Poor People in Rich Countries

Paul Krugman's column and blog post from today refer to some good analysis of relative poverly levels in developed countries, apropos to last week's discussion. In particular, Tim Smeeding’s “Poor people in rich countries“ has some good stuff:

A substantial fraction of the variance in nonelderly cross-national poverty rates appears to be accounted for not by the variation in work, but by the cross-national variation in the incidence of low pay, as shown in Figure 2. Because the United States has the highest proportion of workers in relatively poorly paid jobs, it also has the highest poverty rate, even among parents who work half time or more (Smeeding, Rainwater, and Burtless 2001)...

What seems most distinctive about the American poor, especially poor American single parents, is that they work more hours than do the resident parents of other nations while also receiving less in transfer benefits than in other countries...

However, the United Kingdom made a substantial push toward reducing child poverty since 1999. In 2000-2001, the child poverty rate in the United States as measured by the U.S. Census Bureau was 15 percent. If that absolute poverty rate is converted and applied to the United Kingdom, the child poverty rate in the United Kingdom was also 15 percent in that year. Both the United States and United Kingdom economies hit a sour patch in the early 2000s. However, Britain has spent an extra 0.9 percent of GDP for low-income families with children since 1999 (Hills 2003). Nine-tenths of a percent of United States GDP is about $100 billion, which is more than the United States government now spends on the Earned Income Tax Credit, food stamps, and TANF combined. The result of this spending in Britain is that the poverty rate for United Kingdom children had fallen to 11 percent by 2003-2004, while the official United States child poverty rate was at 18 percent in 2004 according to the U.S. Census Bureau (2005, Table 3). It seems unlikely that the United States labor market by itself will generate large reductions in poverty for families with children. Single parents with young children and those with low skills will all face significant challenges earning an income that lifts them out of poverty, no matter how many hours they work.