Conclusions
Despite robust growth in real GDP per capital in the last three decades, U.S.
poverty rates have changed very little. A number of studies have suggested that the
lack of improvement in the poverty rate reflects a weakened relationship between
poverty and the macro economy. We find that this relationship has weakened over
time, but in spite of this, changes in labor market opportunities—measured by
median wages, unemployment rates and inequality—predict changes in the poverty
rate rather well. Importantly, we find that the lack of improvement in poverty rates
despite rising living conditions is due to the stagnant growth in median wages and
increasing inequality.