Life in Poverty: What is Poverty in the US?

In 2007, 12.5% of Americans were living at or below the Poverty threshold.   What causes them to fall into poverty.  The answers might surprise you. With all of the focus on middle class tax breaks and stimulus payments,  we forget that we have a percentage of our nation who are living in deep and abiding poverty.

Three years ago, I had a management position with a large corporation and an income over $60,000 per year.  I owned a small house and a new car.  Sounds pretty good doesn’t it?   It is deceptive because the cost of living where I was located was so high that even with my income, I couldn’t afford to live.

This was before I discovered personal finance.  Had I known then what I know now, the decisions that I made would have probably been different.  Hind sight is always 20/20.  I decided to make some changes in my life.  I was looking to significantly lower my cost of living and keep my income in the same range.  You can read more about the decisions that I made in the post 4 Good Decisions that Brought Me to My Financial Knees.

So here I am, an intelligent, moderately well educated 50 year old woman whose income is at or below the poverty level.  I am not however, destitute.  I am not living on welfare or food stamps.  I eat well and I have heat but I can’t pay my consumer debt.  I’m actually fairly happy.  Of course there are holes in this situation.  It allows no saving for retirement, I have no health or life insurance as my income just won’t stretch that far.  I live on the brink of disaster all the time.  If I have an accident or a major illness and can’t work, there is very little cushion to fall back on.  My tiny little emergency fund is all that stands between me and disaster.

I am probably more representative of American poor than the unwed mother living on welfare or the drug addict who is homeless and unable to hold down a job.  Over 37 million people live below the poverty threshold.  Paul Harris writes in a 2006 article for the Observer:

A shocking 37 million Americans live in poverty. That is 12.7 per cent of the population – the highest percentage in the developed world. They are found from the hills of Kentucky to Detroit’s streets, from the Deep South of Louisiana to the heartland of Oklahoma. Each year since 2001 their number has grown.

He has some interesting stories on a few people who are living in poverty.  I don’t believe that they are the norm but it made interesting reading.

What Is Poverty?

Officially the poverty threshold is determined by the US census and the full tables can be seen at the census website.  According to Wikipedia “This measure recognizes poverty as a lack of those goods and services commonly taken for granted by members of mainstream society.”

Poverty Guidelines are issued by the Department of Health and Human Services and are a simplified version of the poverty thresholds.   They are used largely for administrative purposes in determining benefits for citizens.

Most industrial nations use a relative measure of poverty (income of 60% of the median income) and this actually increases the percentage for the US.  Our national median income is $50,233 and 60%

The following table is from the US Census bureau website.

Stop for a moment and imagine that  you had to support your family on this income.  One factor in determining the poverty thresholds is the amount of money that a family spends on food.  The Department of Agriculture found that families of three or more spend one third of their after tax dollars on food so that the threshold was determined by multiplying the cost of food by three based on the Thrifty Food Plan.

Now stop and think about how much you spent at the grocery store last week.  A family at the poverty level would be spending approximately $35 per person on food per week.  In fact, this is the amount that food stamps are based on.  It differs based on sex and age but according to the Cost Of Food for September 2008, you should be able to feed a family of 3 a nutritious diet for approximately $110 per week.  This amount differs based on the ages and sex of the family.

And if you think that you will never be “poor” statistics may prove you wrong.  Interestingly enough 58.5% of Americans will spend at least one year living below the poverty level between the ages of 25 and 75. Why and how does that happen?

One Example of a Fall Into Poverty

David was a 55 year old man.  He had a good job with decent benefits.  He wasn’t rich but he wasn’t poor either.  Two years ago, he was diagnosed with cancer.  When his doctor told him what his treatment schedule would be, he was concerned about taking that much time off work.  His doctor informed him that he would never work again.

Just that quickly he lost all his income and soon after his benefits.  His savings was eaten up by medical bills and living expenses.  He was thrust rudely into the disability nightmare.  He was lucky, if you can call it that, because he had a terminal illness and recieved disability quickly (less than the two or three years that it sometimes takes).  He receives medicaid because he now has no property and little income.

He exists now on under $1,000 per month.  That pays for his food, rent, electricity, tv, phone, gas, and believe it or not, child support.  He is frugal with his money, he has to be.  He schedules his doctors appointments early in the month because by the end of the month, there is no money to pay for gas to get to them.

The good news is that his cancer is in remission.  He still takes chemo therapy but there is no sign of cancer.  Once his chemo is over, there is the chance that his disability and medicaid will stop and he will be faced with trying to find work as a 57 year old man in a poor economy.

Poverty can happen to anyone and does happen to over half of the American population.

No related posts.