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Economic Problems and Issues

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Background on Methods
The majority of the literature referenced here on poverty-related issues is the primary research data sets. Included are studies and findings that surface through research of literature on specific reviews of the specified issues. The assessment of the methods of analysis used in the referenced research was rooted in peer reviews, frequency of citations, and perceived quality. For the purposes of this summary, the methods were not re-analyzed or tested. The research addressed here is focused on findings within the context of the United States.
The analysis of the causes of poverty as well as research on issues that impact income, earnings and poverty can be considered determinants of poverty. The issue of employment and life experiences that put people at risk of not working or not working enough to prevent entry into poverty is strength of the economy and quality of wages. Introduction

The scale and conditions of poverty make it one of the most pressing social issues facing the nation. According to the 2007 Population Report prepared by the US Census Bureau, over 36 million people in the United States are living in poverty and 54 million are at severe risk of falling into poverty.1 “The annual rate of entry into poverty for the total population of the United States has been estimated at roughly three percent per year”.2
Poverty will touch the majority of Americans at some point during adulthood. It is estimated that, on average, 60 percent of 20 year olds in America will experience poverty at some point during their adult years and about half of adults will experience poverty by the time they are age 65.
Poverty is not static. It represents the status of families moving into and out of poverty at different points in time. Almost half of the spells of poverty are quite short: nearly 45 percent end within 1 year, 70 percent are over within 3 years, and 12 percent last 10 years or more.3 In general, research suggests that the longer a person has been poor, the less likely it is that he or she will escape poverty. 4 Many spells of poverty are short; there is substantial risk of returning to poverty after having exited. Poverty reentry rates are relatively high: half of all individuals ending a poverty spell in a given year will again have incomes below the poverty line within 4 years. 5 It is common in American thinking to believe that all people have the likelihood of experiencing upward mobility, regardless of their economic standing at birth. Recent research, finds that while there is considerable mobility, there is also considerable persistence of income status.6 Intergenerational elasticity in earnings is estimated to be around 0.6 – this is the correlation in earnings between parents and their children in adulthood. This means that for a hypothetical family of four whose current income is at the poverty line, it would take the descendants of the family 5 to 6 generations (125 to 150 years) before their income will be within 5 percent of the national average.7 Estimates of intergenerational mobility are significantly lower for families with little or no wealth.8
Results

So what has been proven to cause these entries and reentries into poverty? One of the factors focuses on employment. Employment has a tremendous effect on earnings and consequently poverty. Important factors include job loss, declines in earnings, reductions in wages or hours worked and growth in low wage sectors.
Past studies have proven that individuals in households that experience a loss of employment are the most likely to enter poverty. Nearly 20 percent of those entering poverty had a head of household lose of job.9 Looking at all adult workers in the household, more than 40 percent of people who enter poverty live in a household that experienced a job loss by the head, spouse, or other household member. Twenty-five percent of female-headed households enter poverty as a result of job loss.10
Some research looked at declines in earnings more broadly instead of solely job loss and found these declines triggered poverty. Almost half (49.3%) of poverty spells begin when the household experiences a decline in earnings: 37.9 percent coincide with a fall in the household head's earnings and 11.4 percent of entries coincided with a fall in the spouse’s or other family member’s earnings.11 The amount of labor force attachment (weeks worked) is also a key indicator of whether or not someone will be poor. Among workers who do not have full-time, full-year employment, below poverty income is a substantial problem.12
Employment alone does not prevent entry into poverty if the wages are too low. As mentioned earlier, structural changes in the economy have contributed to a rise in low-wage employment. It is well established that workers at the lower end of the wage distribution have not fared well in recent decades, with the exception of the boom of the latter half of the nineties 13 and are on the receiving end of the worst the formal labor market has to offer. When available jobs are concentrated in low-skill occupations with shrinking wages, limited benefits, poor working conditions and fluctuating schedules, labor force participation may not be sufficient to keep some workers and their families out of poverty.
Over 29 million workers, or one-fourth (24.5%) of the workforce in the United States earns poverty level wages (the hourly wage that a full-time, year-round workers must earn to sustain a family of four at the poverty threshold).14 The average hourly wage for this group is $7.36 versus $18.07 for the total workforce. The workers are disproportionately female, minority, non-college educated and new younger entrants into the workforce. They are more likely to work in retail trade and service industries and are less likely to work in durable manufacturing, transportation, finance, information services and government.15
Employment and related changes, such as job loss by an adult in the household, joblessness, decline in earnings due to job changes, reduction in wages or hours worked, discrimination in hiring and employment opportunities concentrated in low-wage sectors, greatly increase the likelihood that a household will become poor. CONCLUSION Poverty is widespread and will touch the majority of Americans at some point during their lifetimes. What emerges out of a review of the literature is a picture of a heterogeneous poor population with employment trigger for entry into poverty. Certain groups are disproportionately impacted and certain events are more influential for various subgroups within the at-risk of poverty population than they are for others.
Forces largely seen as outside of the control of individuals have dramatic impacts on income, earnings, and poverty. Recessions, high unemployment, the decline in the manufacturing sector and growth in the service sector and declining unionization depress earnings and increase poverty, particularly for disadvantaged workers.
References
Rynall, Amy (2008 October), Causes of Poverty, Retrieved 10-26-11 From Heartland Alliance

