Historical Analysis

Prior to the American economy’s recovery from the early-1980s recession, the poverty rate was very closely correlated with the country’s overall economic growth. During the 1960s, when annual GDP growth averaged over 4 percent (and the Great Society antipoverty programs were begun), the poverty rate declined from 22 percent to just over 12 percent. By 1973 at 11.1 percent of the population, poverty had reached its historic low in the United States.
It increased during the 1974-1975 recession (to 12.3 percent) then began to decline slowly until the early 1980s when the highest unemployment rates since the Great Depression helped push the poverty rate back up to 15 percent by 1982 the highest since 1965. However, by 1985 the third full year of economic recovery poverty was still at 14 percent, and it remained in the 13 to 14 percent range throughout the late 1980s despite continued economic growth. This unprecedented failure of poverty to respond to expansionary economic conditions (average GDP growth from 1981 to 1990 was 2.6 percent) has become even more pronounced during the 1990s.

For a number of reasons, average wages in the United States were only 10 percent higher in 1994 ($25,070) than in 1973 ($22,694), whereas average hourly wages in these two years were nearly the same ($14.40 in 1994, compared to $14.22 in 1973; ail amounts are in 1995 dollars). Annual pay was only able to increase due to the increased average hours worked per year by American workers. At the same time, and as should be expected, given the majority share of wages in.

Americans’ total income, the distribution of wages followed a trend similar to that of income; those with the lowest-paying jobs had to accept the largest percentage decreases in pay. American workers at the 20th percentile of the wage scale (those making more than the lowest-paid 19 percent but less than the highest-paid 80 percent of all workers) saw their average real wage decline by 11.1 percent between 1973 and 1995 (from $6.96 per hour to $6.19 per hour in 1995 dollars). Most American workers faced declining real wages during this period, and even those at the 80th percentile of the scale realized only a 3 percent real increase over more than two decades.

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