Do you think that most poor people in the US are Latinx/Hispanic, Black/African American, Native American, Asian, or white?
If you are like the majority of people who answer a similar question in public opinion surveys, you would have picked Black/African American. When Americans think about poor people, they tend to picture Black Americans (White 2007). This popular image is thought to reduce the public’s sympathy for poor people and to lead them to oppose increased government aid for the poor. The public’s views on these matters are, in turn, thought to play a key role in government poverty policy. It is thus essential for the public to have an accurate understanding of the racial/ethnic patterning of poverty.
It is also true, though, that race/ethnicity affect the chances of being poor. In other words, some racial groups are overrepresented among the poor. In 2023, while only 7.7% of non-Hispanic white Americans are poor, 17.9% of Black Americans and 21.2% of American Indian and Alaska Native Americans are poor. The chart below shows Census data for poverty by racial/ethnic category. The higher poverty rates of people of color are so striking and important that they have been termed the “colors of poverty” (Lin & Harris 2008).
Education
Poverty varies greatly by educational attainment. A college education is strongly protective against the risk of experiencing poverty.
In 2023, people with a bachelor's degree (a 4-year college degree) or higher had a poverty rate of only 4%. In contrast, a quarter of people (25.1%) without a high school diploma were in poverty. Having some college experience is also somewhat protective as the poverty rate is 8.5% compared to those with a diploma but no college at a rate of 13.1% (Shrider 2024).
Gender
Women are more likely than men to be poor. According to the Census (which uses the language of biological sex), 11.9% of females live in poverty, compared to only 10.2% percent of males. These figures translate to a large gender gap in the actual number of people, as over 20 million women live in poverty, compared to less than 17 million men (Shrider 2024). The higher rate of poverty among women is called the feminization of poverty (Iceland 2006). We will see more evidence of this pattern when we look at the section on family structure that follows.
You may have heard the claim that women comprise 70% of the worlds poor; however, that figure is misleading and the gender gap is complicated. For instance, Carolina Sánchez-Páramo and Ana Maria Munoz-Boudet (2018) at the World Bank explain:
"We have such questionable 'facts' because existing poverty data makes it hard to have a clear picture of the true gender dimensions of poverty. Poverty is, generally, measured at the household level—meaning that if a household lives in extreme poverty, we assume that everyone under that roof lives at the same level of deprivation. However, evidence and common sense tell us that this is rarely the case; women, children, people with disabilities, and elders, for example, often receive smaller portions of food or have less invested in their education and health."
Additionally, there are gender differences in global poverty rates:
"poverty rates are highest among children, particularly among girls. There are 105 girls for every 100 boys living in extreme poor households, across all ages. ... As boys and girls get older, the gender gap in poverty widens further. 122 women between the ages of 25 and 34 live in poor households for every 100 men of the same age group. This coincides with the peak productive and reproductive ages of men and women, and likely reflects that as young women become wives and mothers, they often stop working in order to care for their husbands and children" (Sánchez-Páramo & Munoz-Boudet 2018).
Data suggest that poverty rates in the US are higher for transgender individuals than cisgender individuals. One study, the Behavioral Risk Factor Surveillance System (BRFSS) survey, found that in 2020 transgender people had a poverty rate of 35%, which dropped to 21% in 2021 during the COVID-19 pandemic, likely due to increased governmental relief funding (Wilson et al. 2023).
Age
Turning to age, 15.3% of children lived in poverty in 2023, over 11 million children (Shrider 2024). About 37% of all children live in poverty for at least one year before turning 18 (Ratcliffe & McKernan 2010). The poverty rate for US children has been the highest of all wealthy democracies and in fact is 1.5 to 9 times greater than the corresponding rates in Canada and Western Europe (Mishel, Bernstein, & Shierholz 2009).
The poverty rate for US children is the highest in the Western world.
© Thinkstock
As with race/ethnicity for the general population, the proportion of children in poverty varies by race. Black children have a poverty rate of 25% and American Indian and Alaskan Native children of 28.8%, while white non-Hispanic children have a rate of 8.7% (Shrider 2024).
At the other end of the age distribution, 9.7% of people aged 65 or older are poor, about 5.8 million seniors (Shrider 2024). The proportion of seniors in poverty declined substantially in the 1960s and 70s, primarily due to government programs: Social Security and Supplemental Security Income (SSI). However, the decline in poverty among the older population means that children now have a higher proportion of people in poverty when considering age.
