The New Age Structure of Poverty in America: Permanent or Transient?

Building on an interpretation of a numbr of recent economic and demographic changes previously advanced by this writer (Easterlin 1987) this analysis covers the causes of the new age structure of poverty especially the increased poverty rate of children and the prospects for its continuation over the rest of the 20th century. In contrast to the view that the gains of either the children or the elderly have been at the expense of the other group i.e. expanded government programs underlying the improved status of the elderly have been purchased by sacrificing programs for the young it is suggested that the divergent trends in poverty rates of children and the elderly chiefly reflect 2 different and largely independent causes: the improved status of the elderly is attributable largely to government action especially advances in social security; and the rise in the poverty rate of children is to an important extent a result of market forces and would have occurred even in the absence of programs improving the lot of the elderly. The base period for most of this analysis is the late 1960s when annual series on poverty rates of persons by age and on income by family status and age first became available. Families and unrelated individuals are classified as being in poverty if their money income (including retirement and disability pensions government cash-transfer payments alimony and child support) falls below a threshold level based upon the Department of Agricultures Economy Food Plan. The rise in the poverty rate of children is part of a broader pattern of shifting poverty status of young versus old. The increase in poverty rates from 1968-85 is progressively smaller with age and for those aged 55 and older the poverty rate decreases absolutely. In 1968 the highest poverty rate 25% was found among the elderly those 65 and older; children the only other above-average group had a rate of about 15%. As a result of the disparate trends by age the elderly now have a below-average rate less than 13%. For those under age 65 divergent trends in poverty rates by age are at bottom a reflection of similar labor market trends. Real wage rates of younger males as measured by year-round full-time income have declined noticeably relative to older males. Younger females also show deterioration in real wages relative to those of older females but the magnitude is less. The labor market conditions of younger adults have affected their poverty rates not only directly through their impact on income within given types of families but also indirectly by shifting the family-type distribution toward female-headed families. Childrens poverty rates have suffered more than those of younger adults because of the more severe impact on children of the shifts in demographic structure.