What Are the Main Causes of Poverty in America?

What are some of the leading causes of poverty in the United States?

Let’s find out:

Rob Moore

Rob Moore

Principal, Scioto Analysis | Master of Public Policy, University of California |
Member, Association for Public Policy Analysis and Management and the Society for Benefit-Cost Analysis

A contributor to poverty in the United States is the country’s relatively weak social safety net

The United States has both a weaker tax and transfer system and a higher poverty rate than most comparable developed countries. Much of this is because the United States has weaker social insurance programs than other comparable countries.

In 2018, the United States spent 18.7% of its GDP on social programs. This figure is below the developed country average of 20.1% and puts the United States behind 21 of 28 other developed countries in social spending.

There is certainly a possibility that causation runs the other way. It may be that wealthy countries with lower poverty rates have more resources to devote to social spending.

That being said, the most straightforward way to reduce poverty is to give people material assistance, and countries that invest less in providing this assistance for the poor are likely to see more persistent poverty levels.

Nora V. Demleitner

Nora V. Demleitner

Professor of Law, Washington and Lee University, Virginia

I will focus on one that is a function and a cause of poverty, the US criminal justice system

With over 2 million people in jails and prisons and about three times as many people under the supervision of the criminal justice system, the system has become a major cause of poverty.

It deprives many families of (an additional) breadwinner and for those with an imprisoned family members adds substantial costs, ranging from (overpriced) prison phone calls to visits, often to prisons that are far away from home towns and require overnight trips. The costs are especially high when the incarcerated parent is a mother, as grandparents often take over guardianship, with all the costs involved.

Obviously, the financial impact on children is substantial (not to mention the emotional impact), especially because many of those involved in the criminal justice system does not come from means.

Even release from prison or a non-incarcerated sentence doesn’t necessarily imply a substantial reversal of fortune.

First, a criminal record has a dramatic and negative impact on future employment and earnings, especially for African-Americans. Studies have indicated that white men with a criminal record are more likely to be hired than African-Americans. And even the “Ban the Box” movement has benefited whites more than African-Americans.

Second, the supervision of the criminal justice system comes increasingly with a cost. Sometimes people are charged for their incarceration, for a public defender, and for supervision, including ankle monitors, drug tests, etc. Add to that mandatory court and other fees and fines.

In the end, involvement with the criminal justice system drives those in precarious financial situations further into poverty. There’s no new start for many as default or late payment means interest and late fees, throwing them further behind and demanding them to make a decision such as whether to feed a child, pay a utility bill, or make a criminal justice payment.

As law enforcement focuses generally on lower-income communities that are often plagued by comparatively high un- or underemployment and many in low-skilled positions, involvement with the criminal justice system triggers a downward financial spiral, for the individual and their family, that depletes any family resources and contributes to intergenerational poverty.

Donald E. Petersen

Donald E. Petersen

Florida Consumer Rights Lawyer | Founder, TCPA Blog

Much of the poverty in the U.S. arises from pervasive racial bias but there is also an inherent class bias in our system too

Historically the quality of educational opportunities depended upon what school district a child resided in which, in turn, depends upon local property tax receipts. Obviously, the more affluent districts have more money to fund education for their residents,*much* more.

The de-industrialization of the U.S.A. contributes to near poverty conditions as well as poverty but the structural wage problems predate approximately 50 years of wage stagnation (in real terms).

In 1937, Congress passed the Fair Labor Standards Act (“FLSA”) to assure that employers who were covered by the FLSA would pay their employees a minimum wage and compensate them for performing overtime.

The FLSA excluded two huge sectors of the U.S.A. economy — agricultural and domestic workers. In our era, the failure to adopt a “living wage” further erodes income at the lower end of the wage scale.

The perceptions of value —- with CEO’s and their cronies walking away with the lion’s share — skew the income distribution to levels which resemble the Golden Age or the 1920’s. So does a tax system which rewards people who have capital at the expense of people whose income consists of wages and salaries.

Highly skewed distributions of wealth typically lead to “frothy” investment markets as evidenced by the “Panic” of 1907, the “Crash” of 1929, and the credit default swap implosion in 2008.

The people who have control over concentrated amounts of capital run out of productive ideas and the laws favor “financialization” of the economy, speculative bubbles grow until they pop. Even then, the working poor bear a disproportionate share of the burden of rebuilding the economy.

Even the workers who are able to save are disadvantaged by entrenched “policy” decisions by the Federal Reserve Board which penalize savers at the expense of borrowers.

While the people who accumulate these savings are not in poverty when they are working and have the income to afford saving, the reduction in their income contributes to the poverty among the retirees.

The federal government’s misrepresenting the cost of living (especially medical care) for older Americans and consequent reductions in Social Security COLA’s also contributes to poverty among our elderly.

Toney Greer

Tony Greer

Philanthropist | CEO & Lifestyle Management Expert, The Royal Society

Poverty in America is a bit more discrete compared to other countries where it is more prevalent. There are people on the street with no food, no shelter, run-down tent communities with only a handful of people to help them.

