Working Poor in the U.S. Hits One-Third of all Employed Families

Working Poor in the U.S. HitsIt wasn’t too long ago when the U.S. economy was on the verge of collapse and any prospects for economic growth were bleak (think 2008). We all know what happened after the financial crisis. Banks needed help or else the financial system would have collapsed. So big banks had billions of dollars made available to them via the government and Federal Reserve.

Fast forward to today, and with all the stimulus packages implemented by the U.S. government and the quantitative easing programs of the Federal Reserve, the banks have been saved. But not much else has been done in the U.S. economy. In fact, the statistics show we may be going in the wrong direction again.

The U.S. economy took a huge wrong turn when banks were permitted to make loans to people who never really qualified for them. It will take decades for the U.S. economy to recover from the wounds of the financial crisis. And some economists like me think all this quantitative easing will create long-term problems for America, as our national debt has skyrocketed and the strength of the U.S. dollar has deteriorated.

My question: if creating jobs was one of the goals of quantitative easing, why are so many people falling into poverty?


In 2011, there were 47.5 million people in 10.4 million families in the U.S. economy living near poverty. Called the “working poor,” they are defined as earning less than twice the official poverty rate income of $22,811 per year for a family of four.

To give you some perspective, the working poor are now almost 33% of all the working families in the U.S. economy. In 2010, this number was 31%. In 2007, it was as low as 28%. (Source: Reuters, January 15, 2013.)

Thanks to several rounds of quantitative easing implemented since 2008, there were surely some jobs created in the U.S. economy. But as I have been harping on these pages, the majority of new jobs created since the “big bust” has been in low-wage industries. The rising number of working poor in this country proves the point.

According to the Working Poor Project (aimed at improving economic security for low-income families), working parents in the U.S. economy have taken jobs such as cashiers, maids, waiters and other low-paying jobs where they are offered fewer hours and minimal benefits. One in four low-income parents has one of these types of jobs.

Even Federal Reserve Chairman Ben Bernanke agrees with this occurrence. At University of Michigan, while talking about the U.S. economy, he said, “…we would like to see a stronger labor market…there are too many people whose skills and talents are being wasted.” (Source: Wall Street Journal, “Fed Chief Sees Bond Buys Continuing,” January 14, 2013.)

Quantitative easing; it’s been good for Wall Street and the big banks. For the “working poor,” the statistics show money printing hasn’t helped. Unfortunately, I see a time down the road when hyperinflation becomes an after-effect of too many dollars in the system. At that point, when inflation comes into play, the poor will just fall further behind.

Michael’s Personal Notes:

It’s quite a race…

As countries around the world struggle to grow in 2013, central banks in the global economy are in a race to devalue their currencies. This is one race I predict will end with a bunch of losers.

The central bank of Japan has gained some extra attention lately due to its increased printing activities. The Prime Minister of Japan, Shinzo Abe, made an announcement last week about a new 10.3-trillion yen spending spree to boost Japan’s economic growth. (Source: Financial Times, January 11, 2013.)

But Japan is not the only country involved in printing and devaluing its currency. Other countries in the global economy are doing the same. The central banks of Switzerland, Brazil, and China have taken steps to devalue their currencies. It’s an outright currency war amongst central banks.

Even Russia is getting into the currency devaluation race. The central bank of Russia has been actively buying foreign currencies. It bought 4.83 billion worth of foreign currencies so far in January and purchased 5.15 billion Russian rubles worth of foreign currencies in December of 2012, as the rising ruble has been hurting exporters. (Source: Bloomberg, January 11, 2013.)

But how useful is the ploy of devaluing currency to stimulate economic growth? Philadelphia Federal Reserve Bank President Charles Plosser recently explained that currency devaluation has no benefit to the global economy. He said, “So central banks and governments need to be cautious about allowing us to slip into a regime like that because that would not be healthy for world trade or for the economies.” (Source: Reuters, “Fed official warns about slipping into currency wars,” January 11, 2013.)

Dear reader, my concern is that there are too many central banks involved in this new (but really old) phenomenon of printing money to lower currency values and stimulate economic growth. If all central banks work to devalue their currencies at the same time, will it work?

Right now, the reason for central banks to print money is declining exports. But I don’t think they realize how bad the situation is on the demand side. Once demands picks up, export growth will eventually follow. Printing more money devalues currencies, but won’t increase demand; rather, the more money printed, the greater chances of inflation and the more expensive exports become—a classic double-edged sword.

Where the Market Stands; Where it’s Headed:

As I have been predicting in these pages, I believe 2013 will be the year the bear market rally in stocks that started in March of 2009 comes to an end. And it may end earlier in the year than most analysts think possible. The stock market is close to its top.

What He Said:

“Many of today’s consumers have purchased properties with very little down payment. They’ve been enticed by nothing-down, interest-only, second and third mortgages. Bottom line: the low interest rate environment sucked consumers into the housing market big-time. And that will eventually cause us all problems.” Michael Lombardi in Profit Confidential, June 22, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.