Region
Poverty rates differ around the country. Some states have higher poverty rates than other states, and some counties within a state are poorer than other counties within that state.
A basic way of understanding geographical differences in poverty is to examine the poverty rates of the four major regions of the nation. When we do this, the South is the poorest region, with a poverty rate of 12.4%. The West is next at 11%, followed by the Midwest and Northeast, both at 9.8% (Shrider 2024). The South’s higher poverty rate is thought to be an important reason for the high rate of illnesses and other health problems it experiences compared to the other regions (Ramshaw 2011).
Poverty also varies considerably worldwide, as discussed on the Overview page. Though the US has a high rate of poverty among rich industrialized nations, other nations globally have far higher poverty rates. Poverty is especially concentrated in sub-Saharan Africa.
Family Structure
There are many types of family structures measured by the Census, including households comprised of a married couple, an unmarried couple, a single-parent, and those living with unrelated individuals. In the US, poverty rates differ from one type of family structure to another.
Not surprisingly, poverty rates are higher in families with one adult than in those with two adults (one-adult households often have lower incomes), and one-adult families are more likely to be headed by a woman (women generally have lower incomes than men). Of all families headed by a solo woman, 21.8% live in poverty, compared to only 11.4% of families headed by a solo man. The poverty rate for households headed by women provides additional evidence for the feminization of poverty concept introduced earlier. In contrast to one-adult families, 8.3% of all primary families (a group of two or more related individuals, which could include married, cohabiting, or solo adults) and only 4.6% of married-couple families live in poverty (Shrider 2024).
Poverty and Family Structure, 2023
This chart displays the percentage of people in poverty by family structure using 2023 Census data. Why might single-mother families experience such higher rates of poverty than other family structures?
Source: Adapted from Shrider 2024, "Table A-2. Families and People in Poverty by Type of Family: 2022 and 2023"
Regarding children in various family structures, the pattern persists: Children are most likely to be in poverty in single-mother families (36.7%), less likely to be in poverty in single-father families (20.3%) or any primary family (15%), and far less likely to be in poverty in married-couple families (7.2%) (Shrider 2024).
Labor Force Status
Some Americans think that the poor do not participate in the labor force (paid work) because they're lazy or lack the motivation but could work if they really wanted to. However, government data show that most poor people are in the labor force – either working or actively looking for work (unemployed) – or unable to work.
Many people in poverty who do not work in fact cannot work. They likely fall into one or more of these categories: They are children, seniors, full-time students, full-time caregivers, and/or disabled. (Separately, it is important to note that disabled adults have a far higher rate of poverty than non-disabled adults, at 22.3% and 8.9%, respectively.) For instance, analysis using 2018 Census data found that among individuals living in poverty, 31% were children, 13% were seniors, 11% were disabled, 8% were caregivers, and 7% were students (Bauer, Moss, & Shambaugh 2019).
This pie chart displays characteristics of people in poverty using 2018 Census data (the Current Population Survey Annual Social and Economic Supplement). How does it challenge the idea that people in poverty refuse to work because they're lazy or lack motivation?
Source: Adapted from Bauer, Moss, Shambaugh 2019, "Figure 1. Characteristics of Individuals Living in Poverty, 2018"
While it is true that poverty rates are higher for people who do not work (29.7% in 2023) than for those who work part-time year-round (11.7%) and who work full-time year-round (1.8%) (Shrider 2024), most people in poverty who are not working for pay aren't doing so due to their age, disability, or other responsibilities (caregiving or school).
Fluctuation in Poverty Rates
Poverty rates fluctuate, sometimes quite rapidly, including for specific social groups. When we discuss changes, we focus on those that are statistically significant, meaning there was a meaningful change (denoted by an asterisk under the 'change' column in the chart below). For instance, between 2022 and 2023, there was statistically significant decrease in poverty for the white population, women, adults (aged 18 to 64), and those with some college education. In contrast, poverty rates grew at a statistically significant rate for mixed race individuals (Shrider 2024). The data chart below displays more changes between 2022 and 2023, for a variety of areas of social location and other characteristics.
