ISBN-13: 9780130999276 978-0130999276
Poverty, Unemployment, and Underemployment
Goals of the Chapter
We begin this chapter with a discussion on the extent, character, and distribution of poverty in the U.S. Employing a critical analysis of poverty reveals discrepancies in the official poverty counts, variations in the numbers of impoverished corresponding directly to the boom-bust cycles of the U.S. business-centered economy, and an unequal distribution of poverty among the country’s various populations. We explain that poverty is significantly connected with unemployment and underemployment in the U.S., and that the persistence of poverty is often rationalized, incorrectly, as the result of the character shortcomings of poor people—the “gospel of individualism.” We close the chapter with a discussion on the failure of state and federal government entitlement programs to make better the living standards of poor people.
After reading and studying this chapter on the social problems associated with poverty, unemployment, and underemployment in the United States, students should be able to address the following themes. Instructors may want to focus lectures and discussions on these learning objectives.
1. Recognize the extent and character of poverty in the United States
2. Understand the relationship among unemployment, underemployment, and poverty.
3. Recognize the relationship between our capitalist economic system relates to unemployment, underemployment, and poverty.
4. Identify the ideology of individualism and the poor.
5. Understand the extent to which government action and its broad subsidy system has failed to alleviate poverty in the United States.
Poverty has been a fundamental and persisting feature of U.S. society, both in the past and in the midst of today’s relative affluence. Government concern with poverty tends to rise and fall with changes in economic conditions and shifts in poor people’s movements. In the twenty-first century, about one American in every eight is officially regarded as poor, and judging from surveys perhaps one-quarter seem to be regarded by the American people as seriously deprived in terms of income and related socioeconomic conditions.
The poor have far fewer resources than anyone else; they not only have low incomes but also lack significant political power and access to adequate housing and legal aid. Although many low-income Americans are unable to work because of age, disability, or chronic illness, many other people are poor because of recurring unemployment and underemployment. In each year since the early 1970s, between 6 million and 10 million Americans have been officially unemployed. In addition to this official unemployment, however, the very serious problem of widespread underemployment is a fact.
Unemployment and underemployment are related to decisions made by corporate executives and investors – with profit accumulation and control of the workforce as corporate goals. Decisions by the economically powerful play a major role in shaping the boom-bust cycles of capitalism. Decisions about profit, location of new enterprises, and automation are made without significant democratic consultation with employees affected, yet such decisions have profound effects on working people and their families. The unemployed and underemployed are essential to the operation of the economy because they put downward pressure on wages and provide a reserve labor force. In recent years, many U.S. corporations have created serious unemployment problems by profit-oriented decisions that do not take worker costs into account. A concern for profits and a docile labor force has motivated decisions by many corporations to relocate operations in countries overseas, particularly those with many low-wage workers.
Poor Americans not only suffer indignities of unemployment and low incomes but also endure considerable hostility aimed at them by middle- and upper-income people. The ideology of individualism includes beliefs about hard work for success and about the character defects and laziness of those who do not succeed, including the poor. The ideology of individualism and the view of the poor as cillains have developed with the growth of the economy and have been fostered by capitalists and allied politicians from the nineteenth century to the present.
Such an ideology helps to legitimate the many inequalities in U.S. society. Culturally ingrained exhortations to work hard have been important in stimulating the effort of workers to do the jobs provided by our capitalistic system. One indication of a poorly developed awareness of economic exploitation among many workers is their strong acceptance of the individualistic views on poverty and unemployment as reflecting immorality. A major consequence of intense antipoor views among ordinary workers is to direct attention away from their own economic exploitation.
Government aid for the poor is the focus of much political attention. Many affluent Americans complain about the high costs of welfare, but far larger than government subsidies for the poor are subsidies for middle-income and upper-income Americans, as well as corporations. The United States has a broad subsidy system. Government subsidies for the affluent and the rich are usually viewed as legitimate and are not considered welfare; subsidies for the poor are considered to be illegitimate and are viewed, often with hostility, as only “handouts.” The United States still lives by a hypocritical and abstract ethic of “justice for all,” which is still far from implemented in everyday social realities.
