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Why Were Poverty Rates So High in the 1980s?

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  • Rebecca M. Blank
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

  • Rebecca M. Blank, 1991. "Why Were Poverty Rates So High in the 1980s?," NBER Working Papers 3878, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3878
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    References listed on IDEAS

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    1. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-1266, December.
    2. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    3. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
    4. repec:bla:econom:v:56:y:1989:i:222:p:141-63 is not listed on IDEAS
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    Cited by:

    1. Marlene Kim & Thanos Mergoupis, 1995. "The Working Poor and Welfare Recipiency," Economics Working Paper Archive wp_151, Levy Economics Institute.
    2. Jaynes, Gerald D., 2011. "Social Policy and U.S. Poverty 1960-1999: An Economic History," Working Papers 90, Yale University, Department of Economics.
    3. Cutler, David M & Katz, Lawrence F, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980's," American Economic Review, American Economic Association, vol. 82(2), pages 546-551, May.
    4. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    5. Patricia Ruggles & Charles F. Stone, 1992. "Income distribution over the business cycle: The 1980s were different," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 11(4), pages 709-715.
    6. Gundersen, Craig & Yanez, Mara & Valdes, Constanza & Kuhn, Betsey A., 2002. "A Comparison Of Food Assistance Programs In Mexico And The United States," Food Assistance and Nutrition Research Reports 33859, United States Department of Agriculture, Economic Research Service.
    7. Hilary W. Hoynes & Marianne E. Page & Ann Huff Stevens, 2006. "Poverty in America: Trends and Explanations," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 47-68, Winter.
    8. Ross Gittell & Edinaldo Tebaldi, 2007. "Did a Strong Economy in the 1990s Affect Poverty in U.S. Metro Areas? Exploring Changes in Poverty in Metropolitan Areas Over the Last U.S. Business Cycle, 1992-2003," Economic Development Quarterly, , vol. 21(4), pages 354-368, November.
    9. Christopher Johnson & John Formby & Hoseong Kim, 2011. "Economic growth and poverty: a tale of two decades," Applied Economics, Taylor & Francis Journals, vol. 43(28), pages 4277-4288.
    10. Maury B. Gittleman & David R. Howell, 1992. "Job Quality, Labor Market Segmentation, and Earning Inequality: Effects of Economic Restructuring in the 1980s by Race and Gender," Economics Working Paper Archive wp_82, Levy Economics Institute.
    11. Gundersen, Craig & LeBlanc, Michael & Kuhn, Betsey A., 1999. "The Changing Food Assistance Landscape: The Food Stamp Program in a Post-Welfare Reform Environment," Agricultural Economic Reports 33993, United States Department of Agriculture, Economic Research Service.
    12. Greg J. Duncan & Timothy M. Smeeding & Willard Rodgers, 1991. "Whither the Middle Class'? A Dynamic View," Economics Working Paper Archive wp_56, Levy Economics Institute.
    13. Barry Bluestone & Teresa Ghilarducci, "undated". "Making Work Pay, Wage Insurance for the Working Poor," Economics Public Policy Brief Archive ppb_28, Levy Economics Institute.
    14. Julio J. Rotemberg, 1998. "Cyclical Movements in Wages and Consumption in a Bargaining Model of Unemployment," NBER Working Papers 6445, National Bureau of Economic Research, Inc.
    15. David Card & Richard B. Freeman, 1993. "Introduction to "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States"," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 1-20, National Bureau of Economic Research, Inc.
    16. Atkinson, Tony, 2002. "Atkinson: evaluation of national action plans on social inclusion: the role of EUROMOD," EUROMOD Working Papers EM1/02, EUROMOD at the Institute for Social and Economic Research.
    17. Elizabeth T. Powers, 1995. "Inflation, unemployment, and poverty revisited," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 2-13.

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