For each row in this chart, the blue dot being on the right side indicates that the poverty rate increased from the year prior (it was higher in 2023 than in 2022), whereas the green diamond being on the right side indicates that the poverty rate decreased (it was higher in 2022 than in 2023). Which social groups saw meaningful changes between 2022 and 2023?
Source: Shrider 2024
Additionally, as we have seen, poverty can be measured in a variety of ways. Thus, it is good practice to examine current poverty rates directly from reliable data sources (e.g., U.S. Census, World Bank, OECD, and other reputable research organizations), and ensure that any comparisons made between social groups use the same measurement of poverty.
Experiencing poverty or living near the poverty line means facing an array of challenges related to health, medical care, housing, education, and more. Below we discuss many examples of the consequences of poverty.
Consequences of Poverty
Poverty can have devastating consequences for the people who live in it. Researchers have found that poverty is associated with several types of material hardship, including for health, housing, food, payment of bills, neighborhood problems, and more (Iceland, Kovach, & Creamer 2021). Poverty and income are associated with adulthood socioeconomic status, a variety of health and educational outcomes, and other outcomes such as for neighborhood or family problems (Bakalar 2011; Duncan & Magnuson 2011; Hair, Hanson, & Wolfe 2015; Mode, Evans, & Zonderman 2016; Ratcliffe & McKernan 2010).
Children
Many studies focus on childhood poverty, and these studies make it very clear that childhood poverty has lifelong consequences. In general, poor children are more likely to be poor as adults, more likely to drop out of high school, more likely to become a teenaged parent, and more likely to have employment problems. Although only 1% of children who were never poor end up being poor as young adults, 32% of poor children are poor as young adults (Ratcliffe & McKernan 2010).
Poor children are more likely to have inadequate nutrition and to experience health, behavioral, and cognitive problems.
Kelly Short – Poverty: “Damaged Child,” Oklahoma City, OK, USA, 1936 (Colorized) – CC BY-SA 2.0
One study used government data to follow children born between 1968 and 1975 until they were ages 30 to 37 (Duncan & Magnuson 2011). The researchers compared individuals who lived in poverty in early childhood to those whose families had incomes at least twice the poverty line in early childhood. Compared to the latter group, adults who were poor in early childhood:
- had completed two fewer years of schooling on the average
- had incomes that were less than half of those earned by adults who had wealthier childhoods
- received $826 more annually in food stamps on the average
- were almost three times more likely to report being in poor health
- were twice as likely to have been arrested (men only)
- were five times as likely to have borne a child (women only).
Below we discuss other examples of consequences of poverty, focusing on several broad areas: Health and Health Care, Education, Housing, Crime, and Families.
Health
The poor are more likely to have many kinds of health problems, including infant mortality, earlier adulthood mortality, and mental illness, and they are also more likely to receive inadequate medical care. Poor children are more likely to have inadequate nutrition and, partly for this reason, to suffer health, behavioral, and cognitive problems. These problems in turn impair their ability to do well in school and land stable employment as adults, helping to ensure that poverty will persist across generations.
One indicator of health outcomes is mortality, which measures deaths. Poverty is associated with higher mortality. One study found that in the US in 2019, current poverty was associated with approximately 183,000 deaths and cumulative (sustained) poverty was associated with 295,431 deaths (among people aged 15 years or older). This association was particularly strong between ages 40 to 70. Cumulative poverty was found to be associated with approximately 60% greater mortality than current poverty (Brady, Kohler, & Zheng 2023).
Neighborhood economic status is also associated with mortality, with higher neighborhood-level economic status decreasing mortality rates. Notably, the association between poverty and mortality varies by race and gender, with Black men living in poverty having the highest rates of mortality (Mode, Evans, & Zonderman 2016).
Taking a global perspective, life expectancy differs among nations, and poverty affects a nation’s overall life expectancy to a startling degree. Life expectancy is highest in North America, Western Europe, and certain other regions of the world and lowest in Africa, where people may live shorter lives by 30 years than in other regions of the world (Global Education Project N.d). As discussed on the Overview page, global poverty is concentrated in Africa.
Average Life Expectancy Across the Globe
Life expectancy has increased worldwide over the past several decades; however, disparities remain. How does this map compare to the map of global economic inequality?
