China's Poverty Halving Contrasts with Rising Extreme Poverty and Inequality in the United States
China has dramatically reduced extreme poverty, defined as living on less than $3 per day in 2021 dollars, from 943 million people in 1990, representing 83% of its population, to effectively zero by 2019. In contrast, the United States currently has more than 4 million people living in extreme poverty, about 1.25% of its population, which is more than three times higher than 35 years earlier despite the US's output per capita being approximately six times that of China.
From 1980 to 2023, income inequality in the US has widened, with the middle-income share relative to top earners declining from about 52.5% to 42.5%. The poorest 10% of Americans earn roughly 1.8% of the national income, a figure comparable to Bolivia but far lower than countries such as Nigeria (3%), China (3.1%), and Bangladesh (3.7%).
Globalization and automation have played significant roles in reducing labor’s share of income and amplifying inequality by benefiting more educated workers while displacing less skilled workers. Policy decisions have also impacted poverty levels and inequality in the US. The Trump administration's policies, including the Big Beautiful Bill Act and tariff measures, resulted in reduced healthcare coverage, cuts to Medicaid and ACA subsidies, and cuts to SNAP. The Yale Budget Lab estimated these policies caused income losses for all but the top quintile, with roughly 7% losses for the bottom 10%.
This situation highlights that income inequality and poverty in the US are influenced by policy choices rather than being inevitable market outcomes, especially when compared to China's poverty reduction achievements under an undemocratic government.
