Tag Archives: poverty reduction

The Young And The Penniless: 25-35 Age Group Vulnerable To Poverty

My Article For Voice Of Russia

WASHINGTON (VOR)— Much ado has been made about the purportedly entitled Millenial generation, but the reality of most young people’s lives is more akin to an urban dystopia than an utopia.

Few topics in public discourse are more plagued by pervasive myths and misconceptions than poverty, especially about how and to whom it happens. Poverty, Dr. Mark Rank points out, is a surprisingly commonplace experience. “The question for most Americans is not whether they will experience it at some point but when.” Dr. Rank and long-time collaborator Thomas Hirschl of Cornell University are releasing a new book in February 2014 entitled Chasing the American Dream: Understanding the Dynamics that Shape Our Fortunes. It explores the shifting nature of the American Dream—how tenuous it has become, how has the concept morphed over time, and how economically viable it is. Dr. Rank describes the methodology in the book as based on a “large longitudinal panel of data from 1968 to 2009 and from it, we generated a life table of the likelihood of experiencing particular economic events, thus quantifying the measure of ‘economic insecurity.’ The book also includes interviews with 75 people, as a way for us to study their responses on the question of the American dream.”

Mark Rank’s research indicates that nearly 40 percent of Americans between the ages of 25 and 60 will experience at least one year below the official poverty line during that period ($23,492 for a family of four), and 54 percent will spend a year in poverty or near poverty (below 150 percent of the poverty line). Yet, the group of young adults aged between 25 and 35 seems be especially susceptible to financial peril. As the figure below illustrates, almost 40% of young adults spend at least a year living below 150% of the poverty line. “Young adults have always been at the greatest risk for economic instability as this is typically a low point in their income earning ability,” Dr. Rank explains. But undoubtedly their economic hardships have been compounding in recent years.
The way that Dr. Rank measured the variable of economic security was living below the poverty line, loss of job, or being on some sort of public assistance program, like welfare or food stamps. The employment status of young adults was a large contributing factor to their economic insecurity. Fewer Americans aged 18 to 29 worked full-time for an employer in June 2013 (43.6%) than did so in June 2012 (47.0%), according to Gallup’s Payroll to Population employment rate. Fewer young adults with a college degree now hold a full-time job than did so in June 2012 (68.9%) and in June 2010 (67.9%). Similarly, fewer young Americans without a college degree have a full-time job now than in June of the previous three years. And as Dr. Rank’s research indicates, unemployment in that age group is the highest of any age group.
According to a Pew study, since 2010, the share of young adults ages 18 to 24 currently employed (54%) has been its lowest since the government began collecting these data in 1948. And the gap in employment between the young and all working-age adults—roughly 15 percentage points—is the widest in recorded history. In addition, young adults employed full time have experienced a greater drop in weekly earnings (down 6%) than any other age group over the past four years.
And what about the white picket fence part of the American dream? Home ownership is becoming less and less attainable to young adults, even in cities with high concentrations of upwardly mobile young people like Washington, DC.
According to the research of William H. Fray from Brookings, while homeownership across all age groups fell by 3 percentage points to 65 percent from 2007 to 2012, the drop-off among adults 25-29 was much larger — more than 6 percentage points, from 40.6 percent to 34.3 percent. Declines in homeownership for those ages 40 and older over in that five-year period were more modest.
The District of Columbia, with its high share of young adults, had the lowest homeownership rate across all age groups at 41.6 percent, followed by New York at 53.9 percent.
Being young puts one in a precarious economic position, but being non-white seems to especially exacerbate the problem. “If you are white, there is a fairly large chance that you will experience economic instability at some point in your life. If you are African-American or Hispanic, this chance now becomes almost a certainty. In the 25-60 bracket of white respondents, a very significant percentage—80%– had experienced one or more economically calamitous events. In the 25-60 age group of non-white respondents, 90% had experienced the same economic insecurity,” Dr. Rank explains.
So what does this all say about the attainability of the American dream? Dr. Rank thinks that concept, while not entirely rendered null, has certainly morphed. “The American dream is no longer about making it big or making a lot of money. Our respondents felt that it now meant leading the kind of life that you want and makes you happy. They also pointed to it being the idea that if you work hard, you should be able earn a decent living and be in a secure economic position. The third component was the importance of having a hope for the future, a certain optimism that one’s children and ensuing generations would fare as well or better.”

What’s In A Number: Can We Meet UN Poverty Reduction Goals?

