Generational poverty is the opposite of generational wealth. Instead of inheriting a solid financial foundation and getting a leg up in life, kids are taught little about finance and learn to live hand to mouth. It’s a phenomenon that affects millions of people in the United States.
Poverty In America
To understand generational poverty, we first need to understand poverty in America. Here are some quick facts about poverty provided by Poverty USA.
- The poverty threshold for an individual is a household income of approximately $13000 per year, and it’s roughly $26000 per year for a family of four
- 37 million Americans are living in poverty, which makes the poverty rate 11.4%
- There are over 11 million children in poverty
- There is a racial disparity in poverty – 20% of black families are in poverty, 17% of Hispanic families, and 10% of white and Asian families. Native Americans have the highest rate of poverty, at 25%
- 3 million Americans live in deep poverty
- 93 million Americans live close to poverty
Is Generational Poverty Real?
Generational poverty is genuine, and Urban Ventures define it as a family that has lived in poverty for at least two generations. Many families facing generational poverty have lived in poverty for far longer than that.
People trapped in generational poverty often lack the education, resources, and hope to escape it. Poverty is the only thing they know. There is no planning for the future; there’s only trying to survive day-to-day.
What Causes Generational Poverty?
It can often seem to those of us looking in from the outside that it’s their fault they are poor. They spend the little money they have on junk food, cigarettes, and alcohol. If they only saved that money – they might be able to dig out of poverty and provide a better outcome for their children. We shake our heads and blame them for their situations as if saving twenty bucks every week would help them pay for college or buy a house.
The reality is more difficult to face because doing so means acknowledging the systematic policies that work to keep people trapped in generational poverty. We must admit that some of those systems have given us a leg up, and they’ve helped us achieve our goals at the expense of others.
In a society that celebrates rugged individualism above all else, it can be challenging to take a minute and appreciate all the help we received in reaching our goals. This help may be in the form of tax breaks, parental help, or even not having to overcome unconscious (and sometimes very conscious!) biases that hiring officials have regarding race and gender.
The truth is that there isn’t just one cause of generational poverty. It’s a multi-faced issue with reasons ranging from racism to financial policy, access to healthcare to access to education.
How Can Someone Overcome Generational Poverty?
A lot of us only consider the individual. We think it’s up to each person to claw their way out and overcome the systematic failures that created generational poverty.
Don’t get me wrong – it is possible. A few people have worked incredibly hard and beaten the odds. They worked multiple jobs in high school, got college scholarships, and did everything they could to break the cycle of poverty that their family was stuck in.
Unfortunately, we often look to those exceptional examples as proof that anyone can do it, and the reality is that isn’t true. Not everyone has the same skills and aptitude. Not everyone can be exceptional, and you know what? That’s okay. We shouldn’t put the onus on the individual to overcome generational poverty when it’s not the individual’s fault that they are stuck in it
How Can Society Fix Generational Poverty?
The real fix for generational poverty will come at the societal level. Some social safety nets are in place, like SNAP (Supplemental Nutrition Assistance Program) and TANF (Temporary Assistance for Needy Families), commonly referred to as food stamps and welfare, but they aren’t enough.
As a society, we could do much more to help the working poor escape poverty. We have to collectively decide that programs designed to help people are worthwhile and make an effort to fix the programs we already have in place.
I’m no policy expert or anything, but these are some of the things we can do, in my opinion, that would help end generational poverty and help give low-income families a shot at economic mobility.
Here is where we take a slight curve away from discussing facts about poverty and transition into an editorial piece about what I think we can do to fix it.
End the Welfare Cliff
Unfortunately, our system is designed to prevent people from digging out. We have a “welfare cliff” rather than a slope. If people try to do better and get better jobs, they lose all their benefits and are thrust back to square one. The cliff leaves people hopeless and thinking there is no escape. Why try harder when they are punished for it?
We can fix this by ending the welfare cliff. Benefits should taper off slowly instead of stopping once your income reaches a certain threshold. A “welfare slope” will give people an incentive to keep working harder and try to do better. It will prevent families from choosing to take an insecure job or maintain the benefits they had to desperately fight for in the first place. In my opinion, ending the welfare cliff would give thousands of people a real opportunity to escape poverty.
Make Education and Childcare Affordable
Two of the biggest obstacles to escaping poverty, in my opinion, are the lack of affordable childcare and the lack of affordable education. These two expenses are destroying American families and keeping generations stuck in cycles of poverty.
Childcare
Having kids is expensive. According to American Progress, it costs Americans on average $1230 per month to pay for childcare. That’s nearly $15000 per year. The poverty threshold for a single parent with one child is under $18000 per year. Even if that parent made enough to be just at the threshold, paying for childcare would only leave $3000 to pay for every other expense. If they have more than one child, the cost of working would be far more. That’s not feasible. It’s no wonder single parents chose to stay on government assistance rather than work.