Source: Global Education Project N.d; data from United Nations Population Division, World Population Prospects, Centers for Disease Control, and National Center for Health Statistics
Another way of visualizing the relationship between global poverty and life expectancy appears in the figure below, which depicts average life expectancy at birth for upper-middle-income nations, lower-middle-income nations, low-income nations, and the United States alone (data for upper-income nations was not available). Life expectancy for low-income nations was 64.5 years in 2023, compared to 76.2 years for upper-middle-income nations and 78.4 years for the US. You may explore this interactive graph yourself at its FRED Graph page of the Federal Reserve Bank of St. Louis.
Country Income and Life Expectancy
This chart compares life expectancy at birth for three levels of country income as well as the US, from 1960 to 2023. Life expectancy has risen dramatically across all country income levels, though disparities remain.
Source: Federal Reserve Bank of St. Louis 2025; data from World Bank
A key contributor to life expectancy and also a significant consequence of global poverty in its own right is child mortality, the number of children who die before age 5 per 1,000 children. The child morality rate in African nations is far higher than in other regions of the world. UNICEF (2025) explains, "A child born in sub-Saharan Africa is, on average, 18 times more likely to die before the age of 5 than one born in Australia and New Zealand. The risk of under-five death in the highest-mortality country is 80 times greater than in the lowest."
Another measure of mortality associated with poverty is maternal mortality, or the number of women who die during childbirth for every 100,000 live births. Maternal mortality increased recently in the US, from a rate of 9.9 deaths (per 100,000 live births) in 1999 to a rate of 17.4 deaths in 2018. There are strong racial differences in the US maternal mortality rate: In 2018 Black childbearers were at a 2.4 times higher risk of maternal mortality than white childbearers. Moreover, poverty is related to this outcome: There was a 120% higher risk of material mortality in the most-deprived areas than in the most-affluent areas, measured with county-level socioeconomic status deprivation indices (Singh 2020).
Every day in 2023, over 700 women died worldwide from preventable pregnancy- and childbirth-related causes, amounting to 260,000 childbearers dying during or following pregnancy or childbirth. Around 92% of these deaths occurred in low-income and lower-middle-income countries, with the great majority in Sub-Saharan Africa (around 70%) followed by southern Asia (around 17%) (WHO 2025). Women in poor nations have been found to be 42 times more likely than those in wealthy nations to die from complications during pregnancy or childbirth (World Bank, 2012).
In addition to mortality, poverty impacts how people eat. In the US in 2023, 13.5% of families – 18 million households – experienced food insecurity, in which they "were uncertain of having or unable to acquire enough food to meet the needs of all their members because they had insufficient money or other resources for food" (USDA 2025). Two related health indicators are hunger and malnutrition or undernourishment, when people do not have a sufficient daily food intake. Hunger is the result of a lack of food, whereas malnutrition can stem from a lack of food but also may be due to a poor diet (UNICEF USA 2025). Malnutrition is exacerbated by infections and diseases such as diarrhea that sap the body of essential nutrients.
In 2023, 1 in 11 people across the globe faced hunger, around 733 million people, with as high as 1 in 5 in Africa facing hunger. More specifically, the estimated proportion of the population facing hunger in Africa is 20.4%, compared with 8.1% in Asia, 6.2% in Latin America and the Caribbean, 7.3% in Oceania, and <2.5% in North America and Europe (WHO 2024). Despite gains in other areas, hunger has continued to rise in most subregions of Africa and in areas of Asia.
This chart displays the proportion of undernourished people between 2000 and 2023 by world region. Sub-Saharan Africa has the highest rates of undernourishment of any world region, as well as concentrated poverty as we have seen.
“Number of people who are undernourished” by Our World in Data is licensed under CC BY 4.0
Focusing on children, over 82% of families with children (29.7 million households) were food secure in 2023, and in 374,000 households, one or more child experienced reduced food intake and disrupted eating patterns at some time during the year, referred to as very low food security (USDA 2025). For children under age 5, over 190 million children across the globe experience undernutrition (UNICEF USA 2025).
