuals who were poor in the beginning of 1993 remained poor for 24 months or more. The persistent poverty rate in 1994 was 5.3 percent versus an average poverty rate of 15.4 percent (and an annual poverty rate of 12.9 percent).

The policy implications of these dynamics, and the actual trigger events, are significant. To accelerate the transition out of poverty, government agencies need to qualify applicants and deliver services within weeks of entering poverty or the public expenditures will be largely irrelevant. Long-term support issues of housing, training, and education may be important to the one-third chronically poor, but not to the two-thirds in transit through poverty.

The war on poverty needs to be fought on at least two fronts. First is the quick response, transactional battle of month to month for those at the edge of poverty to sustain or regain employment and family stability - supporting most of the people and most cost- effective support because it leverages their own substantial family and financial momentum. The second is the chronic poor, where there is a different strategy of long-term support and gradual transition.

As the 1998 Census Bureau report concluded, "Poverty may seem to be a relatively simple picture, but, in fact, it is complex."

George B. Weathersby is CEO of Genesys Solutions LLC, a management consulting firm.

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