First Person: The Good Fight


America’s war on poverty 50 years later–are we winning?

This summer marks the 100th anniversary of the start of World War I. While the anniversary of the Great War has, deservedly, received a lot of media coverage, another anniversary of interest to economists has garnered much less attention. January 2014 marked the 50th anniversary of Lyndon Johnson’s declaration of the “war” on poverty.

After 50 years of fighting poverty we have more than enough evidence to evaluate how we’ve done. The official poverty rate in the United States has remained between 10 and 15 percent since the late 1960s. The percentage of children living in households that are below the poverty line has remained between 15 and 25 percent, and the child poverty rate has consistently exceeded the overall poverty rate. We have had one unqualified success. The United States has experienced a dramatic reduction in poverty among seniors. More than 25 percent of all seniors lived in poverty in 1967, but that figure has fallen to around 10 percent.

In the decades since Johnson’s declaration, economists have constructed alternatives to the official measures of poverty. These measures take into account things like the EITC (Earned Income Tax Credit) payments and “in kind transfers”—such as food stamps and spending on Medicaid or Medicare—that the official poverty measures ignore. But, regardless of the poverty measure we look at, we get largely the same result: Roughly 15 percent of the population lives in poverty.

What do these figures mean? For me, they mean we’ve lost the war on poverty. One out of every five children in the United States lives in poverty. (For a family of four the poverty line is currently $23,850.). Thankfully, the percentage of children living in poor households has fallen since the 1980s. But, when you combine the lack of progress we’ve made in reducing the overall poverty rate with the statistics on child poverty, it is clear we’ve not done enough.

It scares me that we’ve lost the war on poverty, but what scares me even more is that things may get worse before they get better. The rate of institutional and technological change in the 19th and early 20th centuries was truly profound, but the rate of technological change we are experiencing in the early 21st century is almost impossible to comprehend. Think about the cell phone you carried in your pocket 10 years ago. Compare it to the smart phone you carry with you today. Your smart phone has more computing power—by leaps and bounds—than the desktop computer you might have had at your workstation in the 1990s.

Increasingly, individuals who don’t acquire the education and skills to use or create advanced technology are going to be left with very few career choices. Many of the remaining jobs will be in service industries—waiting tables or working in shops—and most of these jobs will experience relatively small productivity gains. Economists will tell you this is of great concern because productivity gains drive increases in pay. Professions that experience small productivity gains will see much smaller wage increases than industries where workers become substantially more productive. This may lead to widening income inequality and the expansion of the segment of the population working jobs that leave them living near (or below) the poverty line.

Perhaps the best way to understand this is by thinking about your smartphone. The person who sold you the smartphone at the cellphone store? His productivity won’t change very much in the next 10 years. Now think about the woman who wrote the code for your phone’s operating system. Any bets on what she might be creating (and earning) in 10 years?

I know that all of this sounds dire, but I think there’s an important, positive takeaway point. We can do better. Davidson, and schools like Davidson, can take the lead in finding a way to win the “new” war we must wage on poverty. Davidson must continue to help students acquire the skills they need to be successful in the 21st century workplace, but, more importantly, it must also remind them how desperately the world needs them to lead lives of leadership and service.


About Author

Fred Smith

Fred Smith is professor of economics at Davidson College. He teaches urban and public economics courses and the primary focus of his research is sports economics.

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