9 Top Reasons for Poverty in the United States

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It’s hard to believe that poverty is still rampant in a country that has produced so many wealthy individuals, but the numbers don’t lie. In 2014, the United States Census Bureau reported that $46.7 million people were living in poverty – that’s nearly 1 out of every 6 people! So what on earth causes this deplorable life status? How is it that so many people hardly earn enough to survive? It’s time we get these questions answered and talk about the reasons for poverty in the United States.

reasons for poverty in the united states - total numbers

Top 9 Reasons for Poverty in the United States

Unfortunately, there is not one single formula that can keep everyone out of poverty. There are too many life situations, too many economic variables, and too few people that care. (Sometimes this even includes the people that are in poverty themselves). Have you ever been curious about the reasons for poverty in the United States? The straight answers are presented below.

1) You Were Born With the Wrong Skin Color

This isn’t meant to be racist – it’s an absolute fact. Those that are born black are the most likely to live in poverty. They earn an average of just $35,000 per household and over 25% of them live in poverty. On the other hand, if you’re born white (non-Hispanic), your average family income is over $60,000 and only 10% of you will live in poverty. Quite the difference isn’t it?

reasons for poverty in the united states - race

2) Stagnant Wages for the Least Skilled

Beyond the 1960’s, the average wage of the lowest-fifth remained stagnant, making it more and more difficult for the poor to gain traction. So what caused this stagnation? Mostly, this phenomenon can be explained with simple supply and demand.

In the 50’s and 60’s, the economy was booming which created a very low unemployment rate. Demand for employees was high, even for the least skilled among them, and the wages increased with demand. When the economy slowed in the 70’s and beyond, unemployment rose to an average of 7% or more. Employers were hiring, but only the better of the low-skilled employees, which left the wages stagnant for many years to follow.

reasons for poverty in the united states - stagnant wages

3) Increase in Single-Parent Households

According to Princeton studies, poverty in female-headed households is four or five times more likely than married-couple families. It sounds a bit shocking at first, but when you stop to think about the challenges a single parent faces (namely, childcare expenses on a single income), the reality rings true. Unfortunately, over the past decades, single-headed households are on the rise. And, this increase is definitely chalked up as one of the reasons for poverty in the United States.

reasons for poverty in the united states

4) Less Government Focus on the Poor

Aside from Social Security, Medicare, and unemployment compensation, much of the nation’s legislation was formed many decades ago and doesn’t have the same impact today as it did then. The challenge in creating new legislation (as I see it) is how to create a program that helps the needy without enabling those in poverty. In other words, how can you institute a program that helps only those that truly want to dig themselves out of poverty and not use it as a way to freeload off the government. I don’t think anyone has quite figured this one out yet.

5) Lack of Affordable Quality Education

Congress has cut spending on K-12 public schools by nearly 20% since 2011. Somehow, many schools have still kept the satisfaction of parents throughout those years, but I can’t imagine that the schooling is as effective when it’s being funded with 20% fewer dollars. Yet one more add to the reasons for poverty in the United States.

6) Increased Cost of Living

Even though wages might not be increasing, the cost of living almost always does. Since 2007, the Consumer Price Index has increased by over 17%, meaning the cost of necessary goods has increased substantially while the lowest-fifth’s income has decreased.

reasons for poverty in the united states

7) Globalization

As the National Bureau of Economic Research confirmed in a recent post, globalization can both benefit and harm the poor – it really all depends on who you are and where you live. While globalization could in fact create cheaper products that benefit the poor, one of the top reasons for poverty in the United States is still globalization.

You see, globalization encourages the manufacturing of a product to take place within the country that can do it most cost effectively. Since the United States continues to increase the minimum wage, fewer and fewer low-skilled jobs are sticking around. Instead, they’re flowing out to Thailand, China, and Vietnam – thereby hurting the United States citizens.

8) Increase in the Cost of Medical Care

Medical costs have been on the rise over the past decade for sure – maybe even longer than that, and it definitely ranks among one of the top reasons for poverty in the United States.

People get sick, it costs more and more to make them better, and they’re left with a hefty bill that they cannot pay. President Obama tried to reverse the rising cost of medical care with this Affordable Care Act, but it has yet to gain traction and as you can see below, the costs continue to rise far above the average cost of inflation. For those living in poverty, sickness is certainly something to be feared. Get sick, and you might be stuck in poverty forever.

