The worst economic downturn since the 1930s has left a record number of Americans in poverty and created strains on the government’s safety net not seen in decades, according to a report issued Tuesday by the U.S. Census Bureau.
“Clearly the safety net has helped, but it’s got holes in it,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and former White House economist.
With the unemployment rate stuck stubbornly over 9 percent, the poverty rate in the United States climbed to 15.1 percent last year — the highest level since 1993 — as the number of impoverished Americans swelled to a record 46.2 million, the Census report said.
The U.S. poverty rate remains among the highest in the developed world. Among 34 countries tracked by the Paris-based Organization for Economic Cooperation and Development, only Chile, Israel and Mexico have higher rates of poverty.
The rate would be even higher without a variety of government programs intended to blunt the impact of the worst recession since the 1930s. The Census estimated that the extension of unemployment benefits enacted in 2009, for example, helped another 3.2 million remain above the poverty line, which the government defines as an annual income of $22,314 for a family of four. Last year, the Social Security helped some 20.3 million seniors and disabled working-age adults avoid falling into of poverty.
Millions more households are collecting food stamps to stretch household budgets far enough to keep food on the table. Since the recession began in 2007, the number of households receiving food stamps has nearly doubled to 21.4 million.
Still, millions have fallen through the cracks of the government safety net. Tuesday's Census report found that the poverty rate rose faster in 2007-2010 than in any three-year period since the early 1980s, when households were battered by rising energy prices, high inflation and soaring interest rates as well as high unemployment.
The recession's lasting damage to the job market was a major force driving families into poverty last year. President Barack Obama sent a 155-page jobs bill to Congress Monday, and Republicans have been busy coming up with counterproposals.
The Census Bureau said median income fell 2.3 percent last year, adjusted for inflation, while the number of Americans without health insurance hovered near the 50 million mark.
“On every measure it seem as (if) this first full year after the recession ended was more extreme than in previous recessions both in terms of continuing unemployment and declining income and earnings," said Christine Owens, executive director of the National Employment Law Project.
The slow pace of employment growth has been compounded by a concentration of job creation in lower-wage occupations, with minimal growth in mid-wage occupations and net losses in higher-wage occupations, according to a recent NELP analysis. Since the recession began 2007, family incomes have fallen by 11.3 for those in the bottom 20 percent of the income ladder, according to Census data.
The recession also has cut a wide swath through American’s personal safety nets. Millions of families facing foreclosure have burned through savings to avoid losing their homes. Tens of millions of more owe more on their mortgage then their house is worth.
The weak labor market also has left more families without a steady paycheck. Since 2007, the number of men working full time, year-round with earnings decreased by 6.6 million and the number of corresponding women declined by 2.8 million.
'Work-based' safety net
The current slow recovery has dramatically lengthened the time jobs seekers spend without a paycheck. As of September, some 43 percent of job seekers had been looking for work for 27 weeks or more, according to Labor Department statistics. That’s more than double the levels seen in any recovery over the past 50 years. As of the second quarter of 2011, some 14 percent of those out of work have been unemployed for 99 weeks or more. (That number doesn’t include workers who have given up looking and are no longer part of the “official” work force.)
“The longer you are unemployed, the worse it becomes because you deplete any resources you had,” said Sheila Zedlewski, director of Urban Institute's Income and Benefits Policy Center. “We’ve moved toward a work-based safety net with assistance like unemployment insurance and tax credit tied to paychecks. That’s are where most of the money is.”
The link between a weekly paycheck and the modern American safety net dates to the mid-1990s, when the Clinton administration undertook a sweeping reform of the welfare system, replacing the centerpiece with Temporary Assistance for Needy Families, or TANF. The program succeeded in moving millions of families off welfare rolls and back into the work force.
But the program has been less successful when there are more than four job applicants for every job opening, as there are now. Even as the number of unemployed workers has more than doubled since the 2001 recession, the number of people enrolled in TANF has fallen.
“Welfare is a good example of a program that was reconfigured to work much better when the economy is at full employment,” said Bernstein. “TANF has been extremely unresponsive to higher unemployment.”
The remaining safety net is stretched thin. State-administered programs like unemployment insurance and TANF are under mounting strain as state governments repair battered budgets. (TANF is funded by federal block grants and administered by the states, many of which expanded the program in the 2000s with their own funds when the economy was booming.)
The Census report also shows that the number of Americans without health insurance rose slightly to just under 50 million, as a weaker economy has chipped away at employer-provided health coverage. Comprehensive health care reform enacted last years doesn’t take full effect until 2014. Until then, congressional Republicans have vowed to roll back much of the plan, and the law faces several legal challenges working their way through the courts.
As the recession has aggravated the forces that send families into poverty, analysts say the impact will likely be felt long after the economy recovers and the unemployment rate falls. Because poor households have lower savings rates and limited access to good secondary schools, children raised in poverty are at much greater risk of become impoverished as adults.
“This is the generation that’s going to be fueling the recovery and the competitive position of the U.S. 20 years from now,” said Zedlewski. “The longer that a child stays in a household with very low income or in poverty, the bigger the effect later on in life."