Children who are malnourished are at much greater risk for fat and muscle loss, brain damage, blindness, and death. Not surprisingly, child malnutrition contributes heavily to the extremely high rates of child mortality that we just examined and is estimated to be responsible for millions of deaths of children annually (UNICEF 2006; WHO 2010). It also impacts children's educational and other outcomes: "All forms of malnutrition threaten a child's ability to survive and thrive. Well-nourished children do better in school, are better able to participate in their communities and are more resilient against disease, disasters and other emergencies" (UNICEF USA 2025).
Over 700 million people worldwide face hunger, and over 190 million children are undernourished. What do you think that a rich nation like the U.S. could do to help alleviate these global problems?
Image courtesy of Dr. Lyle Conrad at the Centers for Disease Control and Prevention, ID# 6874
Two other indicators of a nation’s health are access to safe drinking-water, sanitation, and hygiene ('safe WASH'). Poor nations are much less likely than wealthier nations to have adequate access to safe WASH. When people lack this access, they are at a greater risk for life-threatening diarrhea, serious infectious diseases such as cholera and typhoid, and parasitic diseases such as schistosomiasis (WHO 2010, 2025). About 2.4 billion people around the world, almost all of them in poor and middle-income nations, do not have adequate sanitation, and more than 2 million, most of them children, die annually from diarrhea. More than 40 million people worldwide, almost all of them again in poor and middle-income nations, suffer from a parasitic infection caused by flatworms.
Education
Poverty also inhibits children's educational success. Children from low-income or impoverished families often have lower levels of school readiness, starting school behind children from more affluent families. More specifically, research consistently finds that poverty decreases school readiness via several factors: The incidence, depth, duration, and timing of poverty, community characteristics (such as crime and neighborhood poverty levels), and how poverty impacts children's social networks (family, friends, and neighbors). Researchers Ferguson, Bovaird, and Mueller (2007: 702) explain:
"A child’s home has a particularly strong impact on school readiness. Children from low-income families often do not receive the stimulation and do not learn the social skills required to prepare them for school. Typical problems are parental inconsistency (with regard to daily routines and parenting), frequent changes of primary caregivers, lack of supervision and poor role modelling. Very often, the parents of these children also lack support."
Additionally, poor children may go to rundown schools with inadequate facilities where they receive inadequate schooling, in part due to the educational funding structure in the US, which relies on neighborhood property taxes. In short, richer neighborhoods have better funded schools whereas low-income neighborhoods have lower funded schools. Children from low-income families are also less likely than those from higher income families to graduate from high school or to go to college. One study found that only 62% of persistently poor children complete high school by age 20, compared to 90% of children who are never poor (Ratcliffe & Kalish 2017). A lack of education in turn may keep them and their own children in poverty, helping ensure a cycle of generational poverty.
For a global perspective, the World Bank (2021) warns: "In recent years, it has become clear that many children around the world are not learning to read proficiently. Even though most children are in school, a large proportion are not acquiring fundamental skills. Moreover, 260 million children are not even in school. This is the leading edge of a learning crisis..." The organization has proposed the concept of learning poverty to describe when children are unable to read and understand a simple text by the age of 10 years. They find that over half (53%) of children in low- and middle-income nations are unable to read and understand a simple story by the end of their primary schooling, and that the level is as high as 80% in low-income nations (World Bank 2021).
A similar education-related measurement is adult literacy, the percentage of people 15 and older who can read and write a simple sentence. Per the chart below, once again we see that people in low-income and lower-middle-income nations are worse off. In poor nations in 2023, only about 63% of adults (aged 15+) were literate, whereas in upper-middle-income nations the rate was 96% (World Bank 2024). The high rate of illiteracy in poor nations not only reflects their poverty but also contributes to it, as people who cannot read and write are obviously at a huge disadvantage in the labor market.
This chart displays adult literacy levels for low-income, lower-middle-income, and upper-middle income nations (upper-income data were not available). What do you think we can do to increase literacy rates, particularly in low-income nations?
Source: World Bank 2024
Housing
The poor are, not surprisingly, more likely to be cost-burdened, live in unsafe housing, unable to buy their own homes, and houseless than the non-poor. The poor also tend to live in poor neighborhoods that lack job opportunities, good schools, and other features of modern life that wealthier people take for granted. The lack of adequate housing for the poor is part of a larger housing crisis, a major national social problem.
