The Morning Economic Report
9:04 pm
Tue June 10, 2014

Fighting Poverty - 6/11/14

For decades, many economists and policymakers have believed that the best way to fight poverty is to accelerate economic growth.  That seems to make sense since faster economic growth produces more job creation, which in turn produces more and better job opportunities – just the tonic for poverty.  One of those policymakers was John F. Kennedy, who among other things said that "a rising tide lifts all boats." 

As reported by writer Neil Irwin, during Kennedy’s era, the notion of a rising tide lifting all boats rang true.  From 1959 to 1973, the nation’s economy expanded 82 percent on a per capita basis in nominal terms, enough to drive the proportion of people living in poverty from 22 percent to 11 percent.  But over the last generation, the relationship between growth and poverty reduction has become less apparent. 

According to Irwin, the economy has expanded 147 percent per capita over the course of a generation, but poverty has stubbornly hovered between 12 and 15 percent, even higher than it was during the early 1970's.  Part of this is attributable to low pay.  If one adjusts for a higher number of hours worked, between 1979 and 2007, hourly pay for the bottom 20 percent of households expanded just 3.2 percent.