Causes of Poverty in America

From the Podcast:

If you travel to India, the poverty is obvious. There are people who have no money and literally have no food to eat. It’s a little bit more complicated in the United States because even though the welfare system is not very good, we don’t actually have mass starvation. Poverty in America is more about a lack of basic necessities and a lack of security.

For many, there is an uncertainty as to where a person is going to get food and an uncertainty as to how a person will pay his or her most basic bills. Sometimes, it’s about a heavy reliance on government institutions or overwhelmed private charities.

Even though we don’t have starvation in America, we do have an amount of poverty that leads to malnutrition and diseases that we don’t tend to associate with First World countries. This leads to a massively truncated life expectancy. All too often, poverty is going to be passed on from one generation to the next, which is at odds with the ideal of America as a place with endless upward mobility.

There are many reasons and causes for poverty in America. For example, it simply could be because of a job loss and a resulting downward spiral, a flight from an abusive partner, an exorbitant rent increase while on a fixed disability or Social Security income, or the results of untreated mental illness.

While there are many reasons for poverty in America, we’ve chosen to give you five of the major causes below.

#1 Poor Economy

Weak economies in America have caused an increase in unemployment. Some companies have been forced to cut jobs or even close their doors for business. Others have also chosen to ship their factories overseas in order to save money by hiring foreign workers at much lower cost. All of these decisions by companies were a direct result of the economy, and without cutting jobs or moving them overseas, these companies would have most likely shut their doors, too.

Also, the old days where Americans had high-quality jobs with good wages and great benefits is slowly becoming a thing of the past. Unemployed people have a hard time finding new jobs since jobs are scarce and the competition for jobs is extremely high. Unemployment not only affects individuals but their families as well. Most of these people will collect unemployment benefits for only a small fraction of their previous salaries. These changes often drive families into a state of poverty, and unfortunately, sometimes even into homelessness.

#2 Lack of Affordable Housing

The growing gap between wage earnings and the cost of housing in the United States leaves millions of families and individuals unable to make ends meet. According to the National Low Income Housing Coalition, families across the country would need to earn a “housing wage” of $15.37 an hour to afford a two-bedroom apartment at the average fair market rent. Even in West Virginia, the least expensive rental state in the country, a full-time wage earner would have to earn over $8.78 an hour in order to afford a two bedroom apartment.

#3 Substance Abuse

Drug and alcohol addiction affects about 20% of the homeless population. Drugs can become so addictive that they will dominate the life of the user. Some people dump all of their money into their habit. For example, a gram of cocaine sells for about $100. If a person were to use a gram per day, they would spend $700 per week on their habit. That is more than most Americans make per week. For those who use heroin, their habit could cost them thousands of dollars per week.

The cost of alcohol can be significant as well, especially in high-poverty areas. Besides money spent on alcohol, a heavy drinker could also suffer other adverse economic effects. These include lowered wages (because of missed work and decreased job efficiency), lost employment opportunities, increased medical expenses for illness and accidents, legal cost of drink-related offenses, and decreased eligibility of loans. Based on these examples, it is easy to see how drug and alcohol abuse could drive users and their families into poverty or homelessness.

#4 Lack of Education

A fourth major cause of poverty in America is due to lack of education. Many people from the lower class simply cannot afford to attend college and earn a degree. The only jobs they can get are low paying with little to no benefits and then they have to support themselves and their families on a low salary. This may slowly drive a family into poverty. As of the year 2008, the average earnings for someone with just a high school diploma was about $28,000, which is just above the poverty line for a family of four.

#5 Medical Expenses

Many Americans, both rich and poor, develop severe illnesses which require immediate medical attention. Many of these illnesses happen unexpectedly and require long stays in the hospital, expensive drugs, treatments, and even surgery. The average cost per night to stay in a hospital typically falls around $350. During a hospital stay, a simple Tylenol in a hospital costs you about $14 per pill. Treatments such as chemotherapy can cost a cancer patient $30,000 just for an eight-week treatment. In addition, minor surgeries cost patients at least a few thousand dollars, while major surgeries may cost patients tens of thousands of dollars.

It is easy to see that these necessary practices done in order to help an illness put a deep hole in patients’ pockets. Yes, medical insurance may help cover some of these costs, but not all of it, and there is usually a copay people have to cover up front. This leaves the patients, whether able to or not, left to somehow pay the remainder of the bill. These bills can easily bring a low class or middle-class person straight into poverty. And for those without health insurance, financial ruin could be just one accident or illness away.