Why Were Poverty Rates So High in the 1980s?
This paper explores the relationship between the macroeconomy and the poverty rate. The first section provides evidence that poverty was far less responsive to macroeconomic growth in the 1980s than it had been in earlier decades. The section explores and rejects four reasons for this: It is not due to the exclusion of in-kind income from the data, to the regional location of the poor, to the public assistance changes of the early 1980s, or to the changing demographic composition of the poor. Instead, it is almost entirely due to declines in real wages that occur among low-wage workers over the 1980s. In fact, employment and weeks of work per year within low-income households expands more rapidly in the 1980s than in the 1960s. This is almost entirely offset, however, by declines in weekly earnings at the bottom of the income distribution. The result is that economic growth has been a far less effective anti-poverty tool over the past decade.
|Date of creation:||Oct 1991|
|Date of revision:|
|Publication status:||published as Papadimitrious, Dimitri B. and Edward N. Wolff (eds.) Poverty and Prosperity in the US in the Late Twentieth Century. London: Macmillan Press, 1993.|
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- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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569, Princeton University, Department of Economics, Industrial Relations Section..
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- Rebecca M. Blank, 1987. "Disaggregating the Effect of the Business Cycle on the Distribution of Income," NBER Working Papers 2397, National Bureau of Economic Research, Inc.
- Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December.
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