Poverty Rates

In 2005, close to 13 percent of the total U.S. population—about 37 million  people—were counted as living below the poverty line, a number that  essentially remained unchanged from 2004. Economic Research Links Poverty with Adverse Outcomes for Individuals Such as Poor Health and Crime

Economic research suggests that individuals living in poverty face an  increased risk for adverse outcomes, such as poor health, criminal activity,  and low participation in the workforce. The relationship  between poverty and outcomes for individuals is complex, in part because  most variables, like health status, can be both a cause and a result of  poverty. Individuals Living in Poverty Experience Higher Rates of Adverse Health Outcomes, in Part because of Limited Access to Health Care, Environmental Hazards, and Risky Behaviors

Health outcomes are worse for individuals with low incomes than for their  more affluent counterparts. 2). Some research examining government health insurance suggests that  increased health insurance availability improves health outcomes. Sedentary life-style: the use of  alcohol and drugs; as well as lower consumption of fiber, fresh fruits, and  vegetables are some of the behaviors that have been associated with lower  socioeconomic status. Additionally, the relationship between poverty and health  outcomes could also vary by demographic group. For example, one study  shows that higher levels of unemployment are associated with higher  levels of property crime, but is less conclusive in predicting violent crime.Another study has shown that both wages and unemployment affect crime,  but that wages play a larger role. Adverse Outcomes, Such as Poor Health and Low Educational Attainment, Lead to Reduced Participation in the Labor Market

Regardless of whether poverty is a cause or an effect, the conditions  associated with poverty limit the ability of low-income individuals to  develop the skills, abilities, knowledge, and habits necessary to fully  participate in the labor force, in turn, leads to lower incomes. Economic Research Suggests a Negative Association between Poverty and Economic Growth

The economic literature suggests that poverty not only affects individuals  but can also create larger challenges for economic growth. In the United States, poverty can impact economic growth by  affecting the accumulation of human capital and rates of crime and social  unrest. While the empirical research is limited, it points to the negative  association between poverty and economic growth consistent with the  theoretical literature’s conclusion that higher rates of poverty can result in  lower rates of growth. Research has shown that accumulation of human capital is one of the  fundamental drivers of economic growth. The accumulation of human capital is generally held to be a  function of the education level, work experience, training, and healthiness  of the workforce. Therefore, schooling at the secondary and higher levels  is a key component for building an educated labor force that is better at  learning, creating, and implementing new technologies. In addition to the effects of poverty on human capital, some economic  literature suggests that poverty can affect economic growth to the extent  that it is associated with crime, violence, and social unrest. Economists have long recognized the strong association between poverty  and a range of adverse outcomes for individuals, and empirical research,  while limited, has also begun to help us better understand the impact of  poverty on a nation’s economic growth. U.S. Census Bureau.
Why GAO Did This Study

In 2005, 37 million people, approximately 13 percent of the total population, lived below the poverty line, as defined by the Census Bureau. Poverty imposes costs on the nation in terms of both programmatic outlays and productivity losses that can affect the economy as a whole. To better understand the potential range of effects of poverty, GAO was asked to examine (1) what the economic research tells us about the relationship between poverty and adverse social conditions, such as poor health outcomes, crime, and labor force attachment, and (2) what links economic research has found between poverty and economic growth. To answer these questions, GAO reviewed the economic literature by academic experts, think tanks, and government agencies, and reviewed additional literature by searching various databases for peer- reviewed economic journals, specialty journals, and books. We also provided our draft report for review by experts on this topic.

What GAO Found

Economic research suggests that individuals living in poverty face an increased risk of adverse outcomes, such as poor health and criminal activity, both of which may lead to reduced participation in the labor market. While the mechanisms by which poverty affects health are complex, some research suggests that adverse health outcomes can be due, in part, to limited access to health care as well as greater exposure to environmental hazards and engaging in risky behaviors. For example, some research has shown that increased availability of health insurance such as Medicaid for low-income mothers led to a decrease in infant mortality. Additionally, exposure to higher levels of air pollution from living in urban areas close to highways can lead to acute health conditions. Data suggest that engaging in risky behaviors, such as tobacco and alcohol use, a sedentary life-style, and a low consumption of nutritional foods, can account for some health disparities between lower and upper income groups. The economic research we reviewed also points to links between poverty and crime. For example, one study indicated that higher levels of unemployment are associated with higher levels of property crime. The relationship between poverty and adverse outcomes for individuals is complex, in part because most variables, like health status, can be both a cause and a result of poverty. These adverse outcomes affect individuals in many ways, including limiting their development of the skills, abilities, knowledge, and habits necessary to fully participate in the labor force. Research shows that poverty can negatively affect economic growth by affecting the accumulation of human capital and rates of crime and social unrest. Economic theory has long suggested that human capital--that is, the education, work experience, training, and health of the workforce--is considered one of the fundamental drivers of economic growth. The conditions associated with poverty can work against this human capital development by limiting individuals' ability to remain healthy and develop skills, in turn decreasing the potential to contribute talents, ideas, and even labor to the economy. An educated labor force, for example, is better at learning, creating and implementing new technologies. Economic theory suggests that when poverty affects a significant portion of the population, these effects can extend to the society at large and produce slower rates of growth. Although historically research has focused mainly on the extent to which economic growth alleviates poverty, some recent empirical studies have begun to demonstrate that higher rates of poverty are associated with lower rates of growth in the economy as a whole. For example, areas with higher poverty rates experience, on average, slower per capita income growth rates than low-poverty areas.