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Could you live on $2 a day? More than a million Americans do
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It's been said that the poorest American is richer than most people throughout the world, especially in what are called developing countries. But new research by two distinguished scholars has uncovered pockets of poverty in the United States that are so deep they are hidden from sight.

In a new book, "$2 a Day: Living on Almost Nothing in America," Kathryn J. Edin, Bloomberg distinguished professor of sociology and public health at Johns Hopkins University, and H. Luke Shaefer, associate professor at the University of Michigan School of Social Work and the Gerald R. Ford School of Public Policy, introduce readers to the stark results of their research: As many as one in 25 American families with children have no earnings, no welfare check and scrape by on less than $2 a day per person an amount that is a "World Bank metric of global poverty in the developing world."

In America, the poverty line hovered near $16.50 a person daily for a three-person household as Edin and Shaefer began exploring the question early this decade. The government deemed $8.30 a day "deep poverty." In early 2011, 1.5 million households that included about 3 million kids were among the poorest of the poor, living on $2 a day.

Recent headlines have trumpeted growing economic inequality in the United States. Little is said about the poorest, in part because they are invisible, according to Shaefer, a research affiliate at the National Poverty Center.

Edin and Shaefer talked about their findings and what they hope will be done to change the outlook for the most vulnerable Americans.

What does $2 a day poverty look like in America for the 4 percent mired in it?

Shaefer: When we first got numbers and then found more and more families that fit this profile, we werent looking for it. We ran numbers from the best nationally representative sample we had to see if there were really people who fit this profile and we were pretty shocked. I was sort of expecting people completely detached from the labor force living in an alternative universe. What we found was families that thought of themselves as workers, that wanted to be workers, but because of instability in the jobs available to them and instability in their family life had experienced some sort of crisis that caused their lives to spiral downward.

We focused on the importance of cash: cash incentives, cash to get the bare necessities that you need to make it to the next day. A lot of life among the $2-a-day poor is spent trying to generate that little amount through selling your blood plasma, selling your food stamps, or selling your body. Theyre constantly at work even though they dont have jobs.

Edin: I studied families' economic survival strategies prior to welfare reform, and I think its important to remember the welfare system never paid enough to survive. It was a system that not only was hugely stigmatizing, but our work in the mid-1990s showed that you were only able to generate about three-fifths of the income you needed from Aid to Families with Dependent Children (the federal assistance program in place prior to 1997) in the typical state.

Women were engaging in survival strategies back then, too, even though we had a much more vibrant safety net. Its just that then we had a floor in the typical state, about $460 a month.

You saw them braiding hair or collecting tin cans perhaps making meals for neighbors. I think whats different about today is because you dont have this floor, you have endemic housing instability. These families are moving around a lot; they are very unstable residentially. The survival strategies that they are engaging in are really bottom of the barrel. You have to have some stability to have a side business braiding hair, a house to do it in. Two things are really different: The level of stability and the depths to which you have to go. We saw virtually nobody selling their food stamps prior to welfare reform.

A third difference: Many families get some help from in-kind safety nets, especially food stamps, but they end up having to trade away a lot of the value of their benefits to get that little bit of cash to survive. The resources they have end up being diminished in value because of the absolute necessity of having cash to pay utility bills, to buy socks and underwear for the kids, cash for school supplies the things that families really cant do without.

Did the welfare reform of the late 1990s do this? What changed?

Edin: No. If you look in the late 1990s, you do see a slight rise in $2-a-day poor. The economy was very strong then. We really began to see declines growing once we hit 2000. What people dont realize was that was the beginning of the recession, that was the beginning of bad times for less-skilled people. We all felt it later in the 2000s, but things got pretty bad for the least skilled early in a way that has persisted.

This scenario is really created by the death of welfare, the degradation of low-wage work, and then this housing instability. To stay in low-wage work, especially in degraded low-wage work of the kind we describe, you have to have some sort of residential stability. Residential instability then becomes both a consequence and a cause of $2-a-day poverty.

Shaefer: We made a lot of changes to our safety net for poor families and children in the 1990s, and a lot of them were good. They expanded the Earned Income Tax Credit, which was a huge benefit to families when they were working. If you dont earn anything, you dont get it and in that way its not really a safety net, but its a very positive program. Recipients like it, we know it reduces hardship, it increases forward thinking. And the old system was not at all a good system, so were not saying we should go back to that.

But the cash assistance program we have does not work. And interestingly, the "not working" is not because of anything that most people have heard about, like time limits and work requirements. We have come to believe the fundamental flaw with that program is the way it is designed as a block grant, which gives states the option to use money allocated to the cash welfare program for other purposes that have fewer requirements placed on them. Often, they keep their cash assistance caseloads very, very low relative to the needs and reallocate the money that comes down from TANF (Temporary Assistance for Needy Families, the program that replaced AFDC in 1997) to things like their foster care system certainly a fine thing to spend money on, but it is not actually any more money for states because they need it to fill their budget deficit in a lot of cases. So the program is not working even as it was intended when it was passed for 1996.

