Sample Economics Essays on Poverty and economic development in the US

Description of issue

Poverty is a lack of necessities (Bradshaw, 2006). Based on human dignity values, food, medical care, shelter, and safety are necessary for decent human life. However, the want for needs is relative and may vary from one person to another. Needs are relative to what is possible, and experience and social definitions influence perceptions about needs. Poverty is a mark of inequality, caused by relative deprivation. The definition of poverty can be social or objective. Social definitions are relative and allow for flexibility in communities addressing local concerns. The objective definition is a statistical measure established federally by the government and allows for tracking of progress and comparison between different areas. Economic development is a process that is multi-dimensional involving social structure changes, attitudinal changes, national institutional changes, accelerated economic growth, and inequality reduction (Todaro and Smith, 2012).

Why the issue of poverty was selected

The issue of poverty is becoming an increasingly serious problem for Americans. The latest data from the US Bureau of Statistics show that there is no year-on-year reduction in poverty levels (Strachan, 2013). The levels remain unchanged with suggestions that the poverty rate might be increasing. Even though the economic recession has eased and there is a stock market boom, the benefits are yet to trickle down to the ordinary person. Although the national poverty level remains unchanged, the number of people leaving in poverty year-on-year increased. This is a worrying trend because many people will be left behind as the economy develops. Economic development should, ideally, lead to jobs and increased income for people, leading to reduced poverty levels. However, indications are that this is not the case despite concerted government interventions (Heavey 2013). This calls for an investigation to determine what is not working.

Background information

The poverty levels in the US have not changed substantially despite robust growth in the US economy over the past three decades (Hoynes, Marianne & Stevens, 2006). Poverty levels fell sharply in the ’60s from highs of over 22% at the beginning of the decade to less than 13% by the end of the decade (Haskins 2009). The drastic reduction in poverty in the 1960s did not happen by coincidence. It was due to concerted government efforts and directed intervention measures. The government enacted a number of programs that contributed a lot to the reduction in poverty. The government’s efforts were possible due to a booming 60’s economy. The government invested heavily in education to give disadvantaged groups a chance to access quality education that could help the children escape the poverty trap. The government not only supported local school districts but also provided grants for students pursuing higher education. The grants, scholarships, and work-study programs offered opened higher education to all irrespective of the economic background.

For young children, the government established pre-schools to give children an early feel for education that was invaluable to future success. The government also introduced a bilingual policy, where immigrants could be thought in Spanish as they mastered English. This ensured that immigrants were not left behind in education due to an inability to understand English. In cognizance of the fact that a healthy population is indispensable in the pursuit of economic development and reduction of poverty levels, the government set up Medicare to provide health insurance to the poor. These programs were accompanied by efforts to combat hunger and malnutrition. The introduction of food stamps helped to feed millions of households, immeasurably improving the health of the population. All of these factors in concert helped to improve the demographic structure of America in the ’60s as the life expectancy levels increased.

The healthier population coupled with the increased education opportunities contributed to the growth in the economy. Consequently, there were more job openings available for people. The virtuous cycle of better health, better education, and many job opportunities helped to drive the poverty rate downwards drastically in the ’60s. The increase in Social Security disbursements in the 60’s lifted millions of Americans from poverty. The extra cash was very useful to the poor who did not need to worry about healthcare charges or tuition fees for their children. The money helped poor Americans buy homes, hence increasing the prosperity of the nation.

However, since the 1970s, the poverty level has remained constant, rising on some occasions (Haskins 2009). The poverty level is correlated with the economy. It rises and falls depending on the prevailing economic conditions. The lack of a marked decrease in the poverty level is surprising given the number of government means-tested initiatives and programs implemented in the recent past. This is in addition to the vast amounts of monetary resources invested in those programs (Haskins 2009). This raises the question as to why there are no decreased poverty levels despite the government’s efforts to reduce the poverty levels in the country.

