In-work poverty became a prominent policy issue in the United States long before the term itself acquired any meaning and relevance in other industrialized countries. With America’s embrace of an employment-centered antipoverty strategy, the working poor have become even more of an issue. This paper reviews some key trends, drivers and policy issues. How much in-work poverty is there in the United States? How does the US compare to other rich democracies? Has America’s in-work poverty rate changed over time? Who are the in-work poor? What are the main drivers of levels and changes in in-work poverty? Finally, what are the prospects for America’s working poor going forward?
OVER-TIME TRENDS IN IN-WORK POVERTY
The top line in figure 1 shows the poverty rate for all Americans using the US government’s official poverty measure. Since the late 1970s this poverty rate has been largely flat, falling during periods of economic growth but rising by an equal amount during economic downturns. Overall there has been no sustained progress in reducing poverty during this period, according to this measure.
THE UNITED STATES COMPARED TO OTHER RICH DEMOCRACIES
Figure 2 shows poverty rates in seventeen affluent democratic nations as of 2000. These are relative poverty rates, with the poverty line in each country set at 50 percent of its median income. The United States has the highest poverty rate both overall and among households with an employed person, but it stands farther away from the other countries on its in-work poverty rate than its overall poverty rate. The contrast between the US and three other English-speaking countries — Australia, Ireland, and the United Kingdom — is particularly striking. Compared to those three nations, the United States has an overall poverty rate only a little higher but an in-work poverty rate that is much higher.