Running head: UNEMPLOYMENT LEADS 1

Unemployment leads to Poverty: A Review of Literature

Julieta Rodriguez
University of Texas at El Paso


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Abstract
The United States has been dealing with high poverty rates since the 1900s. There has been
several controversies in determining if the main reason for the United States having a high
poverty rate is due to unemployment. The unemployment does play a big role in the effects of
poverty and it is shown to have a strong correlation with it. The following review on literature
will: provide information regarding on the causes of unemployment, discuss the impact
unemployment on poverty, inform about the policies for the unemployment and about the actions
that are either taking place or will take place in order to decrease the unemployment and as a
result poverty as well. There are many factors that contribute to the high unemployment rate and
it may vary according to your gender, class, age, and ethnicity. The group ages that have the
hardest time getting employed would be the teenagers while the ethnicity who faces the most
unemployment rates would be the blacks. The government is aware of the high unemployment
rate and has been helping the public with Food Stamps benefits, cut over board employments,
and companies have been offering scholarships to employees so they could get a better paid job.


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Unemployment leads to Poverty: A Review of Literature
Poverty in the United States has significantly decreased over the past 30 years. Poverty is
a government defined term that describes individuals who do not have adequate warm housing or
clothing, and lack of nutritious food. Many individuals and families who are at or fall below the
poverty line are most likely struggling every day to sustain themselves. An article titled
Americas have-nots: What it means to be poor by Lam Thuy Vo and E. Tammy Kim stated that
about 16 percent, or 49.7 million people, of the whole population in the United States live in
poverty (2014). One of the many factors that lead to these circumstances is the crucial number of
unemployed. There are many reasons why people are unemployed. One reason would be because
the company they were working for shut down due to low profit. Other cases may be because the
individual was not productive, was not responsible, and was not skilled. Many of the individuals
who are unemployed are veterans and it is difficult for them to get a job. The reason being, is
because most of the employers are searching for educated professionals.
There has been several controversies in determining whether the high number of
individuals who are unemployed leads to poverty or not. The unemployment in fact does play a
big role in the effects of poverty however many Americans seem to not know anything about the
subject, and in order to comprehend four important questions need to be considered:
1. How strong is the correlation between unemployment and poverty?
2. What factors do people face when they apply for a job?
3. Should job positions lower their qualifications for employees in order for people to obtain
a job?
4. Has the government done something to reduce the number of the poverty?
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The following review on literature will: provide information regarding on the causes of
unemployment, discuss the impact of unemployment on poverty, inform about the policies for
the unemployment and about the actions that are either taking place or will take place in order to
decrease the unemployment and as a result poverty as well.
How strong is the correlation between unemployment and poverty?
Poverty has been around in the United States since the 1900s along with unemployment.
The Organization for Economic Co-operation and Development (OECD) recently published its
biannual Society at Glance which reports data between 2001 and 2010. According to Damon,
the poverty rose significantly in most of the countries surveyed as a result of mass
unemployment and falling wages (2014). Furthermore, the number of unemployed increased by
a third, or 48 million, and the number of households [in the United States] without any income
from work increased by 20 percent (Damon, 2014). As a result, the United States had a
poverty rate of 17.4 percent resulting higher than the OECD average of 11.1 percent (Damon,
2014).
An online survey was conducted in order to demonstrate the existence of unemployment.
The question asked about the number of individuals who were living in the household that were
both currently unemployed and looking for work. The results indicated that roughly 39 percent
have at least 1 individual who is unemployed and looking for work. About 30.8 percent have at
least 1 individual who fits the description and 7.7 percent has more than 4 individuals that fit the
description. On the other hand, about 61.5 percent have absolutely no individuals who fit the
description (See Figure 1).
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Even though this is a small sample and
cannot be generalized to the whole
population it contributes to the fact that
there are people who are unemployed. The
unemployed individuals represented in the
sample data do not necessarily live in
poverty. However, finding a job may take
days to months and if the unemployed
individuals do not have someone that
financially sustains them then they will find themselves knocking on povertys door. Until they
find another job they will have to spend any money they might have saved up, wisely (Amadeo
2014).
When the unemployment rate increases it worsens the nations economy because it loses
consumer spending. It can be stated from Figure 1 that there is a high unemployment rate and
from the OCEDs biannual report it can be stated that this high unemployment rate leads to
massive high numbers of poverty. It was said by a participant that if there is no job there is no
money and if there is no money then there is no food, healthcare, education etc. Therefore,
employment is the basis of funding a country with a minimum amount of poverty.
Figure 1. A chart depicting survey responses to the
question, How many people living in your household are
currently unemployed AND looking for work?

