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Businessweek Archives

The Rigors Of Poverty...

Economic Trends


A new study details the hardships

To paraphrase F. Scott Fitzgerald's remark about the rich, the poor are different from you and me. Writing in the Labor Dept.'s Monthly Labor Review, a team of researchers uses survey data to detail many of the differences.

Although poverty is defined by income, the gap between the poor and others still seems stark. In 1993, the family income of the average poor person was $8,500, roughly a sixth of the average income of other families. Welfare households averaged $12,680.

While home-ownership rates among the poor and welfare recipients of 41% and 25%, respectively, seem high, it's important to note that the numbers are pushed up by high ownership among low-income elderly families. Similarly, the high rate of car ownership reflects the transportation needs of many poor working families.

More than 90% of the poor live in families with color TVs, refrigerators, and stoves, but nearly a quarter lack access to a home phone. Less surprising are poor people's vulnerability to violent crime and reduced access to health care. Some 29% of the poor have no health insurance at all, compared with 13% of the nonpoor. More than 43% of poor mothers get inadequate prenatal care, compared with 16% of nonpoor mothers. Also, the poor suffer far higher infant mortality rates (chart).

Such statistics tell only part of the story. To measure the overall economic pressures felt by the poor, the researchers created an index based on such hardships as being evicted, having gas or electricity turned off, lacking food, living in crowded housing, and having no refrigerator, stove, or phone.

The final tally: In a typical year, some 55% of the poor and 65% of those in welfare families lived in households experiencing at least one such hardship, compared with 13% of the nonpoor. And 12% of poor and 15% of welfare families (but only 1% of the nonpoor) suffered at least three hardships.BY GENE KORETZReturn to top


How The Poor Fare In America



OWN HOME 77.6% 40.8% 24.9%

OWN CAR 97.2% 76.8% 66.3%

HAVE TELEPHONE 97.2% 76.7% 67.5%

TWO OR MORE PEOPLE PER ROOM 4.2% 19.2% 23.6%

VIOLENT CRIMES PER 1,000 PEOPLE 26.2 53.7 87.5*


NO HEALTH INSURANCE 13.0% 29.0% 18.0%*

Note: 1992-1993 survey data adjusted for family size

*Single-parent families (most of whom receive welfare)


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Welfare reform neglects downturns

Despite their good intentions, the welfare-reform bills currently before Congress could significantly increase the hardships suffered by America's poor during recessions. So concludes a recent analysis by economist Elizabeth T. Powers of the Federal Reserve Bank of Cleveland.

Powers notes that Congress' reform plans promise to save the states big bucks by ending unlimited entitlements to welfare. But the proposed reforms tend to ignore the sensitivity to the business cycle of such welfare programs as Medicaid, food stamps, and aid to the indigent elderly and to families with dependent children. Providing capped block grants to the states and only modest funds for emergencies, they would no longer oblige states to expand programs in times of high unemployment--just when work incentives are least likely to prove useful.

Yet history shows that welfare caseloads and outlays rise substantially during recessions. Powers' own "conservative" estimate, for example, indicates that a rise of one percentage point in unemployment in 1994 would have boosted annual outlays for major welfare programs by at least $5.2 billion.

States could, of course, opt to spend more on welfare in hard times. But with new limits on federal support and new freedom to tighten standards and reduce benefits, they are more likely to cut back in the face of a recessioninduced fiscal squeeze. The upshot could be tougher times for those in need--and less stimulus to stabilize the economy automatically during downturns.BY GENE KORETZReturn to top

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