NCPA - National Center for Policy Analysis


January 7, 2005

With the poverty rate increasing from 11.3 percent in 2000 to 12.5 percent in 2003, there are worries that America's underclass is being left behind. These concerns are without foundation, says Robert Rector in a study by the Heritage Foundation.

There are two main reasons why policy markers should not react to the slight change in poverty in America.

First, poverty is a lagging economic indicator -- even though formal recessions usually last less than one year, the poverty rate almost always continues to rise for several years after a recession. Moreover, the poverty rate rose by a relatively small 1.2 percentage points. In contrast, during the recession in 1980, poverty went up 3.3 percentage points; in the recession that began in 1990, the poverty rate was up 2.0 percentage points.

Second, the actual conditions of those in poverty are far from the destitution often portrayed by the press and social activists. For example:

  • Forty-six percent of all poor households own their own homes; the average home is a three-bedroom house with one-and-a-half baths and a garage.
  • Seventy-six percent of poor households have air conditioning.
  • Nearly three-quarters of poor households own a car, with 30 percent owning two or more vehicles.
  • Ninety-seven percent of poor households have a color television, 78 percent own a VCR or DVD player, and 62 percent have cable or satellite TV reception.

Rector says that while the poor experience hardships and do not exactly live in opulence, it is nonetheless true that to be in poverty today reflects a lifestyle that would be judged as comfortable or well off just a few generations ago.

Source: Robert Rector, "Understanding Poverty and Economic Inequality in the United States," Heritage Foundation, September 15, 2004.


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