Truth About Poverty in America

Last week the internets informed me that the United States is terrible because we “allow children to go hungry.” This is not true by any stretch of the imagination. If parents are willing to take even a minimal amount of responsibility for their children, the children will be fed. Food stamps, free breakfast and lunch at school, food pantries, and cash benefits from government programs are more than enough to feed a family’s children.

I wanted to bring the picture of “poverty” in America into focus with some cold hard facts. What you will see is that “poverty” in America is nothing close to the poverty we see around the world. To illustrate this, I am using a fictitious Milwaukee family of 4 as an example. (In this example, we are assuming there is a mother, a father, and two school age children. If you instead assume a single parent household, the numbers work out slightly better for the family.)

Under guidelines issued by the U.S. Department of Health & Human Services, Office of The Assistant Secretary for Planning and Evaluation, this family is “below the poverty line” if the income of the household is less than $24,250.

Suppose one spouse works full time and makes $12.00 an hour. This is not a lot of money, but it puts the family just at the poverty line with $24,000 in wages per year. The family then receives an additional $5,100 per year via the Earned Income Credit and another $2,000 per year for the child credit. (Both of these credits are refundable, meaning if the taxpayer doesn’t owe any federal income taxes, the government writes them a check for this amount.)

The family also receives:

  • $7,700 per year in food stamps
  • Free breakfast and lunch for both children at Milwaukee Public Schools
  • BadgerCare, which gives the family full health insurance coverage only $0.50 to $3 as a copay for all services and prescriptions
  • Rental assistance to cover a portion of their rent
  • Energy assistance to cover a portion of their utilities

The family also pays nothing in state or federal taxes.

To summarize, the effective income of the family including assistance totals more than $40,000 per year: poverty-in-americaOn top of this, the family is receiving BadgerCare to cover all health needs, which is worth at least $6,000 per year in premiums (actually worth much more because the unsubsidized cost of health insurance on the exchange is much higher), with almost no out of pocket costs. They also receive rental assistance and energy assistance, which will total at least a few hundred dollars per month.

This paints a very different picture of “poverty” than the one we see in the media. Yes, the parents will have to be proactive in applying for these benefits. However, if we assume one parent isn’t working and both children are in school, how difficult is it?

To put this into perspective, I wanted to see how much a family of 4 would have to earn (wages only, no government assistance) to net $40,000 per year after taxes and after the cost of health insurance. Would it surprise you to know that the family not receiving assistance would have to earn at least $50,000 per year to be “even” with the “family living in poverty”?

Here are the rough numbers:

family-not-in-povertyYou see that this family has $39,400 after paying taxes and health insurance costs, which include the $6,000 per year premiums and an estimated $2,500 out of pocket. That out of pocket estimate is probably on the low side, since the insurance  the family gets on the exchange has a deductible of $2,500 per person (yes, $10,000 per year for the family).

Does anyone think that a family of 4 earning $50,000 per year is “living in poverty”? Of course not. Yet this is how the “living in poverty” family who earns $24,000 in wages each year lives. Remember, too, that there are other resources available to the first family, including almost free daycare, substantially reduced cost of college or technical school, and more.

This is not “allowing children to go hungry.” This is not poverty.

Let me also point out that our current “welfare” system is terrible because it is encourages dependence. Getting a second part time job to better support the family is the worst thing the first family can do. As they earn more, the benefits start to go away. With the second job, even if they end up “even” when comparing income and benefits with one job versus two… who would get the second job? They are no further ahead, so they have no incentive to work more.

Our system is broken, and the media is not helping. Instead of focusing on a false image of “poverty,” lets figure out how we encourage families to be self-sufficient. That likely should include time limits on benefits. The welfare system was created to help families in temporary need of assistance. It should not be a  not a long term plan for the government to support families into infinity.

5 thoughts on “Truth About Poverty in America”

  1. Where I live, even jobs above entry level do not earn $10/hour. I wonder what the cost of living vs. this hypothetical $12/hour is. You mention that the numbers would be slightly different for a single parent household. Do you know the numbers on two parent households below the poverty line? I appreciate the numbers, but I think you are showing a privilege here based on your education and job opportunities that people without your background do not have.

  2. Elyssa – This IS an example of a two parent household below the poverty line!!! What you’re asking for is exactly what this article is about.

    And think about this… you’re talking about entry level jobs at $10 an hour. If this family has 2 school aged children, at least one parent should have been in the workforce 5 to 10 years before now. A person with a work history of 5 to 10 years is not “entry level.” It’s fun to talk about how oppressive the minimum wage is, but lots of people forget that that’s a starting point, and if someone has been working for 5 to 10 years, they should be well past minimum wage (unless they fail to show up for work or fail to do their job).

    And what privilege do I have? What education and job opportunities did I have that “people without my background” did not have? You know nothing about my background. In fact, I worked my ass off to get where I am because I do not come from a “privileged” background.

  3. That reminds me of Ben Carson who rose to become a prominent neurosurgeon despite growing up in poverty in Detroit. Ben needs to check his privilege!

  4. Here’s the issue, though. Your math assumes that the family successfully received assisted housing. In my area, the cheapest apartment (studio) is $900 a month and utilities run into the $200/month range. Because this area does not have an abundance of transportation and I’m handicapped, I need a car for transportation to that job. That’s another $300 (gas, car, insurance). My job pays $14 an hour. I share custody of my children but because their dad outearns me and remwrried, he has primary. I still have them for about five months a year. But, the government will not count that reality. So, after taxes, my take home is roughly $1300 a month. As you can see, there’s no money left. Poverty is depressing and it’s real. If I lived in Missouri or some other less expensive place, I might be ok. If the social services you add on to your example families income, you would have a great point. Unfortunately, it’s more complicated than that. If you have suggestions or comments, I would love to hear them.

  5. Swan – The housing assistance is IN ADDITION TO the $40k that I calculated for the family’s income. Yes, I understand that the custody of the children will affect the amount of assistance received.

Leave a Reply