The U.S. Department of Housing and Urban Development (HUD), defines cost-burdened households as those that spend more than 30% of their income on their rent or mortgage and other housing costs. In 2023, nearly half (49.7%) of US households who are renters – which the great majority of the poor are – spent more than 30% of their income on housing, amounting to over 21 million renter-households (Census 2024c). Being cost-burdened leaves far less money for other expenses, including those related to health and education as discussed above, as well as childcare, transportation, and other major and daily expenses.
Additionally, around 26 million people in the US experience being unhoused at some point during their lives (National Academies of Sciences, Engineering, and Medicine et al. 2018). We will discuss houselessness and other housing issues in more detail in the following chapter on Neighborhoods and Housing.
Crime
Crime and incarceration are associated with family income. In short, being raised in a poor family increases the risk of crime and incarceration. Senior Fellows at the Brookings Institute found that boys from low-income families – the lowest 10% of the income distribution – were 20 times more likely to be in prison on a given day in their early 30s than those from high-income families. They estimated that nearly 1 in 10 of the lowest-income boys are incarcerated when they reach age 30 (Looney & Turner 2018).
As we will discuss in the Crime and Social Control chapter, criminalization and incarceration are considered by sociologists and other social scientists to be forms of social control that fuel social inequalities. People in poverty who become incarcerated experience the loss of rights, which can further perpetuate their low socioeconomic status.
Family Problems
The poor are at greater risk for family problems such as divorce and domestic violence (Bonomi et al. 2014; Karney et al. 2022). A major reason for many of the problems families experience is stress. Even in families that are not poor, running a household, caring for children, and trying to pay bills can cause stress. Families that are poor typically experience more stress because of their poverty, so the ordinary stresses of family life become even more intense. Compounding this situation, when these problems occur, poor families have fewer resources than wealthier families to deal with these problems. We will discuss family problems further in the Family chapter.
Children and Our Future
Getting under Children’s Skin: The Biological Effects of Childhood Poverty
As the text discusses, childhood poverty often has lifelong consequences. Poor children are more likely to be poor when they become adults, and they are at greater risk for antisocial behavior when young, and for unemployment, criminal behavior, and other problems when they reach adolescence and young adulthood.
According to growing evidence, one reason poverty has these consequences is that it has certain neural effects on poor children that impair their cognitive abilities and thus their behavior and learning potential. As Greg J. Duncan and Katherine Magnuson (2011: 23) observe, “Emerging research in neuroscience and developmental psychology suggests that poverty early in a child’s life may be particularly harmful because the astonishingly rapid development of young children’s brains leaves them sensitive (and vulnerable) to environmental conditions.”
In short, poverty can change the way the brain develops in young children. The major reason for this effect is stress. Children growing up in poverty experience multiple stressful events: neighborhood crime and drug use; divorce, parental conflict, and other family problems, including abuse and neglect by their parents; parental financial problems and unemployment; physical and mental health problems of one or more family members; and so forth. Their great levels of stress in turn affect their bodies in certain harmful ways. As two poverty scholars note, “It’s not just that poverty-induced stress is mentally taxing. If it’s experienced early enough in childhood, it can in fact get ‘under the skin’ and change the way in which the body copes with the environment and the way in which the brain develops. These deep, enduring, and sometimes irreversible physiological changes are the very human price of running a high-poverty society” (Grusky & Wimer 2011: 2).
One way poverty gets “under children’s skin” is as follows (Evans, Brooks-Gunn, & Klebanov 2011). Poor children’s high levels of stress produce unusually high levels of stress hormones such as cortisol and higher levels of blood pressure. Because these high levels impair their neural development, their memory and language development skills suffer. This result in turn affects their behavior and learning potential. For other physiological reasons, high levels of stress also affect the immune system, so that poor children are more likely to develop various illnesses during childhood and to have high blood pressure and other health problems when they grow older, and cause other biological changes that make poor children more likely to end up being obese and to have drug and alcohol problems.
