By Our Reporter InvestAdvocate
Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) on Wednesday said 15 percent of Americans (46.7 Million people) live in poverty, quoting Christine Lagarde, the Fund’s managing director (MD) in her opening remarks on the latest IMF review of the U.S. economy—the 2016 Article IV Consultation.
Lagarde said “four forces” pose a challenge to future growth in the US which includes poverty. “The share of the population living in poverty is at very high levels. The latest data shows almost 15 percent of Americans—or 46.7 million people—living in poverty. Poverty is even higher for certain minority groups; for single parent (and particularly female-headed) households; for children; and for those with disabilities,” the IMF chief affirmed.
According to her, with such a large share of the population living below the poverty line, undoubtedly is an important macroeconomic issue.
She affirmed that not only does poverty create significant social strains; it also eats into labour force participation, and undermines the ability to invest in education and improve health outcomes. “By holding back economic and social mobility, it creates an inter-generational persistence of poverty,” Lagarde added.
The IMF says there is an urgent need to tackle poverty in the US. In the latest data, 1 in 7 Americans is living in poverty, including 1 in 5 children and 1 in 3 female-headed households. Around 40 percent of those in poverty are working. A more generous earned income tax credit (including eligibility for workers without dependents, those under 25, and older workers that are not yet eligible for social security) combined with a higher federal minimum wage would help alleviate poverty,” the report said.
The Fund said these two (2) measures would have strong complementarities. The improvements in the Earned Income Tax Credit (EITC) can work in tandem with the minimum wage to ensure a meaningful increase in after-tax earnings for the nation’s poorest households.
To check poverty, the IMF advocated upgrading social programs to support the nonworking poor would also be a step forward. “Efforts to improve K-12 education, investing in early childhood education, subsidizing childcare for lower income families, and expanding needs-based support for tertiary and vocational education can have important effects, over a longer horizon, in reducing the intergenerational persistence of poverty,” the global lender said.
Despite these, the IMF says the US economy is, overall, in good shape and a total of 2.4 million new jobs were created over the past year and unemployment has fallen to 4.7 percent, its lowest level since the eve of the “Great Recession.” Inflation remains contained, and the U.S. economy has repeatedly demonstrated its resilience in the face of financial market volatility, a strengthening dollar, and subdued global demand.
