Why Were Poverty Rates so High in the 1980s?

54 Pages Posted: 14 Aug 2007 Last revised: 6 Feb 2021

Multiple version iconThere are 2 versions of this paper

Date Written: October 1991

Abstract

This paper explores the relationship between the macroeconomy and the poverty rate. The first section provides evidence that poverty was far less responsive to macroeconomic growth in the 1980s than it had been in earlier decades. The section explores and rejects four reasons for this: It is not due to the exclusion of in-kind income from the data, to the regional location of the poor, to the public assistance changes of the early 1980s, or to the changing demographic composition of the poor. Instead, it is almost entirely due to declines in real wages that occur among low-wage workers over the 1980s. In fact, employment and weeks of work per year within low-income households expands more rapidly in the 1980s than in the 1960s. This is almost entirely offset, however, by declines in weekly earnings at the bottom of the income distribution. The result is that economic growth has been a far less effective anti-poverty tool over the past decade.

Suggested Citation

Blank, Rebecca M., Why Were Poverty Rates so High in the 1980s? (October 1991). NBER Working Paper No. w3878, Available at SSRN: https://ssrn.com/abstract=473995

Rebecca M. Blank (Contact Author)

U.S. Department of Commerce ( email )

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