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However, there is a disagreement on whether the high unemployment rate is the cause
factor for the Unites States high poverty rate. The same participants from the online survey were
asked if they thought that unemployment is the main factor that contributes to poverty. The
amount of people who think that high unemployment is the main factor is slightly higher than the
amount of people who think the opposite. About 61.5 percent answered Yes while about 38.5
percent answered No (See Figure 2).
There is at least one person who thinks that the high poverty rate is misleading because
most of the people who are considered by the government to be poor are actually not. Rector, a
leading authority on poverty, is The Heritage Foundations senior research fellow in domestic
policy believes this. According to Rector only a small number of the 46 million persons
classified as poor by the Census Bureau fit that description (2011). Furthermore Rector
claims that 80 percent of households [who are defined by Census as poor] have air
conditioning and nearly two-thirds have cable or satellite TV (2011). It is stated by Rector
that those individuals considered to be poor have
a car, microwave, personal computer, personal
cell phone, plasma TV, and sufficient funds to
meet their families needs (2011).
Even if Rectors statements were true he
doesnt have enough evidence to state that the
poor individuals bought all of the stuff
themselves. Whatever they might how now may
have been gifts. Anyhow, there are powerful
statistic evidence of children living in high-
Figure 2. A chart depicting survey responses to
the question, Do you think that the high
unemployment rate is a primary reason for high
poverty rate as well here in the U.S.?

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poverty neighborhoods across the nation due to the individuals not making or not having enough
money:
Overall, 22 percent of children in large cities live in communities of concentrated
poverty. About 8 million children in the US as a whole reside in such economically
deprived areas. (Walsh, 2012)
As stated earlier about 16 percent, or 49.7 million people, of the whole population in the United
States live in poverty (Thuy Vo L. & Tammy Kim E. 2014). According to Bureau of Labor
Statistics of the whole population in the United States 12.6 percent are unemployed (2014). It is
therefore that there is a strong correlation between poverty and unemployment not necessarily
meaning that one is caused by the other but there might be an influence.
What factors do people face when they apply for a job?
There are many factors that contribute to the high unemployment rate and it may vary
according to gender, class, age, and ethnicity. Employers or companies will always be looking
for someone who has had work experience from a certain field. If an individual is young they
might not get hired because they will not have the work experience required. In many cases
females are said to get easily stressed and are most likely to get emotional break downs which
some companies might dislike and may not get hired. The group ages that have the hardest time
getting employed would be the teenagers while the ethnicity who faces the most unemployment
rates would be the blacks:
Among the major worker groups, the unemployment rates for adult men (6.4 percent),
adult women (5.9 percent), teenagers (21.4 percent), whites (5.8 percent), blacks (12.0
percent), and Hispanics (8.1 percent) showed little or no change in February. (Bureau of
Labor Statistics, 2014)
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Depending on the social class someone belongs to, an individual can face any type of
problem such us not having a computer with internet, not having a cell/house phone, and even
not having enough water to shower daily. These problems contribute to the unemployment rate.
Not having enough water to shower daily may affect the appearance of the individual when they
are applying for a job or when they are getting interviewed. Therefore, if an individual does not
have the proper tools and appearance he or she will not get hired
An article titled Millions of Americans
live in extreme poverty. Heres how they get by.
by Dylan Matthew stated that many of the
people living in poverty rely heavily on
homeless shelters and soup kitchens, as well as
public goods like libraries (2013). This is
because job hiring is happening mostly online.
Therefore in many cases people have to make
the effort to go to a library to access the Internet
if they do not have the use of one at home.
Furthermore, individuals with different
ethnicities might have different cultures which
makes them difficult to communicate with others in a work field. If the individual is applying
online for a job questions being asked in the application might be worded in the way the
applicant doesnt understand. This may be because the applicants native language was not
English.
Figure 3. A chart depicting survey responses to the
question, Even though we live in the 21
st
century
do you still think that there are ethnicity
discrimination/differences when it comes to hiring
new employees?