20151123 - reasons for poverty in the united states - health care costs

9) Rising Cost of College

While one of the top reasons for poverty in the United States can certainly be attributed to medical costs, there is something out there that is beating down the poor even more: the rising costs of college tuition.

reasons for poverty in the united states

Since 1978, medical costs have increased by 600%, which is HUGE, but the cost of education has increased by almost double that….1,120%. It has far exceeded the cost of housing, food, and is far beyond the income trends. The costs of college are simply out of control and it’s making it almost impossible for the poor to get ahead.

There are many theories for the dramatic increase, but it all stems back to basic supply and demand. Everyone is taught that success comes after going to college, student loans are pretty easy to get, and therefore demand has shot through the roof, along with college tuition of course.

Many might say, “Well those in poverty can just apply for loans too. Then they could get a solid education and get themselves out of poverty.” Not so fast. Many kids don’t have the credit to get loans on their own – they need a co-signer. But, not just any co-signer – one with solid credit. Typically, poverty stricken folks don’t have the best credit….which means that junior won’t be able to achieve his college dreams. It’s a sad story, but it’s the reality of life for those in poverty.

My Personal Take – Reasons for Poverty in the United States

When I was in college, I distinctly remember riding in a car with my friends. We spotted a homeless man sitting on a park bench and my initial response was, “Why doesn’t that bum just get a job?”

A couple of my friends balked at my comment and took the side of the homeless man. “Maybe he lost his job and can’t find more work…Or maybe he has piles of medical bills and got foreclosed on because he couldn’t make the mortgage payment.” It got me thinking a little differently, but I still struggle with the life of those in poverty. “Isn’t there some way they could get themselves out?”

Even with all the data above, I still think the answer is “Yes” for many. What do you think? Do you think the above reasons are enough to keep the poor in desperate need? Or do you think there’s something the poor can do to get out of their vicious cycle of poverty?

Do you think these reasons for poverty in the United States are valid? How do they get out?

Editor’s Note: Want to avoid a future life of poverty? Then you should absolutely start tracking where your money is going. Try out the Personal Capital tool for free through this link. Set up your budgets, track your spending, and invest for your future – all for zero dollars. Take advantage of this offer and get yourself on track today.

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

36 Comments

  1. I work in a school where you can count the white people with your fingers and toes. I see the struggles. One of my worries is that if the minimum wage goes to $15, more students will drop out since they will be making enough money that it is enticing not to be at school. I see a few pregnancies with single mothers and I know that is a way of staying poor and it is very sad. I also see students not taking their education seriously while it is in high school and free. I went to a state school and the tuition in the last 15 years has more than doubled. People need stop being consumers of thoughts (spending time texting, snap chat, facebook) and need to be the inventors in creating something (papers, projects, blogs, websites). My students seem to be the former. Too much of their time is wasted.

    • Great commment, BarbC. All these reasons seem to ring true for you and your students. I saw it with my friend’s class as well – too many kids not taking school seriously. It’s like they don’t realize it’s deciding their fate for the rest of their lives.

  2. I know I’ll be labeled cruel and heartless and perhaps I am, however I think that one reason for poverty is that people have it “good enough” on welfare and subsidies to bother looking for a situation that will allow them to better themselves. Too many people are content as long as they have a smart phone and their remote control or gaming system works. They have little incentive to work, when their government subsistence allows them to exist with a few things they like. No one should receive more on welfare than minimum wage, whatever it might be.

    • I tend to gravitate that direction too, Kathy. One of my top posts, “9 Things the Rich Do That The Poor Do Not” got a lot of flack from readers because I indirectly threw the poor into this basket of do-nothings and lazies. While that obviously isn’t always the case, it’s something we definitely see among the poor and it’s hard to put it out of our minds for the rest of those in poverty. Undeniably though, there are plenty that truly need help and do not want to be in their current sub-standard demographic.

      • Please do not say “the poor”, but instead “some of the poor”. You’ve lumped them all together, just like you did with the homeless man. I have taught poverty level children and have neighbors that are poverty level. Many of those parents told their children time and again, “Get an education so you don’t end up like me.” I’ve had conversations with a couple of young people who think they will make enough money working at a fast food joint to support themselves. I even had an 8th grade student who planned on making his living selling drugs, because that’s what he saw in his neighborhood! Many who do receive government assistance are stuck because to get a job means losing their benefits, and often the job does not pay enough for child care and other expenses. The issue of poverty is very complex, and to boil it down to “Get a job!” is too easy a solution.

        • Hi Ann. I do agree that poverty is incredibly complex and a one-size-fits-all answer isn’t going to work for everyone. But, poor, broke, rich, or just plain snooty – we all have a choice in life – to run toward success or mediocrity. I, and many of my readers, are choosing success!!

