The Great American Indigence - Research Paper Example

?The Great American Indigence It was confirmed by the eminent economist Alfred Marshall that human wants are unconstrained. In the study of finances, it has been stated that the most imperative economic problem of any country in the current world is the difficulty of ‘choice and scarcity’. At this juncture, when the inhabitant’s level of mankind is budding at an increasing rate, the resources available for the construction of various goods and services are inadequate. Thus, allocating resources professionally is the foremost task of all the producers in the modern world. If the income distribution of a market is not equal, then the resource allocation becomes ineffective. In such circumstances, the economy gets bifurcated into two groups namely, the ‘haves’ and the ‘have nots’. An increase in the strength of the latter is the underlying factor which generates poverty in the economy. This research paper will explain the poverty of U.S. in details. Name of the Student Name of the Course Time Date United States Poverty I. Introduction Poverty is the state of misery that can exist in any nation in the world. If a nation is poor, then it is not capable of meeting the basic requirements of its citizens. Poverty not only dampens the economic prosperity of a country, but also brings about the downfall of human development in a nation1. This research paper will consider the extent of poverty in United States. It was earlier believed by the economists that poverty only had its presence in the lagging and underdeveloped nations in the world. However, the contemporary economic affairs of the world show that rich developed nations like, United States, also house substantial amount of poverty in its domestic economy. II. Poverty in United States As recorded in 2011, the level of poverty in United States was about 15%. It was estimated that around 46.2 million individuals in the country were poor11. The median level of the family incomes of the individuals of the country had fallen by almost 1.5% from 2010 to 2011. It has been claimed by the researchers that the poverty in U.S. is actually responsible for the rise in the country’s level of unemployment. After the globalization of the world economy in 1990, the competences of the developed nations have fallen significantly. The fall in the core competences in U.S. have resulted in a decline in employment opportunities in the nation. The fall in the income prospects have increased the poverty in U.S. Then again, the poverty in U.S. is seen to be generally urban in nature. III. Causes of Poverty There are various causes or reasons that have caused the poverty in U.S. The big American corporate companies always outsource their requirement of skilled labor workforce from the developing nations in the world. This is because skilled and educated workers in those nations are available at a cheaper cost. This has made the U.S. workforce less competitive in nature, thereby lacking the proper knowledge which is needed for maintaining high paid jobs. Thus, lack of higher education and knowledge among the youth of U.S. is a prime reason for its impending urban poverty. The recession in the world economy since 2007 has added fuel to the fire of dismay for the U.S. individuals. Low velocity of money circulation in the economy has reduced the productivity and investment thresholds of the nation2. A fall in the level of productivity in the economy has been responsible for the job losses in the nation. In figure 1 at the end, it can be observed that down the years from 1968 to 2012, the workforce participation in U.S. did not increase. Rather, the trend shows a fall in the employment opportunities. Then again, it is obvious and quite natural that the population strength of the country has increased with time. The employment level in the nation has not increased in equivalence to the rise in the population of the nation10. This shows that a large proportion of the individuals in U.S. is unemployed and therefore, leads their lives as poor urban individuals. The racial and social differences in the nation have also contributed to heighten the poverty level. If the political history of the country is analyzed, it can be found that the ruling principles of Ronald Reagan are, to some extent, responsible for the extensive poverty at present. Ronald Reagan (president of U.S.) had always given more value to the capitalistic progress of the nation. He was responsible for reducing the welfare oriented activities in the country. A fall in the public expenditure for the welfare related factors in the economy is largely responsible for the prevalence of poverty in U.S3. Figure 3 at the end clearly shows that the fall in the social spending is largely responsible for the poverty in U.S. The Gulf wars in the Middle Eastern nations during 1990-1991 had increased the oil prices in the global market. This had in turn contributed to the rise in the price level of all kinds of goods and services