Unfortunately, poverty in America is a cycle – it gets passed down from generation to generation. There are several organizations, charities, and government sectored systems to assist but it’s simply not enough. Below are 5 main interlocking causes of poverty in America:

Poor Economy

When there is a week economy in America that increases unemployment rates. A lot of companies start to cut jobs, perhaps revert to online vs brick and mortar, some companies decide to ship their manufacturing overseas in order to pay for their workers at lower rates or even worse, closing their doors but what this does is increase unemployment rates and when there’s unemployment, jobs become scarce therefore making the competition for jobs extremely high.

This leaves so many Americans unemployed with the ability to collect unemployment benefits that are much lesser rates than their previous salaries which cause families to go into poverty and in some cases homelessness.

Lack of affordable housing

There’s been a continuous growing gap in America between what you earn and the cost of living or cost of housing which really makes it difficult for American families to make ends meet.

The average in which one would need to make in order to afford a modest two-bedroom apartment has increased from $15.35 an hour in 2016 to now $22.10 an hour in 2019 and those who don’t or can’t find subsidized government housing could end up resorting to sharing blended family homes, moving from home to home of possible friends and family, Shelters, or even worse living on the streets.

Drug, Alcohol, and smoking abuse

Usually, when someone is on drugs they’ll pour all of their earnings and or money into their habits. Example if you spend $100 for 1 g of cocaine a day that’s going to cost you $700 a week which is a lot more then a lot of Americans make per week. And if you are involved with any other harsher drugs like heroin they could cost you at least $1000 a week or more.

Then, on the other hand, there are more socially accepted and legal habits like smoking marijuana, cigarettes, and alcohol.

Smoking and Alcohol alike are much more expensive than just purchasing the product itself because of additional repercussions associated with drinking or smoking it such as missing out on work, losing your job, illnesses, accidents, and fees of driving under the influence that happen as a result of smoking and drinking alcohol.

These addictions/habits increase the weekly and in some cases even daily expenses. Not only that but it easily leads individuals into incarceration which is another conversation in itself. These factors alone could lead many Americans to poverty.

Lack of education

Majority of lower classed individuals and families aren’t able to afford to go to college or earn a degree therefore only being able to obtain a low paying job with little to no benefits while relying on their low salary income to support themselves and/or family.

The average income for someone who just has a high school diploma was about 28,000 a year in 2016 which has increased to about $35,000 a year in 2019 which is slightly above the poverty line. It is evident to see that someone who lacks an education could easily get stuck in the cycle of poverty.

Medical expenses

Now, you could be rich or poor and develop a severe illness that requires immediate medical attention and in oftentimes could very easily happen unexpectedly that requires you to stay in the hospital for very long periods of time possibly treated with an array of things you need, medications, and treatments.

Most people don’t know that the average cost of staying at the hospital is $350 a night. A little generic pill like a Tylenol or ibuprofen has a ridiculously inflated cost of about $14!

And then if you have cancer and need chemotherapy could cost you well over $30k. There are of course minor surgeries that will cost several thousands of dollars and major surgeries that cost way much more than that and so forth.

If you are someone in lowering middle class and don’t have the resources to afford medical expenses it can and will lead you into poverty and of course, the insurance companies will insure a large portion of it but not all of it, and there’s still an upfront co-pay fee upfront that could be a lot of money. This is how someone could easily fall into a state of poverty.

Poverty is all they know

There are a variety of reasons why people are poor in America. One of the main contributing factors is being born into a poor family and not having any positive role models. This is likely to cause someone to have low expectations of life as they learn to become acclimated to their environment.

Believe it or not, there are some people you could not pay to move out of the impoverished neighborhood they live in. Their mindset seems to be in agreement with the old adage: “Better the devil you know.” 

Making poor life choices

It’s one thing to be born into poverty and it’s another thing to indulge in behavior which leads to poverty. Some examples are:

  • dropping out of school
  • having an unplanned pregnancy while being a teenager or unemployed
  • having multiple children without a good-paying job
  • living with major credit card debt and high-interest rates
  • living beyond one’s means and not saving a percentage of their salary
  • getting arrested for committing crimes
  • associating with gang members, drug dealers, or others involved in illegal activities
  • becoming addicted to drugs, alcohol, or gambling

Falling in love or marrying someone who brings a lot of negative baggage and drama to the table will also keep you struggling. You really do have to be selective about whom you allow into your life and spend your time with. Friends are the family you choose. Some people are like vampires. They will suck the life out of you!

Ignorance regarding resources

It’s been said; “When you know better you do better.” Too often people are unaware of vocational training, charities, scholarships, grants, mentors, and various other programs designed to assist the poor. It never occurs to many folks to even bother to see if there is help available!

Most people these days never set foot in a library or do not even own a library card. Whatever it is you want to do there is probably someone who has done it and written a book providing information on how to do it!