          • If being successful was just a result of working hard, Mexicans in the US would rule the country. There are so many factors as to why people are poor. Some are due to lack of education, broken families, sexual abuse, unforeseen medical problems, drug addiction. When did we become a nation where the rich have waged war against the poor? Everyone seems to be so against helping our most disadvantaged (yes, some are abusing the system but it’s not the majority) by giving them welfare. Not many of those same finger pointers are speaking out against corporate welfare. Why aren’t we ALL outraged that the top 1% of individuals as well as corporations are paying very little, if anything at all, in taxes? The amount of money we could collect, if they weren’t given all of the tax cuts, could easily pay for most of the people who need welfare. The problems are systemic and need to change.

          • Kelly, you have a ton of messed up “facts” in your comment.

            1) No one is waging war against the poor. I help the poor out quite often, and love doing so.
            2) The top 1% aren’t the issue. They worked hard for what they have and many of them choose to give tons of money back because of their good fortune in life. Taking money away from those that actually know how to earn it will only screw over the entire country.
            3) The rich DO pay a lot of taxes. Sure, they may pay only 15% if they earn it passively, but 15% of $1,000,000 is STILL $150,000, which supports our government and their social programs.

            Respectfully,

            Derek

    • Looking at statistics for both the US and the UK. Children of single parents of any race are more likely to be in poverty by far than those of two parent households. Having a parent in jail or who uses drugs increases the povertly likelyhood as well . these kids are also more likely to have children without being in a commited relationship and without having finincial security. We need to start making effective birth control super easy to get and make it the norm for unwed girls. Stopping young women from having babies before they are financially stable and in a commited relationship would lower poverty rates drasticaly. Not sure why poor girls tend to get pregnant younger than the middle class. I hope my daughter waits, but at least I know the chances she will get pregnant if she dosen’t are slim. Can’t find statistics on why poor girls get pregnant. Do they have sex sooner? More? Do they not use birth control? Or do they do it intentionally becuase they don’t know what else to do and a baby means a government check?

      • Hi Maria. I think the message to your (and my) children is that sex is fun…but it’s best inside of a committed relationship…and when you want to have kids. Outside of that, it might just ruin your life and cause you to be broke for decades.

  3. While I agree with all nine above; I think mental and, physical illness are the largest reasons for poverty in America.
    We take a sound mind for granted. We take a fairly “normal” upbringing for granted. We take “average” health for granted. We take the ability to learn for granted.

    Let’s be real. No one wants to be poor. No one wants to be homeless. Healthy minds are naturally productive.
    Healthy bodies enjoy movement. Depression, schizophrenia, bipolar, dementia, traumatic brain injury, learning disabled, mentally, physically, and, sexually abused to the point the mind is plagued with anxiety, low self-esteem, post traumatic stress disorder etc….. The list is endless, this causes poverty.

    Our minds are fragile. We need to understand that what we see on the outside hasn’t anything to do with what is happening on the inside.

    I don’t have answers either. I wish I knew what would really be helpful. Throwing money at the poor/homeless will keep them fed. But, it will never make up for what is missing in their lives.

    • Good point Joy. Mental illness probably is a top factor that is really never considered – or maybe it’s just not taken seriously enough. This would definitely put people into a terrible position right from the start though. Thanks for the extra thinking points. All very real and impactful.

  4. I think this is probably more of a philosophical argument than an economic one. Whenever I hear the line about welfare being too comfortable I wonder if those making the comments have ever been in that situation themselves? It’s not just about numbers, it’s about the sense of hopelessness that often engulfs those who are struggling to make ends meet. Too often the exact same line is repeated so often, by so many, it becomes a ‘fact’ for the uneducated.

    In a civilised society, it is vital to ensure the welfare of those least able to care for themselves. It’s not charity, it’s an investment in social cohesion. Sure, there are a *very* small percentage who will never do more than accept their government handout but that is the price you pay for having a healthy, educated and safe society.

    I’d rather see my taxes go toward social welfare than corporate welfare any day of the week! It’s better for society and better for the economy. And, I’m very glad to live in a country that still places value on social equity.

    I can’t help but wonder… How do you get yourself out of poverty when your entire focus is putting the next meal on the table?

    • And truthfully, I don’t think there’s too many people that enjoy living off someone else’s dollar. There just can’t be much satisfaction from that. Sure, they might tell people they wouldn’t have it any other way, but REALLY? I would enjoy life much more by earning my status – no matter how big or small.

  5. Derek, very good post. I appreciate all the hard data you cited. Some good points made in the comments, especially Barb and Joy. My opinion only, but I think it continues to be such a large problem because it is complex and there are not easy or quick solutions. There are so many variables, where you live, how you were raised, what you have access to, what you have been exposed to, your circumstances. Sometimes you don’t know what you don’t know. Events beyond your control can send you down a path that is very difficult to escape from. If you haven’t read it already, you may want to check out “Nickel and Dimed: On (Not) Getting By in America” by Barbara Ehrenreich.