The policy implications of the scientific research on childhood poverty are clear. As public health scholar Jack P. Shonkoff (2011: 12) explains, “Viewing this scientific evidence within a biodevelopmental framework points to the particular importance of addressing the needs of our most disadvantaged children at the earliest ages.” Duncan and Magnuson (2011: 27) agree that “greater policy attention should be given to remediating situations involving deep and persistent poverty occurring early in childhood.” To reduce poverty’s harmful physiological effects on children, Skonkoff advocates efforts to promote strong, stable relationships among all members of poor families; to improve the quality of the home and neighborhood physical environments in which poor children grow; and to improve the nutrition of poor children. Duncan and Magnuson call for more generous income transfers to poor families with young children and note that many European democracies provide many kinds of support to such families. The recent scientific evidence on early childhood poverty underscores the importance of doing everything possible to reduce the harmful effects of poverty during the first few years of life.
Economic Inequality
Economic inequality in the US has increased over the last five decades. The middle-class is slowly shrinking, as shown in the chart below, while those in upper-income households are earning significantly more. More people are becoming downwardly mobile, moving into a lower class. If you would like more details on this transition, you can explore this report from Pew Research: How the American Middle Class Has Changed in the Past Five Decades.
Wealth inequality in the US is even more pronounced, and growing. According to Robin DiAngelo, “More and more wealth is being concentrated into fewer and fewer hands. The US has the highest level of income inequality among G7 countries. The wealth gap between America’s richest and poorest families more than doubled from 1980 to 2016” (DiAngelo 2021:156).
The Congressional Budget Office (CBO) provides data on the wealthiest 10%, the bottom 50%, and those in between. In 2022, families in the top 10% of the distribution held 60% of all wealth in the nation, and families in the bottom half held only 6% of the nation's wealth. In the chart below, we see that the top 10% saw their wealth grow at a far higher rate than all others, especially in relation to the bottom half (CBO 2024). Thus, family wealth has grown far faster for those at the top of the class hierarchy than everyone else. You may check out an interactive data chart at the CBO's Trends in the Distribution of Family Wealth page.
This chart displays family wealth trends of the top 10%, bottom 50%, and all families in between. What do you think allowed for the wealthiest families to grow their wealth much faster than the rest of the population?
Source: Congressional Budget Office (CBO) 2024
Why did economic inequality increase so dramatically since the 1980s? The loss of manufacturing jobs and unions accounts for some of this increase, as well as the rise of low-wage service positions. As factories shut down and moved overseas, a process called offshoring, Americans experienced the loss of all levels of jobs at these factories. Offshoring occurs in large part because it's cheaper for corporations to operate in lower-income nations – think of what corporations likely don't have to provide there: Retirement benefits, health insurance, vacation days, decent wages, and workplace safety mechanisms. Another process that occurred in the 1980s is deunionization, or the decline in the strength of unions, which serve to protect workers such as fighting for higher pay, better benefits, and safer work conditions. Deunionization places more power in the hands of corporations and weakens worker power.
Another reason for growing economic inequality is the increase in service positions, which are unstable and low-paid. In these positions, such as retail or fast food workers, employees may only be able to work part time, are 'disposable' (meaning they can be fired for little cause and replaced with another worker), and earn very low wages, sometimes as low as the federal minimum wage of $7.25 per hour. As the rise of service positions meant low pay for more workers at the low end of the income distribution, CEOs at the high end began earning an astronomical amount of compensation, leading to an extreme gap between our poorest and our richest individuals.
However, a primary reason for the rising inequality has been tax policy. More specifically, the federal government has implemented steep cuts in the highest tax rates for income from salaries and wages and especially in tax rates for income from dividends and capital gains (Hacker & Pierson 2011). This latter cut is especially important because dividends and capital gains account for a much larger share of the income of wealthy families than the income of other families. To be more specific, they account for only 0.7% of the income of the bottom four-fifths of the nation’s families, but for 18.8% of the income of the top fifth, 38.2% of the top 1%, and a striking 51.9% of the top 0.1% (Hungerford 2011). In a related statistic, three-fourths of all capital gains are received by the top 1% (Krugman 2012). Relative to its national wealth, the US is the lowest-taxed industrial democracy in the world (Leonhardt 2012).