In addition, there are self-help, motivational and inspirational books, and biographies that can help to lift someone’s spirits. Seek and you shall find is often the case if one is willing to do some research.

Lack of ambition

A lack of ambition above all else will keep a person poor. In America, you have the right to do nothing and have nothing. Most people who escape or move out of poverty have drive, ambition, or desire and determination. They make a decision, commit, and succeed.

These are people who write down their goals and give it everything they’ve got. They are willing to sacrifice short-term fun for long-term gains. They will work two jobs, ask questions, read books, or do whatever it takes to reach their dreams.

I have a cousin who stated he wanted to be a doctor from the time he was a child. His family did not have the financial resources to pay for his education. He joined the military and the government paid for his college and medical school with the requirement he serves a certain amount of time.

Today he is a doctor and is also married to a doctor. When someone makes up their mind to do something it doesn’t matter where they start from. There have been more “rags to riches” stories created in the U.S. than any other nation on earth!

Ky Trang Ho

Ky Trang Ho

Business and Investment Writer | PR Consultant, Key Financial Media LLC

One of the main causes of poverty in Los Angeles is sky-high property values

I am also a landlord with three properties and I am active in my community as a neighborhood board member. High property values lead to sky-high rents, which leaves people with very little after paying for basic shelter.

Why are property values and rents sky-high? Single-family homeowners fight tooth and nail whenever new multi-family developments are proposed in their neighborhoods for fear of increased traffic, more cars parking on the street or threats to their property values.

Why are apartments so expensive in areas zoned for multi-family like downtown Los Angeles? Developers are basically forced to make them all luxury because of LA restrictive building codes. Otherwise, they can’t make recoup their costs.

LA’s building code calls for 100 square feet of open space for each unit plus a common area of at least 400 square plus parking for each unit. Thus all of the buildings downtown have rooftop gardens, pools, screening rooms, lounges, rec rooms, etc.

Constructing buildings to support all of the dirt needed plus the parking structure is much more costly than a regular building without these amenities.

Developers must then pass on the cost to buyers and renters. They always buy out of the affordable housing requirement. People who can afford to live in expensive buildings don’t want to live next to poor people, who will drag down property values.

LA neighborhoods are more spread out than other major cities because each house has to at least 20 feet of the front yard, at least 15 feet of backyard space and five feet on the sides.

What’s more the size of the house cannot exceed 45% of the total lot square footage. Imagine how much more housing you could fit into a city if homes could be built closer together like in San Francisco?

LA’s housing shortage was decades in the making.

Frequently Asked Questions

Who is poverty affecting the most?

Poverty is a complex issue that affects individuals and communities around the world. While poverty can impact people from all walks of life, there are certain groups that are more likely to be affected than others.

One group that is particularly vulnerable to poverty is children. Children living in poverty are more likely to experience health problems, educational barriers, and other challenges that can have a long-lasting impact on their lives.

In addition to children, women are also disproportionately affected by poverty. Globally, women are more likely to live in poverty than men, and they often face additional barriers to accessing education, healthcare, and employment opportunities. These barriers can make it difficult for women to achieve financial stability and independence, perpetuating the cycle of poverty.

Other groups that may be more likely to experience poverty include people with disabilities, racial and ethnic minorities, and individuals living in rural areas. These groups may face additional challenges related to discrimination, lack of access to resources, and other systemic issues that contribute to poverty.

What can be done to reduce poverty?

Increase access to education and job training programs: This can help people develop the skills they need to secure higher-paying jobs and improve their economic circumstances.

Implement policies to raise the minimum wage: This can help ensure that people who work full-time are able to earn a living wage and better support themselves and their families.

Expand access to affordable housing: This can help ensure that people aren’t spending a disproportionate amount of their income on housing costs, leaving them with little left over for other essentials.

Provide greater support for social safety net programs: This can help ensure that people who are struggling to make ends meet have access to basic necessities like food, healthcare, and childcare.

Address systemic issues like racism, sexism, and discrimination: These factors can play a significant role in keeping people trapped in poverty, so it’s important to work to address these issues on both an individual and systemic level.

Why do the poor stay poor and the rich stay rich?

This is a complex question that has puzzled many individuals for decades. The truth is, there are several factors that contribute to this phenomenon.

One factor is that wealth is often passed down through generations. This means that individuals born into wealthy families are more likely to have access to resources, connections, and opportunities that can help them maintain and increase their wealth. Conversely, individuals born into poor families often lack these advantages and face greater barriers to upward mobility.

Another factor is that the wealthy often have access to better education and job opportunities, which can help them increase their income and accumulate wealth over time. They may also have more financial literacy and investment knowledge, allowing them to make smarter financial decisions.

It’s important to note that these factors are not the only reasons why the rich stay rich and the poor stay poor. Other factors such as systemic inequalities, discrimination, and limited access to resources and opportunities also play a significant role.

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