    • Glad you liked the post, Suzie. The problem certainly is complex and will really never be “solved”. Thanks for the book recommendation, I’ll have to check that out!

  6. One thing that often goes under-discussed in discussions on poverty is the concept of vicious and virtuous cycles.

    In certain poverty situations, especially those in the United States, the best possible choice for the time being often leaves you continuosly trapped in poverty. Escaping vicious cycles requires more than simply good decision making (which is hard enough on its own), but it requires a certain level of stability that would make you believe that a sub-optimal immediate choice will pay off.

    When people talk about structural poverty what they often fail to define is that the structure isn’t meant to be a government structure, or a program, instead the structure should address ways for individuals to escape the decision set of vicious cycles and face the decision set of virtuous cycles.

    • Amazing points, Hannah. Again, in my article, “9 Things the Rich Do That the Poor Do No”, I conjured up a situation that divides the mentality of the rich vs. the poor. The rich receive a dollar and think, “What can I invest to make this dollar grow into more dollars?”…whereas the poor might think, “Sweet, a dollar, I’m going to go buy something right now!”

      For some, the choice could be idiotic, like buying milk duds just because they had a craving for sweets. But for many in poverty their choice is either 1) bread for my family, or 2) possibly dying while trying to earn more with that dollar. This spurs the vicious cycle – to your point, not because of bad decisions, but because of impossible ones. Thanks again for the comments, Hannah. This is truly making everyone think a little harder about this topic!

  7. Poverty is the most powerfulliest demonstration ever put down on man (to my oppion only). Because wether or not you got the desire to get out the lack of resources make it hard to manage to get out of debt. It begins to try your patience and slows down your motivation to try ,you start to feel your working hard for nothing and it hurts to struggle especially watching your love one’s also struggle and im constantly trying to think of a way out this not only for myself but many out struggling like me. But i lack the resources to back my thoughts. I don’t believe its wrong to speak your mind against poverty but every one is not lazy not saying any reader of this said this, although its been many lack motivation after try so hard for little of nothing like myself in respect to every one if anyone like to help start with investing in to the ideas of poverty strickin people

    • Makes total sense Edward. You can try so hard for so long and if you see very little progress, it can be easy to give in and ultimately…give up. But keep trying! Keep studying! There are people who succeed, so it IS possible! Best of luck to you Edward.

  8. I have a question… Hypothetically speaking… If every adult went to college and got a degree with 4.0’s… Would there be a good paying job for everyone? And, what if they all wanted to open a business? Who would do the work? It seems to me that the system depends on those who do not have college degrees. Don’t get me wrong, I have 2 college degrees with a decent job and my husband is an engineer wgo makes twice my salary. But, my heart goes out to all those who struggle because life is not easy. I know engineers who lost their careers due to the economy and had to restart with a different type of job. I know people who used to be in real estate and lost their careers due to the recession and had to start all over… with great struggle. Everyone has their story and yes there may be some who don’t want to work, but I believe most people are willing to work hard for that “dream”, but have a hard time finding it. We should be careful not to criticize as we do not know the road many have travelled.

    • Hi Angela! Of course there wouldn’t be a good paying job for everyone. We’re actually seeing that now already. Just getting a degree doesn’t mean anything for you future – not like it did 40 years ago. You’ve still got to differentiate yourself from the herd. Life is certainly not easy, but in this great country of ours, absolutely anyone can win!

  9. Minorities have more poverty because they exhibit predictive behavior. Unstable family units, drug or alcohol problems, drop out of high school, get arrested, get pregnant at an early age. Isolate these factors regardless of race, and the numbers normalize.

    • Interesting. What’s your source?

  10. Funny thing is when you break down “black” the blacks from africa who come here are the top earners of all blacks , maybe it has to do with being born here vs not …Maybe a different mentality and less personal victim mentality American blacks have but oops ignore the real truth.

    • Studies show that first generation immigrants are 4 times more likely to become millionaires than those that were born in America, so that makes total sense. Most of us don’t realize how big of an opportunity we have since we were born into it.

      Thanks for the comment, Tony!

