By: Dan Ritter
December 15, 2013
The difference between being poor and being in poverty can seem fairly arbitrary to those at the bottom of the wealth and income ladder. The Census Bureau calculates that there are 46.5 million people living in poverty in the United States, or 15% of the population. These are single adults with incomes below the federal poverty guideline of $11,490 per year, families of two that earn less than $15,510 per year, families of three that earn less than $19,530 per year, and so on.
An elevated poverty rate is a tragic and embarrassing problem to have if you're one of the wealthiest countries in the world, but the Census Bureau's 15% estimate only paints part of the picture. What is not included in the calculation are the millions of single adult Americans who earn just above the poverty level, placing them in the economically dubious lower and lower-middle classes.
The Hamilton Project, an economic public policy initiative conducted by the Brookings Institute, a nonpartisan think tank, reports that as many as 30% of working-age families with children earn incomes between 100% and 250% of the federal poverty limit. "Though not officially poor, these individuals and families experience limited economic security," Director Melissa Kearny and Policy Director Benjamin Harris wrote in a December report on America's lower-middle class. "One major setback could thrust them into economic chaos."
Here are some of the data, highlighted by the Hamilton Project, that contextualize the economic reality facing many Americans who walk the line between poverty and the lower and lower-middle class.
1. Nearly half of American families live below 250% of the federal poverty limit
Using data from the Bureau of Labor Statistics' Current Population Survey, the Hamilton Project calculates that about 19% of working-age families with a child or children under the age of 18 earn an income that puts them below the federal poverty level. These families are represented by the area to the left of the shaded region in the graph below.
The families represented by the shaded region are those that earn between 100% and 250% of the federal poverty limit, putting them in a place that means "any unanticipated downturns in income could push them into poverty." This is about 30% of working-age families.
Combined, this means that nearly half of all American working-age families either live in or just beyond the threshold of poverty.
2. A college education doesn't automatically exclude you from the lower or lower-middle class
The real value of a college education has been put under intense scrutiny over the past several years. According to a Pew study, the inflation-adjusted cost of a four-year education has more than doubled over the past 30 years, leaving many graduates saddled with enormous debt at the most financially vulnerable time of their lives. At the same time, just 55% of these graduates feel that college prepared them for a job.
Between a high debt burden and insufficient training, many people with a college degree have found it impossible to head a family and earn a decent living. The data compiled by the Hamilton Project show that 6% of families in poverty are headed by someone with a bachelor's degree or above, and 14% of families in the lower-middle class range have a bachelor's degree or above.
3. Many people above the poverty line still rely on government support
Food stamps aren't just for those in poverty. The Hamilton Project found that more than 20% of working-age families that earn between 100 and 250% of the federal poverty limit rely on the Supplemental Nutrition Assistance Program for assistance. More than 30% of these families rely on some form of social assistance like unemployment, welfare, or disability benefits.
For some families, particularly those closer to the brink of poverty, cuts to assistance programs could be the negative catalyst that sends them into the "economic chaos" that the Hamilton Project warns about.
4. Income can impact diet
Food insecurity and obesity are related problems that have a tremendous impact on health and well-being, and they are tremendously influenced by income. More than 50% of children living in poverty -- of which there are more than 16 million, or 22% of all children in the United States -- are either obese, suffer from food insecurity, or both. About 40% of children who live between 100 and 250% of the poverty line fall into this category, while just less than 15% of those who live above that threshold do.
5. The tax system fails many low-income earners
It's no secret that the American tax system is broken, but it's not just corporate tax loopholes and offshore bank accounts that people should be worrying about. The marginal tax rates for those living in poverty and for those below the 250% poverty level threshold are much, much higher than not just the median marginal tax rate but the marginal tax rate for the top 10% of earners.