America’s Middle-class Meltdown: Fifth of US adults live in or near to poverty
One in five US adults now lives in households either in poverty or on the cusp of poverty, with almost 5.7m having joined the country’s lowest income ranks since the global financial crisis.
Many of the new poor, or near-poor, have become so even amid an economic recovery that is widely expected to lead the US Federal Reserve to raise interest rates next week for the first time in almost a decade. More than 45 per cent of them — almost 2.5m adults — have joined the lowest income ranks since 2011, long after the post-crisis recession was ostensibly over.
The findings, contained in data prepared for a new study of the US middle class by the Pew Research Center and shared with the Financial Times, put a stark human face on the economic legacy left by the crisis and reveal how uneven the recovery has been.
They illustrate how many Americans are being left behind even amid the strong jobs growth that, should the Fed move as expected, will be at the core of the argument its policymakers present for raising rates.
They also help explain why any notion of a recovery still seems a long way off to many in the US and why the message of populist politicians such as Donald Trump that America is not working resonate on the eve of an election year.
“There’s a new American dream,” says Torrey Easler, a Baptist preacher who helps feed a growing population of poor in the town of Eden, North Carolina. “The old American dream was to own a home and two cars. The new American dream is to have a job.”
A large part of the shrinking of the US middle class, which for the first time in decades now forms less than a majority of the country’s adult population, has surprisingly been due to the country’s growing affluence, the Pew study found.
But the country’s lowest income group — defined by Pew for a three-person household as earning less than $31,402 a year — has also grown at more than five times the rate of the middle class in the past seven years. There are now 48.9m adults in this bracket in the US, up from 43.2m in 2008 and just 21.6m in 1971.
Pew’s measure of the lowest income group is relatively broad, though it calculates that almost half of the adults in this category — 23m — fell below the $18,850 poverty line for a household of three set by the US Census Bureau.
The group’s members earn half or less of Pew’s $62,804 median household income in the US last year and the $41,869 to $125,608 range Pew uses to define the American middle class. They also account for a population that, even as the struggles of the middle class draw an increasing focus, is often left out of policy discussions — as some policymakers admit.
Julián Castro, US secretary of housing and urban development and mooted as a potential running mate to Hillary Clinton, said this is in part because “the argument that the poor are impoverished because they are somehow lacking or to blame has too often carried the day”.
That misses a point, he says. Many in the middle class are vulnerable to slipping back, which means “the concern about what happens with the middle class and also what happens with the impoverished becomes more and more relevant to the lives of American families across the board.”
That was illustrated in the aftermath of the financial crisis. Between 2009 and 2012, according to the US Census Bureau, more than a third of the US population had at least one spell of poverty lasting two or more months.
Kathryn Edin, a Johns Hopkins University sociologist who authored a recent book about those living on less than $2 a day in the US, argues that the shrinking social safety net after landmark 1990s welfare reforms has made the US a harsher place to be poor than it was.
The offshoring or automation of many low-skilled jobs has also made rising out of poverty harder than it once was, she says: “The bad jobs of yesterday were just much, much better than the bad jobs of today.”
The educational make-up of the middle class has also changed significantly. In 1971, 76 per cent of adults in middle class households had a high-school education or less. Today that figure is just 40 per cent, according to Pew’s data analysis, while just 12 per cent of adults in lower income households had a university degree.
“It’s a tough world out there when you get into these very competitive, knowledge-based, very up and down, transient businesses that are here today and gone tomorrow,” says Robert Doar, a former New York City social services commissioner and now a fellow at the conservative American Enterprise Institute. “But that’s not what the problem is at the bottom. The problem for people at the bottom is that they can’t get up and be in that game.”
Life in ‘donut city’ has bitter taste for its poor
At first glance, Dallas is a gleaming American economic success story. Home to huge corporations including AT&T and Southwest Airlines, the city’s joblessness is well below the national average. The broader metro region is among the top five performers of 100 urban areas since the eve of the Great Recession, according to the Brookings Institution.
Yet you don’t have to drive far from the skyscrapers of the city centre to find a disturbing underside of entrenched poverty that taints the Texan city.