in the global marketplaces4. The inflation in the prices of various goods and services had been responsible for the rise in the consumption expenditure thresholds of U.S. individuals. The rise in the expenditure requirements is also responsible for the poverty in U.S. IV. Impact of Poverty As mentioned before, there are various negativities of poverty. Poverty in U.S. has created all sorts of severe problems for the individuals and the country as a whole. They can be listed as follows: Low income: Indigence in terms of income is the most severe factor that contributes to the poverty in a nation. The prevailing poverty has directly affected the income levels of the individuals in the country. A substantial proportion of individuals in the nation are not able to meet the basic necessities of life5. Poor educational facilities: Low levels of income among the average households of the U.S. individuals have been responsible for lesser accessibility of financial resources among them. Thus, the disposable amount for the purpose of educational expenditure has grown meager. Poor standard of living: Lack of income and education has lowered the probability of the U.S. individuals to acquire opportunities to work as skilled labors. This has forced them to spend over the basic amenities of livelihood, but of inferior quality. Substandard expenditure incurred by the individuals of the nation has resulted in the poor standard of living. Bad health status: Human capital is considered to be the most valuable form of asset of any country. Poor public expenditure in heath related aspects in U.S. has been responsible for the prevailing poor health status and depleting welfare. Medical treatment has almost become a form of luxury service consumption (highly expensive) in the country9. Rise in income inequality: It has been observed that, over the years, the income distribution of U.S. has become increasingly inequitable6. This is because the capitalist classes of the nation have received more incentives than the labor classes, since the Reagan Age. Low welfare: Low public spending in the nation has been responsible for the low level of net social welfare. It has been found that the average consumption of public goods in the nation has significantly fallen over years. V. Ways to Reduce Poverty Poverty in any economy can be reduced only through the help of active initiatives taken by the public authorities in a nation. There are many economies in the world like, Sri Lanka, that exhibit low level of poverty even though the rate of growth of economic aggregates of the nation are lower. On the other hand, the nations like, Dubai, have high growth rate of national product but the economy experiences high income poverty. The government of U.S has adopted various types of poverty alleviation programs throughout the nation. Through the implementation of these programs, the public authorities have tried to improve the living standards, employment opportunities, health status, education and welfare in the country7. The government of the country has introduced special employment benefits for the reduction and gradual eradication of poverty in the nation. Approximately 1.7 million individuals in the country have been benefited from these programs launched by the U.S. Government. Moreover, the government of the country has also adopted strong expansionary fiscal policies. This has been done by increasing the level of unilateral transfers in the nation. The income tax slabs are also progressive in nature, which allows the government to extract higher taxes from the rich individuals than the poorer classes, thereby reducing the income inequality in the country. The monetary authorities of the country have also taken active steps to reduce the negative impacts of recession on its economy. The tools of “Quantitative Easing” have helped in reducing the market interest rate, thereby helping to increase the level of investments in U.S. Many programs like, the Supplemental Nutrition Assistance Program (SNAP), have been introduced by the government in order to lessen the nutrition related problems in the nation8. The Earned Income Tax Credit (EITC) mechanism has also helped to eradicate the poverty of about 6.6 million individuals in the nation. VI. Conclusion The resources available in any economy are always scarce. The primary economic problem that must be recognized and solved is the efficient resource allocation. In the current epoch, the nations must abide by the rules and regulations of mixed economic principles. It can be analyzed that extensive practices of capitalistic approaches in the economy of U.S. had made the government of the country neglect the socialistic virtues of governance. It is believed that with the help of the new active initiatives which have been undertaken by the government of U.S. for poverty alleviation, the absolute and relative poverty in the country would surely fall. Table 1 U.S. Poverty (2000 to 2010) Year Percentage of people with income less than 125% of