1 U.S. Census Bureau, Current Population Survey 2007 Annual Social and Economic Supplement, Microdata calculation conducted by the Mid-America Institute on Poverty of Heartland Alliance.

2 Eller, T.J. (1996, June) Who stays poor? Who doesn’t? U.S. Department of Commerce, Bureau of the Census, Current Population Reports, P70-55, Household Economic Studies, Washington DC: U.S. Government Printing Office.

3 Bane, M. J., Ellwood, D. (1986). Slipping into and out of poverty: The dynamics of spells. Journal of Human Resources, 21(1), 1-23.

4 Iceland, J. (1997, August) Urban labor markets and individual transitions out of poverty, Demography, 34(3), 429-441.

5 Stevens, A. H. (1999) Climbing out of poverty, falling back in: Measuring the persistence of poverty over multiple spells, Journal of Human Resources, 34(3), 557-588.

6 Corcoran, M. (2001) Mobility, Persistence and the consequences of poverty for children: Child and adult outcomes, In S.H. Danziger & R. Havemen (Eds.) Understanding poverty (pp. 127- 161) New York: Russell Sage Foundation.

7 Mazumder, B. (2005) Fortunate sons: New estimates of intergenerational mobility in the United States using Social Security earnings data. The Review of Economics and Statistics, 87(2): 235-255
.
8 Mazumder, B. (2005, May). Fortunate Sons: New estimates of intergenerational mobility in the united states using social security earnings data. The Review of Economics and Statistics, 87(2): 235-255.

9 McKernan, S. M. & Ratcliffe, C. (2002, December) Events that trigger poverty entries and exits. Washington, DC: The Urban Institute.

10 Ruggles, P., & Williams, R. (1987, December) Transitions in and out of poverty: New data from the Survey of Income and Program Participation. U.S. Department of Commerce, Bureau of the Census, No. 8716 Washington DC: U.S. Government Printing Office.

11 Bane, M. J., Ellwood, D. (1986) Slipping into and out of poverty: The dynamics of spells. Journal of Human Resources, 21(1), 1-23.

12 Hauan, S. Landale, N., & Leicht, K. (2000) Poverty and work among urban Latino men. Work and Occupations, 27(2), 188-222.
13 Council of Economic Advisors (1999) Economic report of the President, Washington, DC: U.S. Government Printing Office.

14 Mishel, L., Berstein, J. & Allegretto, S. (2006) The State of Working America 2006/2007. Economic Policy Institute, Ithaca, New York: ILR Press.

15 Mishel, L., Berstein, J. & Allegretto, S. (2006) The State of Working America 2006/2007. Economic Policy Institute, Ithaca, New York: ILR Press.

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