Cornerstone Baptist Church, overseen by its pastor Chris Simmons, sits on Martin Luther King Jr Bvd, a few minutes south of Dallas’s downtown. It is an area pockmarked with vacant, boarded-up buildings, a long-abandoned cinema and cut price liquor stores.
Homeless men drift along the road and camp beneath underpasses in scenes of urban decay more often associated with fallen rust-belt cities such as Detroit.
While crime rates have fallen since the 1980s, Mr Simmons says he is seeing increasing numbers of children visiting his church’s kitchen, which serves free meals to as many as 300 people in an evening. Across the city, child poverty rose nearly 60 per cent between 2000 and 2014, according to the University of Texas at Dallas. One in four of the overall population is poor, many of them Hispanic and African American, one of the worst records of a major US city.
“As change and affluence have impacted other parts of Dallas, there are no visible signs that it has impacted this neighbourhood at all,” says Mr Simmons, sitting in a meeting room of his church, which was converted from a former supermarket.
Regina Montoya, who oversees Dallas mayor Mike Rawlings’ poverty task force, describes it as a “donut city” in which a booming centre is surrounded by concentrated poverty. Many of those people do have jobs, she says. “But when you look at trying to survive on minimum wage jobs, particularly when you have children, it is very, very hard”.
At CitySquare, an anti-poverty project not far from Mr Simmons’s church, dozens of Texans wait patiently for free groceries at a busy food pantry. Remarkably, the vast majority of those who turn to CitySquare for help have jobs and an income, says Larry James, the organisation’s chief executive. “The problem is that it is very little.”
One of the visitors is Eva Contreras, a Dallas resident for 18 years. She is struggling to afford to look after her ill son and her granddaughter on the $300 a week that she makes working in the kitchen of a seafood restaurant.
Faced with a cash crunch after being forced to buy new furniture and curtains following a bed bug infestation, she has turned up at CitySquare a sunny November afternoon for free groceries. “It is really hard,” says Ms Contreras, 48, citing a saying from her native Mexico:
“If the sky drops lemons, you learn to make lemonade . . . You have to make the best of bad things.”
“In America, poverty and place are tied together in really deep ways,” says Carol Naughton, the president of Purpose Built Communities, a non-profit organisation. People are “trapped in intergenerational poverty tied in one place” with substandard schools and higher crime rates. “It is much harder than if you are poor in an economically diverse neighbourhood.”
Her organisation, whose backers include Warren Buffett, the billionaire investor, offers one possible answer. A cornerstone of its strategy is bringing mixed-income housing to poor areas, ending the segregation of those at the bottom of the income ladder. This is coupled with top notch, “cradle through college” education, and facilities to improve local health.
One of projects it is involved in is now bearing fruit in south-east Ft Worth, Dallas’s sister city less than 40 miles to the west. There, a vast Walmart superstore opened in 2013 on a formerly crime-ridden lot once owned by a Masonic orphanage.
In the area, called Renaissance Heights, a broader strategy is now gathering momentum, bringing in new housing for a variety of income groups, as well as a YMCA, health facilities, and a high-achieving new school called Uplift Mighty.
Larry Tubb, one of the leaders of the regeneration effort, says it is crucial to end the isolation that afflicts so many poor communities. “We can’t live separately — we see what happens when we try to do that. So let’s see what happens when we try to live together,” he said.
Victor, a bus driver who lives in the area, says the change since developers arrived has been striking. ”The area was really running down, housing was being abandoned, people were leaving animals all over the place, there were abandoned cars,” he says. “Someone had to come in and save this area.”
In Dallas’s city hall, Mayor Rawlings says the swelling poverty in his city is keeping him awake at night and that he has yet to get a full explanation for the problem.
Part of the issue is a longstanding legacy of middle class flight from central parts of the city, but he argues that Dallas is also a magnet for “Grapes of Wrath” style migration of jobseekers to a city that is perceived to be bursting with opportunity.