Aid to Families with Dependent Children
Ideology of individualism
Official Unemployment statistics
Primary labor market
Rationalizations for poverty
Secondary labor market
The Phillips Curve
War on Poverty
Given that the official poverty level currently is about $18,556 for a family of four, prepare a family budget based on this figure including the major spending categories of housing, food, utilities, transportation, medical care, clothing, and entertainment. Then compare your guesses about a family’s expenditure distribution with empirical breakdowns for U.S. poverty families using the Census Bureau data at http://www.census.gov.
1. What are the major trends in the incidence of poverty? Identify which groups are most likely to fall into the poverty category, and which groups are most likely not fall into the poverty category?
2. The U.S. Bureau of Labor Statistics (BLS) presents an “official” picture of unemployment each month. Contrast this official unemployment rate with the “true” rate by identifying several categories important to measuring underemployment.
3. What is the social impact of unemployment? Consider both individual and community harm.
4. How has the ideology of individualism shaped our perceptions about the causes of poverty, unemployment, and underemployment?
5. Given the option, most workers would probably choose to work at a job in the primary labor market rather than the secondary labor market. What conditions make these jobs relatively attractive?
6. The validity of the “Phillips Curve” has now been debated for almost 30 years. What was the British economist’s argument concerning the relationship between inflation and unemployment rates?
7. What is the connection between unemployment and poverty? About what proportion of families with an unemployed member fall below the poverty line?
8. Whether one is poor or unemployed depends on a number of basic factors including one’s personal characteristics (i.e., sex, age, and race). Beyond these, what are some of the characteristics of capitalism that generate unemployment and poverty?
Multiple Choice Questions
9. The number of Americans in the United States who are below the poverty line today is [b]
a. about half what it was in the 1950s and 1960s.
b. about 38 million.
c. approximately 5 percent of the population.
d. approximately 10 million.
10. Which of the following statements is true in the United States today? [b]
a. Most whites are poor.
b. A large and disproportionate segment of the poor are blacks and Latinos.
c. About 60 percent of blacks are poor.
d. The number of blacks and Latinos who are poor is roughly proportionate to their percentage in the population.
11. The number of poor people in the United States has [c]
a. consistently declined over the past few decades.
b. increased each year since the late 1950s.
c. regularly increased in times of recession and depression.
d. remained about the same over the past 30 years.
12. The majority of the poor in American today [a]
a. live in metropolitan areas.
b. are between the ages of 20 and 50.
c. are recent immigrants.
d. live in suburban neighborhoods.
13. Conservative order-market analysts argue that government statistics [b]
a. overcount the poor because poor people pay less income tax.
b. overcount the poor because many poor people receive in-kind benefits such as Medicare and Medicaid.
c. undercount the poor because the official poverty line is unrealistically low.
d. undercount the poor because government statistics are usually not very accurate.
14. The group whose members are most likely to be in the poverty category is [d]
a. black males.
c. white females.
d. black children.
15. Some social scientists consider that the official government count of the poor is too low because the [d]
a. Census Bureau is unable to count all the poor (for example, migrant workers).
b. emergency food budget which is the basis of the official “poverty line” is unrealistically low.
c. poverty level income figure assumes that too great a proportion of a family’s income will go for food.
d. all of the above.
16. Unemployment in the United States [a]
a. has ranged between 5 percent and 10 precent since the late 1970s.
b. is lower today than at any time since World War 11.
c. is higher today than at any time since the Great Depression of the 1930s.
d. as been approximately 5 percent since the late 1970s.
17. In times of high unemployment [c]
a. all groups in U.S. society are equally affected.
b. white women and white teenagers are the groups most seriously affected.
c. black teenagers are most seriously affected.
d. black females are most seriously affected.
18. According to mainline Keynesian economic theory, when inflation is a problem government should [a]
a. tax more and spend less.
b. tax less and spend more.
c. lay off most of its employees.
d. tax more and spend more.
19. Official government unemployment statistics [c]
a. include all workers who do not have jobs which they consider adequate for their income needs.
b. include those with no jobs and those with jobs which pay less than $3.35 an hour.
c. overlook discouraged workers who have given up looking for work and part-time workers who want but cannot find full-time work.
d. overestimate the number of unemployed workers.