Edin: If you slash welfare rolls, you actually get a bonus in that youve got discretionary money you can apply to fix gaps in your budget or for a legislative priority that you couldnt have afforded.

In a case where youre basically paying for things that you would have had to pay for anyway, we claim that TANF has become welfare for the state. Two-thirds of all TANF dollars are now spent for things other than TANF. This is a perverse disincentive to have a functioning safety net.

What has changed since the 1990s?

Edin: How these families define themselves.

I used to interview welfare moms back in the 1990s. They would say, "I am a mother first. I am dubious about work because will it compromise my parenting? Can I do both?" They really saw that as a tradeoff. Now, you hear families say, "I need to be working, because I need to model the value of education to my children."

There was a huge uptick in labor force participation of single mothers during the late 1990s, and this was important. Virtually everybody who went to work that we interviewed enjoyed work and found great meaning in it. They liked the structure and they really began to think of themselves in a fundamentally different way. Now, among the $2-a-day poor, the feeling that "I am a worker and I really draw a sense of meaning and even being part of society from my work" is very palpable even among moms with fairly young children and with their husbands and partners alike.

Where you have a situation where people define themselves as workers and theyre trying to activate this identity by trying to find work all of our families were desperately trying to find work, in ways, by the way, that were probably not capturing in federal statistics because of how unstably housed these folks are it becomes inconsistent with who you think you are to walk to a welfare office and claim benefits. We found welfare had become so atrophied in the imaginations of the poor that when they hit hard times, it didnt even occur to people to apply, even if they could have gotten welfare. Several had never even heard of the program.

We only have 1 million left on rolls, down from about 4.6 million. Were hugely down, and half of those adults are in just two states, California and New York. So weve only got 500,000 adults across the country who could create the information flows so necessary to get people to know about social programs.

And we found out that when they do go, they often may be targets of what are called soft diversions. They get to the office, and like Rae McCormick in Cleveland, are told, though her situation was truly desperate, "Honey, there're so many poor people in Ohio theres just not enough to go around; why dont you come back next year?" Is this the way its supposed to work in the state of Ohio? No. But theres mounting evidence across the country that soft diversions are a big part of the story. We have to think of that as a reflection of the perverse incentives we offer states.

Many people seem to picture welfare as robust. Is that picture correct?

Edin: When I studied welfare in the 1990s for the book I wrote with Laura Lein, Making Ends Meet, welfare was actually more generous. Benefits have fallen by about 30 percent even since the early 1990s in real terms because they havent been adjusted for inflation.

Even if you manage to find your way onto (welfare), it offers extraordinarily paltry rewards. But I think the main thing to emphasize is the people who hate it the most are the people who are eligible for it. The reason that they hate it is they want to be workers, they want to be part of society and they see that work as essential. Something fundamental about America is that we really gain our sense of belonging from what we do and what were contributing.

What is the solution?

Shaefer: Kathy and I wrote a column calling for rethinking of work in the 21st century. How do we make the next generation a jobs generation, stressing availability to those at the bottom for people who would rather work than receive a welfare benefit? We would like to have a national conversation and get the best ideas about how to increase the number of jobs available at the bottom.

Thats really our central theme: to think hard about housing instability as a critical component of $2-a-day poverty. To figure out, how do we increase housing stability among poor families? But even that gets back to this jobs thing. While rent has gone up, wages and earnings have decreased by a far greater percent. So if we were able to do something about increasing economic opportunity for families at the very bottom, we think it would help housing stability as well.

When you fall on hard times you have to have some sort of cash. Right now, the (welfare system) we have in most parts of the country is not functioning in any way the way it should. Whether we rethink that and create some new mechanism that can help families in hard times or reform the one we have, its clear we have to do something.

Edin: A lot of times, academics really want to throw the kitchen sink at the problem.

In listening to these families, thats not our claim. Our claim is that the move toward a work-based safety net in the 1990s we limited the amount of money available to nonworkers and we gave much more income support to people who could manage to find full-time full wage work was in part recognition of how important it was for policy to be consistent with American values.

The reason welfare was so hated was that it was so inconsistent with American values in that it seemed to reward indolence and family break-up. That was felt keenly by recipients in the old welfare system. We dont think its productive as a nation to create a safety net that divides the poor from the non-poor in ways that creates a citizenless class.

The welfare reform bill was called the Personal Responsibility and Work Opportunity Reconciliation Act. Whats clear if you look at the work behavior of the poor is that the poor have done their part. They have taken on the personal responsibility part of the bargain. Now society needs to take up the work opportunity part of the bargain. If were going to have a work-based safety net, we need to make sure there are jobs.

How do you get the right people to know this?

Edin: Stories are really important. This was really an iterative process where we built our case both on the best numbers you can find and on a really in-depth examination of what its like to live this poor.