Creeping Poverty

Posted by Bob Lord

Remember Andrei Cherny? Contrary to popular belief, he didn't vanish. He may have failed in his quest for elected office, but he's continued his work as a writer, and on that front he's no slouch. His op-ed piece in Friday's Washington Post, ALICE Americans, Slipping Out of the Middle Class, is worth the read.

"ALICE," Cherny explains, stands for Asset Limited, Income Constrained and Employed. The ALICE Americans are the group lodged between the bottom 20% of Americans (the poor) and the middle 20% of Americans (the middle class). The ALICE Americans are the group that has felt the brunt of our difficulties over the past decade.

For most of the past 50 years, the income growth lines for the middle 20 percent of Americans and the 20 percent right below them tracked one another. A unified middle class rose and fell together. But increasingly over the past decade, these lines have diverged and a new income gap has grown. While the financial situation for both the bottom 20 percent and the middle of the middle class has stabilized over the past couple of years, the income of the 20 percent in between has continued to fall at such a rate that, as of 2012, their total income growth since 1967 is roughly 60 percent of those below or above them.

Cherny then focuses on ALICE Americans as a demographic group which he believes is up for grabs in the next election.

Beyond the scope of Cherny's piece (op-ed word limits are stingy) is what the plight of ALICE Americans signifies in terms of the bigger picture. 

The larger point is that the last decade for ALICE Americans reflects the creep of poverty up the socioeconomic ladder in America. When poverty expands, it expands from the bottom. Effectively, over the last decade, those ALICE Americans have left the middle class and joined the poor. David Safier's post from yesterday, Recalibrating the Poverty Line, discusses a study by U of A professor John Schwarz that demonstrates the poverty line in America is far higher up the income scale than we recognize. Using Schwarz's updated methodology, the ALICE Americans have pretty much completed the transition from middle class to poor.

The impoverishment of the ALICE Americans, however, only is the beginning. If the trends of the past several decades continue for another few decades, then that next group up, the middle 20% of Americans, who Cherny describes as having treaded water over the past decade, will be the group that drowns. 

From a political perspective, Cherny's observations regarding the programs needed to win the votes of ALICE Americans make sense. From a policy standpoint, however, they don't. The economic trends in America are not limited one demographic group. Our worsening inequality will impact all but those at the very top adversely, unless we focus on policy choices that will arrest, then reverse, that inequality. We'll never get those policy choices right if we focus on one demographic group.