Current anti-poverty policy

The government is implementing policies to mitigate the effects of poverty within the American public. By the mid-1990s, government policy shifted from the fight against poverty to the reduction of welfare dependence (Blank, 2000). This policy change interestingly led to the revival of the war against poverty. Initially, disbursement of cash support occurred through the Aid to Families with Dependent Children (AFDC) program. In 1996, the Temporary Assistance for Needy Families (TANF) replaced AFDC; giving states more leeway to implement local poverty reduction programs in a manner that they felt was appropriate. Some states allowed people to keep a higher level of public support even after going to work, for a smoother transition from joblessness to work. Some states changed the welfare offices into work assistance offices where they give benefit beneficiaries incentives to seek work. There are penalties imposed on those who do not show effort in seeking work. These efforts were to help in removing people from the welfare system and help them into the job market so that they can earn to support themselves and their families. Other policies like the upward adjustment of the minimum wage, adjusted to inflation also helped in the fight against poverty.

Suggested policy considerations

Currently, the biggest problem is that it appears as if the multiplicity of support programs might be working against each other to keep people in poverty. Food stamps (SNAP) are the most effective program by the government, lifting millions of families with children out of poverty. Beneficiaries seeking and finding work are punished for their success. A slight increase in income leads to precipitous cuts in food stamps, housing subsidies, and loss of any cash assistance. This approach is wrong because usually, the income earned does not put the welfare beneficiary above the poverty line. For programs to be effective, the beneficiaries should be slowly weaned off government support as their income rises until they are above the poverty line. If the government’s approach remains the same, the incentive for seeking salaried employment for the poor is reduced.

Recommendations for the future

The government has done much to reduce poverty in the nation. However, poverty levels remain unacceptably high, and much needs doing if the poverty level is to reduce to single-digit levels. The following are some things that can help to reduce poverty

  • Adjust the minimum wage upwards to above $ 10 per hour to mitigate the increased cost of living
  • Increase funding to anti-poverty programs, especially to SNAP which has proven efficacy in lifting millions from absolute poverty
  • Taking care of the senior and disabled citizens, who are much at risk from poverty by strengthening the social security benefits system
  • Help immigrants, who form a disproportionately high percentage of the poor, to settle and get decent jobs
  • Enact programs that encourage people to seek work by gradually getting them off the benefits system as their income rises and they move above the poverty line
  • Regulate and subsidize student education loans to prevent students from taking unsustainable levels of debt that handicap them after they graduate.

Conclusion

The trickle-down effect assumes that a developing economy leads automatically to a reduction in poverty levels.  Although there is a positive correlation between economic development and reduced poverty levels, the government must actively intervene to ensure that some portions of the population do not miss the benefits if a developing economy. Poverty is a serious problem, and it cannot be eliminated by merely developing the economy and hoping for the best. The country requires putting social policies in place, and source adequate funding to ensure that the poor get help to overcome the poverty of their circumstances

 

 

References

Blank, R. (2000). Poverty: lessons from recent U.S. history. Journal of Economic Perspectives 14(2), pp. 3–19

Bradshaw, T. (2006). Theories of Poverty and Anti-Poverty Programs in Community development. RUPRI. Retrieved from http://www.rupri.org/Forms/WP06-05.pdf

Haskins, R. (2009). What works is work: welfare reform and poverty reduction. Northwestern Journal of Law & Social Policy. 4(1), pp. 29-60.

Heavey, S. (6 November 2013). U.S. poverty rate remains high even counting government aid. Reuters. Retrieved from http://www.reuters.com/article/2013/11/06/us-usa-economy-poverty-idUSBRE9A513820131106

Hoynes, W., Marianne, P. & Stevens, A. (2006). Poverty in America: trends and explanations. Journal of Economic Perspectives, 20(1): 47-68.

Stevans, L. (2008). The relationship between poverty and economic growth revisited. Selected Works of Lonnie K. Stevans. Retrieved from http://works.bepress.com/cgi/viewcontent.cgi?article=1003&context=lonniekstevans

Strachan, M. (9 September 2013). America’s poverty rate stuck at 15 percent for the second straight year. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2014/03/08/worst-product-flops_n_4926112.html?ref=topbar

Todaro, M & Smith, S. (2012). Economic development 11th ed. Boston: Pearson.