Sunday, February 9, 2014


What are the causes of poverty? How can one avoid becoming poor?

1) Many people are poor simply because they are not employed:

Data from the US Census Bureau shows that the best anti-poverty measure is a full time job. According to their data, "The poverty rate for full-time workers in 2012 was just 3%, while for part-time workers it was 16% — and for those who had no job, it was 33%" [1]

In fact, the data shows that the mean number of income earners in the lowest household income quintile (the poorest Americans) is 0.4. [2] That means that there is less than half a person earning income for most low income households. This contrasts with an average of 1.3 workers for all households and 2.1 workers for households  in the top income quintile (the richest families). [2] That means that income inequality is partly fueled by the fact that higher income households  have high incomes because they have more people working and earning money.

Research from the conservative think tank, the Heritage Foundation:

"In good economic times or bad, the typical poor family with children is supported by only 800 hours of work during a year: That amounts to 16 hours of work per week. If work in each family were raised to 2,000 hours per year-the equivalent of one adult working 40 hours per week throughout the year- nearly 75 percent of poor children would be lifted out of official poverty." [3]

It should be no surprise that people who work more and belong to a household which has multiple workers will be richer than households that don't work much and have very few workers.

2) Single mothers with children are the most prevalent type of family among the poor. Also, the amount of married couples with children has decreased since the 1970's.

Data from the Census Bureau shows that among households in the lowest income quintile (the poor),  20% consist of a single-mother with children. This contrasts with 13% for all households and 3.6% for households in the highest income quintile (the rich). [2]

Additionally, of the households in the lowest income quintile, married couple families only make up 16.7% of households [2]. Once again, this sharply contrasts with the 48.7% for all households and 82.2% for households belonging to the highest income quintile [2].

The Heritage Foundation finds that:

"Father absence is another major cause of child poverty. Nearly two-thirds of poor children reside in single-parent homes; each year, an additional 1.5 million children are born out of wedlock. If poor mothers married the fathers of their children, almost three-quarters would immediately be lifted out of poverty.

While work and marriage are steady ladders out of poverty, the welfare system perversely remains hostile to both. Major programs such as food stamps, public housing, and Medicaid continue to reward idleness and penalize marriage. If welfare could be turned around to require work and encourage marriage, poverty among children would drop substantially." [3]

According to Wikipedia:

 "While the proportion of wives working year-round in married couple households with children has increased from 17% in 1967 to 39% in 1996, the proportion of such households among the general population has decreased. This means that the share the most economically prosperous type of household has been dwindling in the United States....In 1969, more than 40% of all households consisted of a married couple with children. By 1996 only a rough quarter of US households consisted of married couples with children." [2]

John McNeil of the US Census Bureau has said, ""From 1969 to 1996, median household income rose a very modest 6.3 percent in constant dollars... The 1969 to 1996 stagnation in median household income may, in fact, be largely a reflection of changes in the size and composition of households rather than a reflection of a stagnating economy." [2]

In short, the number of workers per household has declined over time, making it seem as though family incomes haven't risen over time (even if individual earners may be making more money over time). To have a high family income, people should work and get married. Coincidentally, the highest 20% of income households do these things whereas the bottom 20% of income households do the exact opposite.

3) Dropping out of high school will drastically reduce a person's ability to get a high paying job.

According to US Census data, the median annual individual income for a person who hasn't completed an education past the 9th grade was $17,422 [2]. High school dropout's median pay was $20,321 per year and a High School graduate's median pay was $26,505 per year. [2] As you could guess, the further an individual pursues their education, the more money they make (median pay for people with doctorates was $96,830 per year). Basically, High School graduates will earn much more money than High School dropouts.

Another cause of poverty and income inequality is the differences between the pay of high school dropouts and college graduates. Unsurprisingly, 26.7% of people in households in the lowest income quintile have less than a High School Degree and only 12.1% of them have a Bachelor’s Degree or more (61.1% have a high school degree or some college). In contrast, 2.2% of people in households in the highest income quintile have less than a High School Degree and 60.3% have a Bachelor’s degree or more (37.6% have a High School education or some college). [4] 


In conclusion, to stay out of a low income household, people should avoid having children without being in a committed relationship, have at least 1 full time worker per household, and graduate from high school. While some people think more government handouts are necessary to decrease poverty and income inequality, in reality the most effective way to decrease poverty and inequality would be for everyone to emulate the behavior of the top 20% of income households.


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