20. Today a full-time worker earning the federal minimum wage [b]
a. earns almost $15,000 annually before taxes.
b. cannot support a family of three above the poverty line.
c. has about the same buying power as a full-time, minimum wage worker did in 1960.
d. earns about $18,000 annually before taxes.
21. Social science research has shown that long-term unemployment frequently is responsible for [d]
a. malnutrition and health deterioration.
b. loss of self-esteem
c. bewilderment, hesitation, and apathy.
d. all of the above.
22. Results of unemployment generally include [a]
a. substantial property crime.
b. a decrease in the infant mortality rate.
c. increased socializing among neighbors.
d. decreased prejudice against minority groups.
23. During the Great Depression of the 1930s [c]
a. the Bonus Army was granted the bonus money that had been promised to World War I veterans.
b. union strikes were rare because workers needed their jobs.
c. there were numerous rent strikes and food marches.
d. a and c above.
24. A Manpower Report to the President showed that [b]
a. most poor youths preferred low-wage jobs to the dangers of the drug business.
b. poor youngsters wanted an education, a successful career, and responsible work but saw no means of securing them.
c. unemployment had no relationship to the crime rate.
d. most poor youths believed that an education would guarantee them a good career.
25. The concept of the underclass as developed by Ken Auletta [d]
a. blames actions of the powerful for creating central-city economic problems.
b. includes an analysis of the link between underemployment and unemployment and poverty.
c. focuses on the role of racial discrimination in understanding the causes of poverty among racial minorities.
d. views the poor as pathological.
26. In times of recession and depression corporate capitalists as a group often operate their factories at of their capacity. [b]
a. 100 percent
b. 30-70 percent
c. 30-40 percent
d. 80-90 percent
27. In recent years, many U.S. corporations have sought to increase profits by [d]
a. reducing unemployment.
b. expanding the production of cheaper goods which more people can afford.
c. investing heavily in retooling and modernization of plants.
d. moving their production facilities overseas.
28. The capitalist and managerial classes [d]
a. consider unemployment to be harmful to the economy in general.
b. benefit from unemployment because it puts downward pressure on wages.
c. benefit from unemployment because it provides a reserve labor force for times when profit and investment conditions require expansion.
d. b and c above.
29. The “working poor” in the United States include [a]
a. large numbers of nonwhites and women.
b. a disproportionate number of white males.
c. mostly people with few job skills and little ambition.
d. a significant proportion of the managerial class.
30. The primary labor market [b]
a. is mostly made up of the working poor.
b. is characterized by better wages and more unionization than the secondary labor market.
c. requires less in the way of educational credentials than the secondary labor market.
d. has fewer unemployment benefits than the secondary labor market.
31. Most adult welfare recipients [a]
a. are alternately employed in low-wage jobs and go on welfare when they are laid off.
b. have never held a paying job.
c. refuse to take a paying job.
d. have been unemployed for more than 5 years.
32. Sweatshop working conditions [c]
a. no longer exist in the United States.
b. exist for factory workers in only one state today.
c. exist for many illegal immigrants who cannot complain because of fear of deportation.
d. are disappearing because of successful unionization of most industries.
33. The gospel of individualism believes that [a]
a. each person should work hard and strive to succeed in material terms.
b. hard work is no guarantee of success.
c. those who do not succeed are not to blame; they probably have spiritual virtues as great as those who do succeed.
d. a and b above.
34. The beliefs of social Darwinism [b]
a. stressed government intervention to aid the poor in U.S. society.
b. were used during the last half of the 19th century to justify aggressive competition and monopolies in the business world.
c. were condemned by business leaders such as John D. Rockefeller and Andrew Carnegie.
d. suggested that the hierarchical structures of capitalistic society and its class divisions were manmade, or unnatural.
35. The gospel of individualism [c]
a. is no longer influential in American society.
b. has been soundly rejected by ordinary working people in the United States.
c. has been a major influence on many U.S. government leaders during the 1980s and 1990S.
d. is adhered to only by right-wing extremists.
36. The 1935 Social Security Act was [a]
a. a major part of the New Deal.
b. wholeheartedly supported by the business world.
c. supported by most Southern legislators because the low wage structure of the South was in need of federal government support.
d. repealed under the Reagan administration.