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The same participants from the survey mentioned earlier were asked if they thought that
discrimination/differences still exist in present day when it comes down to hiring new
employees. The results showed that about 92.3 percent think that discrimination and differences
still exist while about 7.7 percent think the opposite
(See Figure 3.). They were then asked if they have
ever had a family member, or someone they know
of, been discriminated. The results showed that
about 7.7 percent did have someone who was
discriminated while about 92.3 percent havent
experience this issue (See Figure 4.). The participant
who answered Yes said that a Hispanic women
had been discriminated when applying for a bank
position and did not get the job she applied for.
There are still discrimination and differences in
present day due to an individuals ethnicity and
therefore it is a factor that many face when applying for a job.
Should job positions lower their qualifications for employees in order for people to obtain a
job?
The Bureau of Labor Statistics (BLS) is used by the U.S. government to obtain a rough
estimate of the many people who have been unemployed in the previous years (Amadeo, 2014).
There are many unemployed individuals who wonder why they wont get hired and most of them
are not aware that most companies face a difficult time to expand because they have a hard time
finding good workers (Amadeo, 2014). When companies refer to individuals as good workers
Figure 4. A chart depicting survey responses
to the question, Have you ever had a family
member or someone that you know that has
been discriminated for his/her race or
ethnicity?

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is because they meet the qualifications and standards that the companies or employers require for
their employees to have. It seems reasonable that if unemployed individuals want to get a job and
companies cant get enough good workers they should collaborate with one another. In other
words, the companies should offer job-training or scholarships to their community so that people
that do want to succeed can take advantage of these
opportunities.
The same participants form the online
survey mentioned earlier where asked if they
thought that high unemployment rate was due to
employment opportunities having high standards
and requiring high qualifications from their
applicants. The results indicate that roughly 61.5
percent do think that high standards and
qualifications enforced by the companies are the
reason for U.S. having a high unemployment rate.
On the other hand roughly 38.5 percent think the
opposite (See Figure 5). One participant who
disagrees stated that it is fairly easy to get a job, it is just people are lazy and don't try more than
once. According to an article by David Edwards in The Raw Story, Paul Ryan, an American
politician, agrees with the participant and believes that the main cause of poverty in the United
States is the men who refuse to work (2014). This may be somewhat true because many people
do not have enough professional experience to seek for higher paying jobs. This being the case
they might give up and refuse to look. In other cases people tend to look for easy jobs that dont
Figure 5. A chart depicting survey responses to
the question, Do you think that the reason why
there is a high unemployment rate is because
employment opportunities have high standards
and require high qualifications from their
employees?

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require professional skills.
In most cases Walmart is the first option for many people who seek for jobs. A Forbes
article titled Why Do 1.4 Million Americans Work At Walmart, With Many More Trying To?,
written by Doug Altner, stated that about 1.4 million Americans choose to work at Walmart
(2013). Walmart is one of the biggest marketing companies across the nation and one of the most
criticized because of the lack of benefits for its employees. However, even if the company
doesnt give that many benefits to its employees Altner claims that the company offers
incredible opportunities for any hard-working, ambitious person who wants to work his way up
in retail (2013). Walmart receives about 10,000 applications when it opens a new store. This
high number of applications may be due to Walmart not having high qualifications for their
employees:
Many entry-level Walmart jobs consist of comparatively safe and non-strenuous work
such as stocking shelves, working cash registers, and changing price labels. Walmart also
pays competitive wages, which, for these jobs, are generally under $12 per hour, because
these positions require little or no work experience or technical skills. For anyone with
modest credentials, these jobs provide good work experienceexperience which they
can use to eventually land a higher paying job. (Altner, 2013)
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The same
participants from
the online survey
were asked to rate
the qualifications
from different
field jobs. The
results showed
that most of the
participants
believe that the
higher the
education required
for the job the higher its qualifications and standards (See Figure 6.). Therefore it will be harder
to get hired for a bank position at Wells Fargo than get hired at a fast food restaurant like
McDonalds.
High qualifications and standards enforced by employers and companies may be a major
reason why there is a high unemployment rate. This is a result of individuals not having a
professional career or lack of education. In many cases, most of these individuals do not have a
proper education because they might not have had the money necessary to get the education
required by majority of the jobs. According to the article Americas Shameful Poverty Stats by
Sasha Abramsky majority of the children are forced to choose between applying to college or
dropping out of school and getting dead-end jobs to support parents who had lost their jobs
Figure 6. A chart depicting survey responses to the question by rating from 0 to 10,
where 0 is the lowest possible and 10 is the highest possible, what number would you
use to rate the qualifications of getting hired for the following employment
opportunities?