the poverty threshold 2000 16.5 2001 16.3 2002 16.5 2003 17 2004 17.5 2005 17.7 2006 17.6 2007 17.3 2008 17.6 2009 18.9 2010 20.1 2011 20.8 2011 20.8 Source: U.S. Census Bureau. “Poverty: 2000 to 2012”, (2013) http://www.census.gov/prod/2013pubs/acsbr12-01.pdf. Table 2 Rise in U.S. Unemployment (2000-2012) Year Percentage of Unemployed People 2000 3.4 2001 3.8 2002 4.2 2003 5.8 2004 5.7 2005 5.3 2006 4.7 2007 4.6 2008 5 2009 7.8 2010 9.8 2011 9.1 2012 8.3 Source: BLS. “Labor Force Statistics from the Current Population Survey”, (2013), http://data.bls.gov/timeseries/LNS14000000. Table 3 Rise in U.S. Population Year Number of people Living in per Sq Km Area 2000 30.80 2001 31.10 2002 31.39 2003 31.66 2004 31.96 2005 32.25 2006 32.57 2007 32.88 2008 33.24 2009 33.54 2010 33.82 2011 34.06 2012 35.74 Source: World Bank. “United States”, (2013), http://data.worldbank.org/country/united-states. Figure 1: Low Work Participation Source: Political Calculations. “Visualizing Teens Working Full or Part Time”, (2012), http://politicalcalculations.blogspot.in/2012/12/visualizing-teens-working-full-or-part.html#.Uo3b8yd8Uwo. Figure 1: Falling Public Expenditure Source: Barro, Josh. “Lessons From the Decades Long Upward March of Government Spending”, (2012), http://www.forbes.com/sites/joshbarro/2012/04/16/lessons-from-the-decades-long-upward-march-of-government-spending/. Notes 1) See Apergis Nicholas, Oguzhan Dincer & James E. Payne. ON THE DYNAMICS OF POVERTY AND INCOME INEQUALITY IN US STATES. 38.2, pp.132 – 143. 2) See Fama, Eugene . AGENCY PROBLEMS AND THE THEORY OF THE FIRM”, pp. 288 – 307. 3) See Hayajneh Abdalla, Igwe E. Udeh & Sushila S. Kedia. IS U.S. GLOBAL ECONOMIC COMPETITIVENESS DECLINING? WHAT CAN BE DONE TO IMPROVE U.S. ECONOMIC GLOBAL COMPETITIVENESS?, pp.20 – 37, 1994.. 4) See Pandey Shanta, Min Zhan and Youngmi Kim. BACHELOR'S DEGREE FOR WOMEN WITH CHILDREN: A PROMISING PATHWAY TO POVERTY REDUCTION, pp.488 – 505. 5) See Treas, Judith. OLDER IMMIGRANTS AND U.S WELFARE REFORM, pp.8 – 33, 1997. 6) See Arnold Roger. MACROECONOMICS. p. 212. 7) See Bagchi Amiya Kumar. THE POLITICAL ECONOMY OF UNDERDEVELOPMENT. P. 89. 8) See Hubbard. MACROECONOMICS. p 132. 9) See Sharp Ansel, Charles A. Register, & Paul W. Grimes. Economics of Social Issues. p202. 10) See Smit Fraser. ENVIRONMENTAL SUSTAINABILITY: PRACTICAL GLOBAL APPLICATIONS. p 166. 11) See DeNavas-Walt Carmen, Bernadette D Proctor & Jessica C. Smith. INCOME, POVERTY, AND HEALTH INSURANCE COVERAGE IN THE UNITED STATES: 2012. p 45. Bibliography A. Articles Apergis, Nicholas., Oguzhan Dincer and James E. Payne. "On the dynamics of poverty and income inequality in US states." Journal of Economic Studies, 38.2, pp.132 – 143, 2011. Web. 20 November 2013. Fama, Eugene .“Agency Problems and the Theory of the Firm.” Journal of Political Economy, 88.2, pp. 288 – 307, 1980. Web. 20 November 2013. Hayajneh, Abdalla F., Igwe E. Udeh and Sushila S. Kedia. "Is U.S. Global Economic Competitiveness Declining? What can be done to improve U.S. Economic Global Competitiveness?" Journal of Global Competitiveness, 4.2, pp.20 – 37, 1994. Web. 20 November 2013. Pandey, Shanta., Min Zhan and Youngmi Kim."Bachelor's degree for women with children: A promising pathway to poverty reduction." Equal Opportunities International, 25.7, pp.488 – 505, 2006. Web. 20 November 2013. Treas, Judith. "Older Immigrants and U.S Welfare Reform." International Journal of Sociology and Social Policy, 17 9, pp.8 – 33, 1997. Web. 20 November 2013. B. Books Arnold, Roger. Macroeconomics. (Connecticut, Cengage Learning: 2008). Bagchi, Amiya Kumar. The Political Economy Of Underdevelopment. (Cambridge, University Press: 1982). Hubbard. Macroeconomics. (Delhi,Pearson Education India: 2007). Sharp, Ansel, Charles A. Register, and Paul W. Grimes. Economics of Social Issues. (Massachusetts, McGraw-Hill: 2013). Smith, Fraser. Environmental Sustainability: Practical Global Applications. (Massachusetts, CRC Press: 2010). C. Websites . Barro, Josh. “Lessons From the Decades Long Upward March of Government Spending.” Forbes, 2012, available from http://www.forbes.com/sites/joshbarro/2012/04/16/lessons-from-the-decades-long-upward-march-of-government-spending/ DeNavas-Walt, Carmen, Bernadette D. Proctor and Jessica C. Smith. “Income, Poverty, and Health Insurance Coverage in the United States: 2012.” Census, 2013, available at http://www.census.gov/prod/2013pubs/p60-245.pdf. “Labor Force Statistics from the Current Population Survey.” BLS, 2013, available at http://data.bls.gov/timeseries/LNS14000000. “Poverty: 2000 to 2012.” U.S. Census Bureau, 2013, available at http://www.census.gov/newsroom/releases/archives/american_community_survey_acs/cb13-167.html. “United States.” World Bank, 2013, availale at http://www.worldbank.org/en/country/unitedstates. “Visualizing Teens Working Full or Part Time.” Political Calculations, 2012, available at http://politicalcalculations.blogspot.in/2012/12/visualizing-teens-working-full-or-part.html#.Uo3b8yd8Uwo. Read More