The numbers in the recently released UN Millenium Development Goals Report are a case in point. Among its key findings, the report tells us that “the proportion of people living in extreme poverty has been halved at the global level. In developing regions, the proportion of people living on less than $1.25 a day fell from 47 per cent in 1990 to 22 per cent in 2010. About 700 million fewer people lived in conditions of extreme poverty in 2010 than in 1990.” A UN High-Level Panel report touts the progress made in the last 13 years as “the fastest reduction in poverty in human history.” In essence, the prevailing consensus is that Millenium Development Goal 1, the reduction of extreme poverty and hunger by half, is already accomplished. But are the numbers really so clear?
The actual numbers on poverty look significantly grimmer–1.29 billion people in 2008 lived below $1.25 a day; 2.47 billion people in 2008 consumed less than $2 a day. At the current rate of progress, there will still be around 1 billion people living below $1.25 per day in 2015. Most of the 649 million fewer poor by the $1.25 per day standard over 1981-2008 are still poor by the standards of middle-income developing countries.
It turns out that the seemingly simple question of how we measure the number of poor people in the world is surprisingly difficult and extremely important to answer. It affects how we report success, especially considering that the post-2015 talks now dare to speak openly about the goal of complete poverty eradication. In April, at a press conference during the Spring meeting of the international financial institutions in Washington, DC, the president of the World Bank, Jim Yong Kim, pointed to 2030 as the global target year to end poverty. President Obama expressed similar sentiments in February, when he promised that “the United States will join with our allies to eradicate such extreme poverty in the next two decades.”
So, how much has actually been accomplished? Thomas Pogge, the Director of the Global Justice Program and the Leitner Professor of Philosophy and International Affairs at Yale University, makes an important insight—the way that extreme poverty and hunger are measured has shifted over time, and significantly. In other words, some of the madness definitely lies in the method—measurement shifts have taken place, perhaps under the radar of public knowledge and only noticeable by economics geeks. This is inherently confusing. When we claim success, we should know what we have actually accomplished.
In September 2000, the heads of 147 governments pledged that they would halve the proportion of people on Earth living in the direst poverty by 2015, using the poverty rate in 1990 as a baseline. Here Pogge points out something largely glossed over: as with the hunger target, the so-called success over recent years owes much to the back-dating of the base year from 2000 (UNGA Millennium Declaration) to 1990. More specifically, the goal set at the World Food Summit in Rome in 1996 was to halve the number of chronically under-nourished people between 1996 and 2015. That criterion quickly changed at the 2000 meeting to “halve, by the year 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger.” Changing the language to refer to a proportion instead of an outright number and backdating the goals to 1990 changed the picture and made the goals easier to reach. Another modification changed the definition to refer only to people in the developing world. Dr. Pogge explains, “…there are two different shifts: (a) shifts in what is to be halved by 2015 (number of poor, proportion of poor in world population, proportion of poor in population of the developing world) and from what baseline (1996, 2000, 1990). (b) Shifts in how persons get identified as poor (average household income below $1/day in 1985 US-dollars, below $1.08/day in 1993 US-dollars, $1.25/day in 2005 US-dollars). These methodological revisions entailed substantial shifts in the number of poor, in their geographical distribution, and, most importantly, in the global poverty trend.” The back-dating of the year allowed for the international institutions to count the significant progress China had made in poverty reduction.

Another major methodological issue is how poverty is measured, using an international poverty line (IPL), and the resulting overreliance on what Dr. Pogge calls a “money-centric” measure set by the World Bank. “In contrast to a human requirements-centered approach, the Bank has set a relatively arbitrary international poverty line (IPL) defined in abstract money units and translated into local currency amounts that it deems to be ‘equivalent.’” The poverty measurement’s excessive sensitivity to the IPL level has a significant impact in how we measure progress, as it provides a very narrow definition of poverty. At $1.25/day, according to PovcalNet, we are 22.4% ahead of meeting the goal. But with $1.50/day, we are only 8.5% ahead, and with $1.815/day we are 5.7% behind. The choice of base year that the progress is measured from is an equally important consideration. Another distortion comes from the use of general consumption PPPs. The general-PPP (purchasing power parity) equivalent to $1.25 (2005) in a typical poor country buys only as much food there as $0.83 bought in the US in 2005. So, the World Bank’s poverty line is too low to cover basic needs. The Bank’s very low line overlooks a lot of very poor people. It counts as poor in 2010 only 1,214.98 million people. The rather narrow IPL measure also disregards intra-household income distribution by looking at the household as a whole, nor does it account for other dimensions of poverty such as the leisure time/labor time ratio, public goods, and climate.
So how can we get around this statistical quagmire and properly measure a very human problem — living in dire poverty. Dr. Pogge suggests that it is crucial that we “define precisely in advance the goals and targets the world is committing itself to as well as the methods by which progress toward these targets is to be measured or assessed,” to prevent midstream revisions and back-dating of targets. He also advocates that the monitoring of progress be left to groups of independent experts, not to international agencies, which are politically exposed. Ultimately, the new agenda should be a lot more participatory, inclusive, and responsive to those directly affected by poverty and social injustice.