  11. Derek, I stumbled on your article and I just ask you to consider a few things. There are way more intangible things and quite frankly things you ignore in your analysis. First off blacks in America started from such a disadvantaged position (slavery, denial of civil rights, Jim Crow, brutality,etc.) that affects your data. Of course whites are at a greater advantage, we have had full access to American capitalism and the “dream” but how do you quantify the affects of not be free or equal in America until the late 60s early 70s. Secondly, unlike some of my black friends I have never been stopped unnecessarily by police or felt the the discrimination that they feel and are subjected to almost daily. This cannot be simply dismissed as easily overcome or somehow their ‘fault’, this is more likely due to how most white Americans still view blacks as a result of their history in this country and our treatment of them. I agree that obstacles can be overcome but you must understand some people have way more obstacles than others even if the overcome them their final positions is far lower than others. We treat immigrants to this country with more favor than blacks in America. I think your analysis may need a more historical perspective on how different groups were assimilated in to the American culture and the impact that has had on their economic and social chances. The numbers you cite are results not causes. You should be thankful for the blessings and opportunities you have received but do not think your better starting positions, your gender and skin color made your road a lot less difficult and more welcoming than others.

    • Hi DJ. Interesting perspective, and I totally agree! Thanks for adding a great comment to this post so others can read more deeply into the reasons for poverty.

  12. Government is out of controlled, the politicians do not care about the citizens of our country. They are making education costly because they do not want the citizens to go to school. They want to keep them in controlled so they want them uneducated and poor. Do not be stupid, the government know what they want, because they are so corrupt for money and controlled of all citizens. Health care has the same problem, no health care for all citizens,

    • This is a little too “conspiracy theory-ish” for me. I don’t believe that the government is intentionally trying to keep us down, but I do agree that they don’t always have our best interests at heart as they should. Thanks for the comment, Robert. Let’s do our best to turn poverty around, with or without the government!!

  13. I am a 62-year-old woman living below poverty level (just above 9,000 a year). I worked as a Registered Medical Assistant for about 15 years, until disabled. I live in Arizona where wages are low. During the years I worked I was never paid more than $10 an hour and I was very good at my job. Because of my parents not bothering to teach me anything about finances or that I truly had a right to negotiate a higher wage with any employer, I was consistently at a financial disadvantage. Now I live on disability, but my check is not very high because of the fact that I didn’t earn as much as I could have. Understanding and training in how to manage money and how to promote yourself (and that it’s normal to do so) was not taught at home, school, or in Medical Assistant school. I really think it should be taught to every child, at home and in school., but sometimes even if the parents are able to manage money well, for any one of a number of reasons it may not happen.

    Even at such a low income I’m actually fairly happy. Life can be a struggle but I have direction, goals, and good, fine friends that encourage and help me. I do dislike the injustice that I see in wages. Women are still consistently paid less than men, for no real reason. Some women allow themselves to be convinced to take less than they should for fear of not being hired or kept on. I had a boss who would not give me a raise even after a year of his being happy with my work. I finally lined up another job and quit working for that man. I was in debt at the time. I’m no longer in debt but I do have to pay all the usual bills; rent, utilities, insurance, car expenses, etc.
    I am taking advantage of all the available assistance programs that I qualify for.

    The point I want to make is that in any country, under any human government, people who have power and/or enough influence will help themselves and their families even at the cost of the well-being of others. Even officials who honestly mean well and try to do well eventually lessen their compassion for others in order to ensure their standard of living. After working hard to be a good influence they simply can’t accomplish all they meant to, they get ill, have problems, get old, and tire out. We are all only human. Everyone wants to take care of family and friends. It’s the state of the world. It’s understandable. Some governments treat people better than others, some are abusive, but some are still doing what they can to take care of their citizens.

    I’m not unhappy because I have hope and quality of life even if my living standard is below that of other people in a financial sense. My personal standards are in good repair and my outlook is positive. My plan is to help others, to love my neighbor, treat others well and draw close to God. He is the reason that I can do anything at all. I have been helped by the information I’ve received at JW.org. There are good answers to important questions there. I have learned a lot. I highly recommend it for any kind of problem.

      • Hi Derek! I read the 50 ideas for ways to make money doing side jobs. I found at least three that sound right for me!
        Thanks for the ideas, I find them very helpful. I do honestly report any income so if I do make money I will also lose some of my benefits (major help with my rent and nutrition assistance), so I need to figure it all out to understand how it all comes out. If it turns into something I can consistently do it could be well worth it. I hope so!
        Thanks for the good suggestions!

        • Glad they helped you! Keep me posted on all your future successes!!

  14. At age 33, I’m fully disabled, and live on disability.

    Because of this, I live on less then 15,000$ a year.

    I do the best that I can, but still struggle to pay bills, and have nothing left over to save.

    • Hi Nathalie. I’m sorry to hear that. What is the nature of your disability? Could you earn an income in a different way?


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