Globalization and the trends in inequality of poverty in US over the past decade

Singh, Ashish (2014). 'Globalization and the trends in inequality of poverty in US over the past decade' Paper presented at the annual conference of the HDCA, 2-5 September 2014, Athens, Greece.

The poverty rate in the United States increased from 11.3% in 2000 to 15.1% in 2010. The increase in poverty during 2000-10 is in exact contrast to the previous decade, where poverty systematically reduced from a peak of 15.1% in 1993 to 11.3% in 2000. In 2011, 46.2 million persons were estimated to have income below the official poverty line. Since 2006, when the poverty rate stood at 12.3% (most recent low), the number of poor has increased by 9.7 million. Also, the 46.2 million persons counted as poor in both 2010 and 2011 are the largest numbers counted in the measure's recorded history, going as far as 1959 (Gabe, 2012). Though the rise in poverty during the last decade is a phenomenon in itself, a more interesting and pressing enquiry would be to look into how poverty among different socio-economic groups has changed during the past decade and the associated reasons behind the changes. Just to make a case: poverty rates for Blacks and Hispanics greatly exceed the national average; in 2011, 27.6% of Blacks and 25.3% of Hispanics were poor, compared to only 9.8% of the non-Hispanic Whites.

This paper investigates the second question, that is, how inequality in poverty across different groups has changed in the United States during 2002-2011. We also relate the changes in the inequality in the distribution of poverty across groups to the process of globalization. To be specific, we examine how the unemployment-population ratio, unemployment rate, loss of employment (and subsequent re-employment) and average weeks of unemployment among different socioeconomic groups have changed due to the rise of globalization, with a special focus on the increasing disparity in the above indicators. The history of globalization can be divided into three periods: 'Globalization 1' (1492–1800), 'Globalization 2' (1800–2000) and 'Globalization 3' (2000–present) with each period substantially different from the others (Friedman, 2005). Globalization 1 was marked by countries globalizing for resources and imperial conquest whereas Globalization 2 was spearheaded by companies globalizing for labor and markets. Globalization 3 on the other hand relates to the globalization of the people and is shrinking the world very fast and is flattening the playing field for all. We focus on 'Globalization 3'.

To measure inequality in the distribution of poverty across groups, we construct two simple measures to investigate the extent and the changes in the extent of intergroup disparity in poverty in the last decade – the first one which we call the 'Intergroup Disparity Index of Poverty' is a representational measure similar to the 'Distributional Fairness Index' proposed by Villemez and Rowe (1975). The second measure (Disparity Indicator) simply captures the difference between the poverty rates of the groups with the highest and the lowest poverty rates.

We use data provided in Current Population Report Series: 2002-11 (Income, Poverty, and Health Insurance Coverage in the United States) based on Current Population Surveys – Annual Social and Economic Supplements conducted by the US Census Bureau to estimate the above mentioned indices. We estimate the above indices for groups based on race (White, Black, Asian and Others), region (Northeast, Midwest, South and West), family type (Married couple, Female householder and Male householder) and nativity (Native and Foreign born). To estimate the other indicators like unemployment-population ratio, unemployment rate, loss of employment (and subsequent re-employment) and average weeks of unemployment we also use data provided in Worker Displacement Series and Employment and Earning Series published by US Department of Labor and US Bureau of Labor Statistics, respectively.

The findings, in essence, add up to a dismal picture. Poverty has increased – for all – racial and ethnic groups; family types; both natives as well as foreign born; and regions. The inequality of poverty in the US is substantial and the gap in poverty between Blacks and Whites has increased. Also, the inequality of poverty based on family-type (extremely high) has increased during the same period. Further, the unemployment-population ratio, unemployment rate, loss of employment and average weeks of unemployment have all increased considerably but the extent of re-employment of displaced workers has decreased enormously during the past decade.  For Example, unemployment-population ratio increased from 37.3% to 41.6% for overall, 41.9% to 48.3% for Blacks and 36.6% to 40.6% for Whites, respectively; unemployment rate increased from 5.8% to 8.9% for overall, 10.2% to 15.8% for Blacks and 5.1% to 7.9% for Whites, respectively; job losers increased from 3.2% to 5.3% among the overall, 5.1% to 8.7% among Blacks and 2.9% to 4.8% among Whites, respectively; and finally, average weeks of unemployment increased from 16.9 weeks to 39.3 weeks for overall, 19.6 weeks to 43.3 weeks for Blacks and 15.6 weeks to 37.8 weeks for Whites, respectively. Though individuals of both the groups have suffered considerably in terms of unemployment (and job losses) on account of globalization and the recent economic recession, it is the Blacks which have bore the greater brunt.

Also, the total number of long-tenured displaced workers (20 years of age and older who had three or more years of tenure on a job they had lost or left during the reference period because of plant or company closings or moving, insufficient work, or the abolishment of their positions or shifts) has increased during the 2001-2011 period. The extent of re-employment has decreased from 66.4% (2001-03) to 56% (2009-11) for the overall population and there is a substantial difference between Whites and Blacks in reemployment and the difference has increased from 8.2 percentage points to 11.3 percentage points. Further, persistence in unemployment (unemployed in January of the year following the reference period of three years as a percentage of total long-tenured displaced) is considerable and has increased from 20.3% to 26.7% during the 2001-2011 period for the overall population. Finally, there is also a large Black-White divide in persistence of unemployment.

Overall, then, this paper's findings are in conformity with a pessimistic view rather than otherwise about the record of the economic development in the US during the third phase of globalization (2000–present).

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