37. The original welfare legislation of the New Deal [b]
a. provided cash assistance for all needy and/or unemployed people.
b. provided aid programs for the blind, the aged, and dependent children.
c. gave the federal government complete authority over welfare assistance programs in the states.
d. was modeled after the socialistic practices of the USSR.
38. Public aid programs today [c]
a. are uniform in all 50 states.
b. in 80 percent of the states provide aid to families with unemployed fathers.
c. include large sums paid to well-off and wealthy people through such programs as farm subsidies.
d. provide a secure safety net for all Americans.
39. Although poverty is a permanent feature of U.S. society. (true)
40. Nearly 3.5 million people in the United States experience hunger because they cannot afford enough food. (false)
41. The U.S. poverty rate for children in one-parent families are lower than in Canada and Sweden. (false)
42. The boom-bust cycles of our corporate-run, business-centered economy have no significant impact on the number of poor. (false)
43. African Americans and Latinos, such as Puerto Ricans and Mexican Americans, have the greatest likelihood of being poor. (true)
44. Today, most of those below the poverty line live in metropolitan centers, especially central cities. (true)
45. A minority of Americans agree with critics that the actual number of the economically deprived is far more than the official count. (false)
46. If every person seeking work could find a job with a decent wage, poverty would be dramatically decreased. (true)
47. The official unemployment rate has remained relatively constant in the U.S. economy. (false)
48. The rates of unemployment for better-educated workers are less than for the least well educated, yet they are increasing more rapidly than for the latter workers. (true)
49. Over the last few decades the United States has often had a lower unemployment rate than other Western industrial countries. (false)
50. The publicized unemployment rate, compiled by the federal Bureau of Labor Statistics, seriously overestimates the extent of unemployment in the United States. (false)
51. Recent data indicate that fewer than one-third of all U.S. unemployed workers qualified for unemployment insurance benefits, and the national dollar average for these unemployment benefits was only a bit more than one-third of workers’ former average weekly wages. (true)
52. While property crime appears to be correlated with unemployment and underemployment, the correlation is most likely spurious. (false)
53. Pursuing business profits, many U.S. corporations have expanded blue-collar and white-collar production in cheap labor areas in other countries over the last decade, thereby reducing the number of employees needed in the United States. (true)
54. One of the major profit-oriented relocations in recent decades has been to the North and Northwest. (false)
55. Capitalism’s tendency to create and maintain separate labor markets with distinctive job characteristics and mobility chances, for different groups of people, is a minor factor shaping the life experiences of the poor. (false)
56. The secondary labor market, characterized by better wages, more unionization, profitable firms, internal mobility opportunities, lower unemployment, and better benefits – is at the core of the economy and is composed disproportionately of white male workers. (false)
57. Evidence tends to support the idea that those who rely on public assistance have long been the target of hostility from nonpoor Americans, many of whom believe that large numbers of people who do not want to work are supported lavishly by the taxes of those who work. (false)
58. Many modest-wage jobs, such as the garment trades and agricultural labor, pay wages that may be temporarily sufficient for a college student or a single person, but for the head of a family such work and its wages may literally be life threatening. (true)
59. Ideas linked to private property and the so-called “free market” or “free enterprise” are closely related to these individualistic beliefs. (true)
60. The main themes of the evolutionary perspective called social Darwinism were incompatible with aggressive expansionism: the “struggle for survival” and the “survival of the fittest.” (false)
61. National figures often take the view that the problem of poverty is more an individual matter and that government intervention is really not needed to stem the tide of poverty. (false)
62. Instead of developing programs to offer recipients job training and job and other economic opportunities, attempts to reform “welfare” have focused primarily on ways to reduce the number helped by government or ways to control recipients, who are stereotyped as lazy. (true)
63. Accusations of immorality and improper work attitudes directed at the poor have proved helpful in focusing more attention upon middle-income workers’ own economic exploitation. (false)
64. A major function of advertising is to maintain, directly or indirectly, allegiance to the American capitalist system and its core values. (true)
65. Federal, state, and local governments provide a vast array of subsidies for groups above the poverty line, aid that has aptly been termed “welfare for the rich” or “wealthfare.” (true)
66. It’s an erroneous assumption that defense expenditures are much greater than the combined total spent for income, social, and health programs for poor Americans. (false)
67. John Kenneth Galbraith wrote in 1962 in __________, that since the United States had achieved the status of an affluent society, poverty could no longer be seen as a major affliction. (The Affluent Society)
68. __________ groundbreaking The Other America, focused attention on the more than 50 million Americans who in 1962 were in serious economic need. (Michael Harrington’s)
69. Today, cutbacks in government aid programs continue despite nearly __________ Americans remaining below the official poverty line. (35 million)
