Association for Public Policy Analysis & Management

Poverty reduction literature emphasized mainly on targeting the people who are poor but little on the reasons why they are poor. Like other economies, poverty in the USA is not a more likely stock of poor population but a threshold level where people fall in poverty and escape it for reasons. Employment is one of the key reasons, while good employment helps people escaping poverty, bad employment pull-downs people to poverty. In this paper, we estimate the impact of per household employment status on the poverty level in the USA. In order to estimate this impact, we constructed a strongly balanced panel dataset covering all US states and from years from 2008 to 2018. Using a two-way fixed effect estimation technique, we find that the share of households that has at least one full-time worker has a significant poverty-reducing impact, while the share of households that has part-time worker and/or no worker has a significant poverty-increasing impact. Approximately, 10% increase in the share of households that has at least one full-time worker can eradicate poverty by 5%. This result also holds for poverty for all racial groups although with different magnitude. The overall findings of this paper carry an important policy implication. Based on these findings, I argue that ensuring that each household has at least one full-time worker can considerably eliminate poverty in the USA. Distribution of full-time jobs across all households is the key determinant of poverty across all US states. I also expand analysis of policy design that may help ensure a full-time worker for each household and get rid of poverty without much efficiency loss.