Please don’t comment with stuff like “they shouldn’t have gotten pregnant” or “stop having kids you can’t afford.” Having kids shouldn’t be a privilege reserved only for the affluent. People shouldn’t be punished for circumstances outside of their control. You never know someone’s situation either, so let’s not judge. Instead, let’s do better for these families.
Education
One of the best ways to escape poverty is to get educated and get a good job. That’s great for the middle-class, who can access student loans and good high schools. For the poor, getting an education is a dream. It’s prohibitively expensive, and because their families are stuck in poverty, they don’t have access to loans to help them pay for it.
End Trickle Down Economics
Trickle-down economics was a fun thirty-year experiment that didn’t work. It led to massive levels of income inequality and made it more difficult for people to advance in socioeconomic status. It’s time to end this system that benefits only the richest among us and start looking into programs to help everyone.
In my opinion, UBI would be the best place to start. Putting cash directly into the hands of the people so that they could spend it on whatever they need would do wonders for lifting people out of poverty and stimulating the economy. Our system is flawed, and it’s time to find a drastic solution to fix it.
Acknowledge and Work to Fix Systematic Racism and Sexism
Our society has failed at being frank about systematic racism and how it plays into generational poverty. There’s a reason that the statistics show black families are more likely to be in poverty – and that’s racism.
Racism is built into our systems. Racial inequalities in the criminal justice system have led to nearly 1/3 of all black men being issued prison sentences. That’s compared to 1/17 of white men. Black men are more likely to be mistreated at every stage of the process – from being targeted and searched more, convicted more, and given harsher sentences. How can you dig yourself out of poverty if you are imprisoned? How can you help your family escape? Can you even get a decent job if you’ve served time? This situation is untenable.
But racial inequality is prevalent everywhere, not just in our justice system. Black-sounding names on job applications are less likely to get called for an interview than white names. Red-lining was illegal until the 1970s – that was only one generation ago! And the real estate industry still makes it more difficult for black families to buy homes now – they do it in sneakier ways, requiring more documentation, higher credit scores, and higher incomes. People of color, especially women of color, earn less on average than any other population segment. We all need to come to terms with and work to address these issues.
Institutional sexism is also a problem that works to keep single mothers trapped in poverty. The gender pay gap is genuine. Even when they can manage childcare, women with children are discriminated against. God forbid a company give parents (and people in general) time off to be sick or care for loved ones.
Vote
We have the power to change this system. We can lift millions of families out of generational poverty. To help our fellow Americans have better lives.
There’s one important thing we can do, and that’s vote. But don’t vote among party lines. Vote for politicians, regardless of party, who have proven track records of solving these issues. Vote for the policies that would help reduce generational poverty, even if they might cost you a little more in taxes. The health and welfare of millions of Americans depend on it.
Generational Poverty vs. Situational Poverty
Although this post focuses on generational poverty, it’s not the only type of poverty. Situational poverty is a type of poverty that results from a crisis. Someone who hasn’t lived in poverty may experience a sudden job loss, medical problem, or relationship change that thrusts them into poverty.
Situational poverty can lead to generational poverty, and the same programs that would fix generational poverty can also assist those experiencing situational poverty.
Situational poverty can be fixed with many of the same programs that would fix generational poverty.
Ending Generational Poverty is Possible
We can end generational poverty. It will take a lot of effort and may cost us extra money in tax dollars. Some folks may have to give up some of the privileges they’ve been accustomed to for generations, and as they say, equality feels like oppression when you are used to privilege. Ending generational poverty won’t be easy and won’t happen overnight.
However, despite the difficulty, it’s a worthy cause and one we should strive to accomplish with everything we do.
Melanie launched Partners in Fire in 2017 to document her quest for financial independence with a mix of finance, fun, and solving the world’s problems. She’s self educated in personal finance and passionate about fighting systematic problems that prevent others from achieving their own financial goals. She also loves travel, anthropology, gaming and her cats.
At the end of 2019, the poverty rate was at a 60 year low, and for blacks and Hispanics it was at a record low. The poverty rate for blacks overall may be 20%, but if you break it down, the poverty rate for a black child in a single-parent home is 45%, but falls to 11% for a black child in a two-parent home. That is about even with the US poverty rate. Unfortunately, almost 70% of black children grow up in a single parent home. Fix that problem and you fix almost all of the problems that plague the inner cities, because they are interconnected.
In 2019, wages grew by the largest annual gain ever recorded. From 2017 to 2019, wages grew at 6.8%, while wages only grew at 1.7% in the previous 8 years. Median household incomes grew by 7.9% for blacks, 7.1% for Hispanics, and only 5.7% for whites. They also increased 7.8% for women and only 2.8% for men. The wage gap between the races and sexes actually narrowed from 2017 to 2019. In the same time frame , net worth increased 33% for blacks, 65% for Hispanics, while only increasing 3% for whites. The wealth gap also narrowed.