70. Americans with low incomes do have far fewer __________ than those with higher incomes. (resources).
71. One international comparison of eight major industrialized nations found that the U.S. poverty rate was __________ than Canada. (more than 4 points higher)
72. The __________ of our corporate-run, business-centered economy significantly shape the number of poor; that number regularly goes up in times of business-generated unemployment, recession, and depression. (boom-bust cycles)
73. The __________ is based on the Department of Agriculture’s economy food plan, a low-cost food budget on which a family could survive nutritionally on a short-term basis. (official poverty line)
74. The __________, with the 1960s’ economic expansion, brought a significant reduction in the number of Americans below the poverty line. (War on Poverty)
75. If one uses a more reasonable assumption that a poverty-line family should spend only 20 percent of its income for food, and if one uses a food budget level that is the bare minimum for a year, then the poverty level would have to be set much higher, and the actual number of poor people might be __________ the official figure. (double).
76. In the 1950s, British economist __________ argued that because wage rates regularly decrease when the unemployment rate increases, an unemployment rate of about 5.5 percent was necessary to keep wage rates from rising. (A. W. Phillips)
77. When inflation is a problem, according to some postwar economic __________ theory, government should tax more and spend less; when unemployment is high, it should tax less and spend more. (Keynesian)
78. __________ literally means that everyone who can and wants to work has a job, but the official (that is to say, the political) definition of this has varied depending on the economic conditions. (Full employment)
79. __________ is often correlated with unemployment and underemployment. (Property crime)
80. The export and investment of U.S. capital overseas is usually called __________. (capital flight)
81. More than 264 United States corporations exported roughly __________ manufacturing jobs overseas in the years 2002 to 2004. (2.8 million)
82. The Department of Labor defines the __________ as individuals who spend at least 27 weeks in the labor force in a year and whose incomes fall below the poverty line. (working poor)
83. The __________, characterized by better wages, more unionization, profitable firms, internal mobility opportunities, lower unemployment, and better benefits – is at the core of the economy. (primary labor market)
84. The __________, typically characterized by low wages, modest profits, small- and medium-sized employers, firms with low market power, more job turnover, little internal mobility, higher unemployment, and no (or weak) unemployment benefits – employs large numbers of people of color and white women. (secondary labor market)
85. The __________ is central to the dominant value system in the United States. (gospel of individualism)
86. Ideas linked to private property and the so-called __________ are closely related to individualistic beliefs that each person should work hard and strive to succeed in material terms, those who work hard will in fact succeed, and those who do not succeed have only themselves to blame. (free market or free enterprise)
87. The main themes of the evolutionary perspective called __________ were compatible with this aggressive expansion: the “struggle for survival” and the “survival of the fittest.” (social Darwinism)
88. American workers’ attention has been focused on signs of individual success—which often take the form of private consumption—rather than on their __________ over their workplaces. (lack of democratic control)
89. The current public assistance (“welfare”) system for the poor began in earnest with President Franklin Roosevelt’s __________, which was a modest step taken against great opposition. (Social Security Act)
90. In 1996, the federal government reformed welfare with the __________, which replaced the old Aid to Families with Dependent Children (AFDC) program with the Temporary Assistance for Needy Families (TANF) program of block grants to states, which has new limitations on eligibility. (Personal Responsibility and Work Opportunity Reconciliation Act)
91. Federal, state, and local governments provide a vast array of subsidies for groups above the poverty line, aid that has aptly been termed __________. (welfare for the rich or wealthfare)
92. The United States has had no major external political enemies since the end of the Cold War, yet its spends three times more on its __________ than any other nation around the globe. (military establishment)
93. __________ has been a fundamental and persisting feature of U.S. society, both in the past and in the midst of today’s relative affluence. (Poverty)