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Wednesday, 25 September, 2002, 07:27 GMT 08:27 UK
Poverty hits one million more Americans
Auto worker
US workers are losing the wage gains of the 1990s

The US economic slowdown has led to an increase in the number of poor people in the world's richest country for the first time in eight years.

New figures from the US Census Bureau show that the poverty rate increased to 11.7% in 2001, compared with 11.3% in 2000.

The number of people in poverty rose by 1.3 million to 32.9 million.

However, the number in poverty is still below the levels of the 1980s, when around 15% of the population was officially defined as poor.

And the recession has cut into the income of average Americans too.

Median household income (50% above, 50% below) declined by 2.2% to $42,228 (28,000) in 2001.

And inequality also increased.

Worse for blacks

And poverty for blacks and Hispanics is still at historic lows, with 22.7% of black households and 21.4% of Hispanic households below the poverty line.

That is still twice the rate for whites and Asian-Americans, however.

Other research by economists at the Economic Policy Institute, using a different data set, suggests that these historic gains - due mainly to more good jobs becoming available for black and Hispanic workers during the long boom of the 1990s - are in danger of being wiped out by the current slowdown.

They say that household income for these families is falling fast as the recession has led to higher unemployment.

Policy dilemma

The rise in poverty is likely to create a policy problem for legislators who will soon be faced with the issue of whether to renew the welfare reform legislation passed in the l990s.

Under these plans, which were eventually endorsed by President Clinton against much opposition in his own party, poor people who received welfare were time-limited to five years before they lost any government support.

The idea was that they could retrain and find jobs, becoming self-sufficient and no longer a burden on the taxpayer.

While the economy boomed, and jobs were easy to find, even for welfare moms, the plan seemed to work.

But now the growing poverty rate is bound to raise questions about whether the strict time limits are still appropriate.

The issue is now devolved to the states, many of whom have introduced safeguards.

But, with the rich receiving a $1.6 trillion dollar tax cut from the Bush administration, Democrats are likely to raise questions as to whether the government could afford to be a little more generous to the poor.

Democrats said the data supported their contention that Congress should increase spending on social welfare programs, resisted by many Republicans.

But Wade F. Horn, President Bush's welfare director, said the number of poor children was much lower than in 1996, when Congress overhauled the welfare law.

A family of four was classified as poor if it had cash income less than $18,104 last year. The official poverty levels, updated each year to reflect changes in the Consumer Price Index, were $14,128 for a family of three, $11,569 for a married couple and $9,039 for an individual.

Economic indicators

Fears and hopes

US Fed decisons

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