Business

IMF warns the US over high poverty

A man walking through Mississippi Image copyright Getty Images

The US has been warned about its high poverty rate in the International Monetary Fund's annual assessment of the economy.

The fund said about one in seven people were living in poverty and that it needed to be tackled urgently.

It recommended raising the minimum wage and offering paid maternity leave to women to encourage them to work.

The report also cut the country's growth forecast for 2016 to 2.2% from a previous prediction of 2.4%.

Slower global growth and weaker consumer spending were blamed.

US economic growth slowed to an annual pace of 0.5% during the first three months of the year, down sharply from 1.4% in the last three months of 2015.

'Social strains'

But the stronger labour market meant that overall "the US economy is in good shape", said the IMF's managing director Christine Lagarde. May's unemployment figures showed the rate at an eight-year low of 4.7%.

However Ms Lagarde warned 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".

"Our assessment is that, if left unchecked, these four forces - participation, productivity, polarisation and poverty - will corrode the underpinnings of growth and hold back gains in US living standards," she added.

The report called on the US to invest more in education, as well as implement better social programmes such as childcare to help poorer Americans get jobs.

More on this story