For Immediate Release: Tuesday, July 24, 2012
Contact: Phoebe Silag or Karen Conner, news@epi.org 202-775-8810

U.S. poverty rates higher, safety net weaker than in peer countries

Among similarly developed countries, the United States stands out as the country with the highest poverty rate and one of the lowest levels of social expenditures, according to findings in U.S. poverty rates higher, safety net weaker than in peer countries, by EPI economist Elise Gould and researcher Hilary Wething.

About 46 million people fall below the official poverty line in the United States, but when compared to peer countries – those with roughly the same GDP per hour worked – both the country’s high relative poverty rate and the less effectiveness of its safety net are put in context.

“The relatively low social expenditures in the United States partially explains the high poverty rate,” said Gould.  “When it comes to alleviating the effects of poverty, the U.S. could learn from its peers.”

Using measurements from the Organisation for Economic Co-operation and Development (OECD) for the late 2000s, the report provides a general comparison of poverty and earnings distribution, then examines the resources used to provide a safety net to keep people out of poverty or help those who fall into poverty get back on their feet.  Here are the major findings:

• Despite the relatively high earnings at the top of the U.S. income scale, inequality in the United States is so severe that low-earning U.S. workers are actually worse off than low-earning workers in all but seven peer countries.
• The U.S. poverty rate, as measured by the OECD, was about 1.8 times higher than the peer country average of 9.6 percent.
• More than one in five children in the United States lived in poverty (as measured by the share of children living in households with equivalent income below half of national median household income). This level is over two times higher than the peer-country average of 9.8 percent.
• Not only is child poverty greater in the United States, but children living in poverty in the United States face higher relative deprivation than impoverished children in other developed countries.
• Among peer countries, the United States’ tax and transfer system does the least to reduce the poverty rate. The average peer countries’ tax and transfer programs achieves a poverty-rate reduction of 17.4 percentage points—an effect nearly two times greater than that produced by such programs in the United States.

This report presents a preview of data from the 12^th edition of “The State of Working America.” EPI will release an advance copy of “The State of Working America, 12^th Edition” in August.  Contact news@epi.org for an advance copy.