Mr Rawlings has launched initiatives aimed at boosting the fortunes of city’s south, as well as his poverty task force. But Mr Simmons, the Baptist pastor, says he has seen dozens of anti-poverty studies and action plans since he came to his church in 1988. None of them has borne fruit.
“People refer to it as a tale of two cities,” he says. “One part has the best of times, and the other part the worst of times.” Sam Fleming in Dallas
Escape from rural woes is daily temptation in Eden
Kevin Thomas is only 25 but he already has the sort of life story that makes you wince.
His father kicked him out at 15 for dealing marijuana from his home. He has battled addiction, survived car crashes, scuffled with the law and been in and out of minimum wage jobs. He left one after discovering the reward for his good work was a five-cent-an-hour pay increase. “I got a raise and it was a nickel. The guy that trained me was there for six years and he got a dime.”
Yet in his home town of Eden, North Carolina, an impoverished former textile town of 15,000 that is emblematic of a deindustrialisation of rural America that has only accelerated in recent years, his life story is not unusual.
What is remarkable about Kevin Thomas these days is that he has what, at $13 an hour plus benefits, counts as a decent job. And that, earning the equivalent of $27,000 a year before overtime and supporting a family of four on an income just a few thousand dollars over the poverty line for such a household, he considers himself a member of the American middle class.
Eden is a place that the middle class — and American industry — has all but deserted. It is also the sort of place where it is easy to encounter the sort of economic anger that underpins the popularity of populist presidential candidates like Donald Trump and Bernie Sanders in America today.
The fact that one in four of its citizens live in poverty is betrayed by the used car dealerships that advertise their “no credit check” policies and the convenience stores that cater to patrons on food stamps. That whole companies have abandoned town is evident in the abandoned mill buildings and once-bustling shopping streets where all but one or two of the shopfronts are boarded up.
The last of the major textile employers in town, Hanes Brands, left in 2008. In September, just days before parent company SABMiller announced its merger with rival Anheuser-Busch InBev, MillerCoors revealed it would next year shut its brewery on the outskirts of town for a loss of more than 500 jobs.
The “research triangle” that has attracted biotech and other companies in recent years and made North Carolina a standard bearer for how some parts of America have thrived in a new knowledge-based economy is a few hours away by car. But Eden is an example of what experts say are the hundreds of rural communities that the new economy is leaving behind.
“There are lots of Edens out there,” says Kimberly Zeuli, a former economist at the Richmond Federal Reserve, who authored a 2013 study of the town’s post-textile woes.
Poverty has long been a feature of rural America. Eden, too, arguably has seen its share of bad luck from the very beginning. When British botanist William Byrd II established the “Land of Eden” in the 1730s it was as a home for hardworking Swiss he hoped to attract to the colonies. Only the ship that brought those first settlers over foundered on the rocks off the Virginia colonies, leaving the bulk of them dead and Byrd’s vision never to be fulfilled.
But rural America was arguably hit harder by the 2008 crisis than the country’s cities. Poverty remains higher in rural counties than metropolitan ones. Between 2010 and 2014 rural America also experienced its first population decline on record, even as US cities continued to grow.
The problem for rural communities was once the end of agricultural work. But In recent years it has been an accelerating deindustrialisation and the loss of low-skill jobs in the textile and furniture industries to China and other cheaper offshore production centres.
In rural America “the jobs have largely disappeared . . . [And] it’s hard to be optimistic that they are coming back any time soon,” says Ron Haskins, a former welfare adviser to President George W Bush. “The number one strategy ought to be people leaving . . . They are never going to do better as long as they stay there.”
In Eden there is plenty of evidence that people — and particularly young people — are taking the advice and running with it.
Kim Holden landed in Eden more than a decade ago with two children in tow. She was seeking shelter among church friends from an abusive relationship in Texas and has worked hard to build a life in Eden — the 43-year-old single mother now carries five jobs to make ends meet. But the day after her 18-year-old son graduated from high school in June she drove him back to Texas to live with her brother.
“He said there’s so much more opportunity for him there, and I can’t argue with him,” she says. “He’s not wrong.” Shawn Donnan in Eden