In addition, at various periods the wealthiest have paid far less in taxes than other Americans. Many very wealthy families and individuals pay a lower percentage of their income in taxes than middle-class and upper-middle-class families do because so much of the wealthiest families’ income is from dividends and capital gains. In fact, the four hundred wealthiest families and individuals in the country paid only 18.1% of their income in federal tax in 2008, and only 16.6% the year prior (Krugman 2012). As the director of Citizens for Tax Justice explained, “The low taxes on capital gains and dividends are why people who make a ton of money, which is largely from investment income, do awfully well. The Warren Buffetts, the hedge fund managers – they pay really low tax rates” (Confessore, Kocieniewski, & Parker 2011: A1). This fact prompts a critical question from Paul Krugman, winner of the Nobel Prize in economics: “Is there a good reason why the rich should bear a startlingly light tax burden?” His feels, “Such low taxes on the very rich are indefensible” (Krugman 2012: A27).
The lowering of tax rates has helped make the nation’s wealthiest families even wealthier. After adjusting for inflation, their after-tax income grew by a much greater amount than that for the poorest families from 1979 to 2007. Income grew by only 18% for the poorest fifth but by 65% for the wealthiest fifth (excluding the top 1%), and it also grew by a whopping 275% for families in the top 1 percent (Congressional Budget Office 2011). As a result, economic inequality increased.
Recently, the second Trump administration again expanded tax breaks for the wealthiest Americans, while cutting government aid for the poorest Americans (Parlapiano et al. 2025). You may learn more about this bill by checking out the New York Times article Everything in Trump’s Big Tax and Spending Law, and How Much It Will Cost or Save.
Consequences of Economic Inequality
Why should we care if economic inequality has increased and if the US has the highest degree of inequality of all industrial democracies? One answer is that it is a matter of fairness. The US is not only the wealthiest nation in the world; it is also a nation that historically has stressed that everyone is created equal and that everyone has an equal opportunity to pursue the 'American dream' by becoming economically successful. Against this backdrop, a high degree of economic inequality is simply un-American and unfair.
Beyond this philosophical critique are more practical considerations. First, a high degree of economic inequality is strongly associated with a high degree of poverty and near poverty: If the rich are getting richer, there is normally less wealth to go around, and the poor get poorer. Think of the Trump administration tax breaks mentioned above – the less taxes wealthy people pay, the less funding for government programs to help the poor. In fact, it is widely understood that the administration cut those government programs to make room for tax cuts. For the same reason, high economic inequality is also associated with a shrinking of the middle-class. In the US, as both poverty (and near poverty) and wealth have increased, the size of the middle-class has decreased.
Second, a high degree of economic inequality is also associated with low social mobility, the movement of people up or down the socioeconomic ladder. As noted earlier, the US is the most economically unequal of all industrial democracies. It also has less upward social mobility: Americans born into poverty or near poverty are less likely than their counterparts in other democracies to be able to move up the socioeconomic ladder (DeParle 2012).
Next, high economic inequality may slow economic growth. This possible effect occurs for at least three reasons (Krueger 2012). First, the wealthy tend to save their money rather than spend it. Second, a shrinking middle-class means there is less spending by the middle-class to stimulate the economy, which is contributes greatly to the strength of the economy. Third, workers' morale is likely to be lower in a society with higher economic inequality, and their lower morale decreases their productivity. As the former chair of the Council of Economic Advisers stated:
“The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth. Businesses would benefit from restoring more fairness to the economy by having more middle class customers, more stable markets, and improved employee morale and productivity” (Krueger 2012: 10).
Additionally, we see economic inequality impact other social problems, such as for housing. One interesting way that we see this inequality affecting housing, which we will discuss further in the next chapter, is the impact of the increase in vacation rentals. While Airbnb, VRBO, and other vacation rental and home share options may increase the number of inexpensive places to stay in an area, they reduce the number of long-term rental units. They also tend to increase the rental prices, decreasing the supply of affordable housing. Wealthy people benefit from these options because they make more rental income on properties they own. People who most need affordable housing are pushed out of the rental markets because they can’t afford to stay (Barron, Kung, and Proserpio 2020; Lee 2016).
Finally, many social scientists consider nations with high degrees of economic inequality to be “unhealthy societies,” to quote the title of a book on this issue (Wilkinson 1996). Economic inequality is thought to undermine social cohesion and increase polarization, and also to cause other problems (Barash 2012; Wilkinson & Pickett 2011). Among the world’s industrial nations, higher degrees of economic inequality are associated with worse physical and mental health, lower life expectancy, and higher rates of violent crime. High economic inequality, then, is a matter not only of fairness but is related to our ability to survive and thrive.