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(2013). In a future these children will face difficult challenges because they will not have a
professional career and if they have families the poverty cycle will repeat. An ongoing cycle
between employment, not having enough money, and lack of education is a major cause of
poverty in the United States.
Has the government done something to reduce the number of the poverty?
It is so ironic how the world sees the United States as the richest country even though it
has one of the highest poverty rates from the whole world. More than one million Americans are
facing critical conditions and challenges because they fall below or are at the poverty line. One
reason for this being is because many individuals have difficult times getting and keeping a full-
time job. It was stated by the Bureau of Labor Statistics that in this past February about 7.2
million people were working part time jobs either because they couldnt find full-time jobs or
their hours had been cut back (2014).
The same participants that have been
talked about throughout this report were
asked how much they were up to date on
news relation to unemployment. The results
show that roughly 53.8 percent do not really
know much, about 23.1 percent know
nothing at all, and about 23.1 percent know
enough about the issue to say that there is a
high unemployment rate (See Figure 7.). The
same participants were asked what they though the government has done to reduce the
unemployment rate. The results showed that most of the participants believe companies offer
Figure 7. A chart depicting survey responses to the
question, How much are you up to date on news
relating to unemployment?

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scholarships to those around their
community who wish to get a full-time
job or get higher paying positions (See
Figure 8.). Even though most of the
participants have no clue about any news
relating to unemployment they were
partially correct with this guess. As it
was stated earlier, Walmart is one of the
companies that offer this to their
employees and community.
The government thinks that by reducing the number of individuals who are unemployed
the economy will improve and it will therefore reduce the poverty rate. President Obama is
trying to bring jobs to Americans from aboard. He believes that items should say Made in the
USA instead of Made in China. If this is not enough to reduce the unemployment rate other
actions will take:
The Federal Reserve will first step in with expansionary monetary policy, lowering the
Federal funds rate. If unemployment continues, the Federal government will use fiscal
policy, creating jobs directly by hiring employees for public works projects. It can also
stimulate demand by providing extended unemployment benefits. (Amadeo, 2014)
Even if President Obama succeeds in creating enough jobs and the economy improves,
there will still be and unemployment rate:
Even though the economy has started to turn around, contracts are still being cancelled
and businesses are still laying off workers. Furthermore, business owners are hesitant
Figure 8. A chart depicting survey responses to the
question, What do you think the government has done to
reduce the high number of unemployed?

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about hiring workers back until they are sure growth is on a stable upward trend. (2014)
Other help given to the individuals who are poor are given directly to them by the
government. One of the largest safety net programs in the United States has increased heavily
trying to reduce the poverty rate. In 2011 it served 44.7 million individuals in an average month
(Tiehen, jollife, & Gundersen, 2012). An economic research 2012 report was a collaboration
between research economist Laura Tiehen (from the USDA, Economic Research Service, Food
Economics Division), senior economist Dean Jolliffe from the World Bank, and professor Craig
Gunderson (from the Department of Agricultural and Consumer Economics at the University of
Illinois). This report found that there was an average decline of 4.4 percent in the prevalence of
poverty due to SNAP benefits, while the average decline in the depth and severity of poverty was
10.3 and 13.2 percent, respectively (Tiehen, Jollife, & Gundersen, 2012). The report discover
that SNAP improves the welfare of low-income households, and therefore reduces the poverty
rate slightly. The Food Stamp Program has successfully been a great help providing about $72
billion in benefits in 2011 (Tiehen et al., 2012)
Conclusion
Suzanne Kindervatter, a vice president of strategic impact at InterAction who has worked
in 20 countries in the areas such as adult and non-formal education and evaluation for the past 26
years, claims that the United States should focus on marginalized poor in middle-income States
and helping fragile States put in place political and economic systems that break cycles of crisis
(2013). Furthermore she states that private capital, domestic resource mobilization,
philanthropy, public-private partnership and technology innovation and transfer need to all
come together to determine new ways to strengthen coordination, transparency and social
accountability to poor communities (2013). Her solution is quite simple but it will take time,
UNEMPLOYMENT LEADS 16

patience, and team work between the community and the government. The government should
offer the community more employments and benefits while the community should get a
professional education and not settle for the easiest path.
As stated earlier, there is an ongoing cycle between lack of education, unemployment,
and not having enough money that contributes to a major effect in the United States poverty
rate. Many individuals face discrimination according to their gender, class, age, and ethnicity.
All these factors contribute to the high percent of unemployment which is being reduce by
creating more jobs in certain fields and by bringing companies from aboard. The government not
only created more jobs hoping to reduce the number of poverty but it has help the poor directly
by providing them with government aid.
Due to the statistical evidence provided, it can be concluded that high poverty rate is
caused by high unemployment rate. Therefore the unemployment and poverty definitely have a
strong correlation. It cannot be claimed that one is caused by the other but statistics suggest that
they are proportional to each other. As the unemployment rate has gone up so does the poverty
rate. The government should then try to focus on reducing the number of unemployed so the
poverty rate can decrease.








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