Over the past 45 years, the United States has experienced a rising standard of living, with real GDP per capita more than doubling between 1959 and 2004. In contrast, living standards among some groups seem to have stagnated. Although a number of studies have documented a correlation between macroeconomic conditions and poverty, the relationship is not as simple, or as strong, as one might think. What additional factors can explain the starkly different trends in economic well-being that are measured by overall GDP growth and the poverty rate?
Other factors may better explain why the poverty rate has failed to fall. Rising numbers of female headed families may offset income gains from women’s increasing labor force participation. Increasing income inequality—in particular stemming from declines in wages for less-skilled workers—may have limited the poverty fighting effects of economic growth. Finally, the level of and changes in government benefits directed toward the nonelderly may explain why the nonelderly poverty rate has not moved in the same direction as elderly poverty.