The 4 most prosperous periods in our nations history in terms of growth all occurred after a major tax overhaul(Coolidge, Kennedy, Reagan, Clinton). Clinton began his term with a tax hike, but saw revenues as a share of GDP fall from 8.3% to 7.8%. It wasn’t until the ’94 tax overhaul that we saw revenues accelerate and growth pick up. The near 4% growth we saw from 2003 to 2007 was also the result of a tax overhaul, as were the stats I mentioned earlier about wage growth from 2017 to 2019..
According to the OECD., the US has the most progressive tax system in the world, where those at the bottom pay the least, and those at the top pay the most. In the US, the top 1% of wage earners pay 39% of the revenue collected from the income tax. The top 5% pay 59%. The top 10% pay 70%. The top 25% pay 86%. The top 50% pay 97%.
People want to blame society or their upbringing for their problems because that is more palatable than owning up to the mistakes they have made in their life. The vast majority of the poor in this country are there by their own doing, usually drug and alcohol induced criminal behavior. Some people have a tougher hill to climb than others, but upward mobility is available for anyone willing to work for it. You will never get your piece of the economic pie if you are constantly waiting for someone to serve you your slice.
There is a fine line between helping someone and enabling them, We don’t need income redistribution and Government mandates, we need an invisible hand economy that is allowed to thrive and work it’s magic. Cut taxes, lower regulations, and incentivize people to make better choices.
Thank you for the well thought out comment. I agree with your first point about single-parent homes – And I think fixing racial inequalities in our justice system would do a lot towards making that a reality.
I disagree with your assertion that the majority of the poor are in the situations they are in due to their own faults and mistakes. Did many people make mistakes? Yes. Should a mistake force people into a life of poverty? No. Are there societal reasons why so many people become addicted to substances? Lack of mental health care? Hopelessness? Etc? Likely. I think we as a society can do more for all of our people. We’ve been cutting taxes and lowering regulations for years, and it hasn’t helped the addiction problems, the hopelessness, the healthcare issues, the education issues. We are the richest country in the world, we should be able to do better for our people.
If they are honest, most adults who are struggling can look back on their life and point to a decision they made that led them to where they are. For many it will be the time they started using drugs or alcohol. For others it is dropping out of high school or getting pregnant at 14. Those aren’t societal issues, they are cultural. We all come to crossroads in our life, and if we take the wrong path, and don’t turn around soon enough, we make it difficult on ourselves. People with mental health problems are a small percentage of those. The most are self-inflicted wounds.
Some kids will grow up poor, and they have to work much harder than someone who grew up wealthy, but they are given a lifeline to overcome the obstacles. We as a society have come up with a litany of welfare programs to assist those people, yet instead of climbing out of poverty, the “generational poor” slide into a life of generational dependency. We do not incentivize people to get off of these programs. It has become too comfortable to be poor, where taxpayers provide their needs, while they can use their money on their wants.
I want to reform the welfare system. I would like to see all welfare recipients required to pay back what they collected. We can do that by seizing their tax refund after they have found work. Once you reform the welfare system, you solve many other issues simultaneously. Those people are now forced into the workforce, which dries up jobs currently being held by illegal migrants, which disincentivizes them from coming here. As a result of those people entering the workforce, you no longer have to fund their lifestyle, which eases the deficit and debt burden. So many of these problems are connected, and solving one solves many others.
On racial inequities, I think people look at the disproportionate number of blacks that cycle through the justice system and assume there is a structural bias that causes that. when in reality the problem exists within the black community itself. Young blacks and Hispanics emulate the lowest rung of their social ladder, namely the criminal and gang culture. The “Gangsta rap” trend that started in the 90’s, as well as popular culture(Boyz In The Hood, Friday, etc) glorified that lifestyle, and has led to a cultural decline. That leads to rampant crime and drug usage, which leads to a death spiral.
A few years ago, when Michael Brown was shot, I believed the myth that black people were killed disproportionately by police, and then I did some research., There are over 375 million police interactions a year. Of those, 11 million result in an arrest and 1000 result in the suspect being killed. Only 21% of the population will have any interaction with police in a given year. In a given year, 10% of black people will be pulled over by police, compared to 9% of white people and 8% of Hispanics.
Of those arrests, black people account for 28%, white people account for 49%, Hispanics account for 21%, and Asians account for 1%. On the deaths, blacks account for 25%, whites account for 51%, Hispanics account for 19%, and Asians account for 2%. Those arrest and death numbers correlate perfectly.
People scapegoat their failures by blaming the system or some other external force beyond their control. As a result, because they believe they are not responsible, they take few steps to remedy it. That is why we have spent over $25 trillion on welfare programs in the last 50 years, and the poverty rate remains fairly constant. We have to change things.