Everything, but everything, depends upon how you measure it. Which leads us to last week’s news from Census about the US poverty rate. Of course, the way that Census measures poverty the numbers they reported were entirely correct. But given the distortions in the methods they do use to measure a more realistic estimate of the US poverty rate would be around and about zero.
The point is well explained here by Timothy Taylor. It’s also something that I’ve been banging on about for years so allow me to explain it my way.
A couple of graphs to help us on our way.
The point that I have been making for some years now is nicely shown in that first chart. We really cannot compare the US poverty rate over time.
Way back when, poverty alleviation was almost entirely done by simply giving poor people cash money. This obviously made them less poor so it was a very effective strategy. However, it was felt that this wasn’t quite the right thing to do and therefore the system has changed over the years to one of sometimes giving money, but not very often, plus giving benefits in kind (Section 8, Medicaid, SNAP) and aid through the tax system (EITC). The US is now spending a great deal more on poverty alleviation (after inflation of course) than it used to but by the official measurement of poverty pretty much nothing seems to have changed.
The reason for this is that we don’t actually count benefits in kind or aid through the tax system in our definition of poverty: although we do count just giving poor people cash money. The upshot of this is that in the old days what the poverty line was really measuring is the number of people who were poor after the things we did to reduce poverty. Today that same poverty line is measuring the number of people who are poor before all the things we do to reduce poverty.
It’s worth noting that the four major poverty reduction programs are Medicaid, SNAP, EITC and Section 8 vouchers. And we include none of them, not one single groat of that money spent, in our current estimates of poverty.
So, while our definition of poverty has not changed (three times a low-cost food budget for a household in the early 1960s upgraded for inflation) what we’re actually measuring is now completely different. The US poverty numbers today do not measure the number of people still in poverty after the aid given: they measure the number of people in poverty before aid is given.
We really therefore cannot go around comparing the poverty rates of the 1960s with those of today: for the measurement is of very different things. As that first chart points out: the real poverty rate is a great deal lower than the one that Census announced.
The second chart takes us into another one of my pet little ideas. We don’t actually care whether people have jobs or not, we don’t even care whether people have incomes or not: we really only care that people have the opportunity to consume. Therefore it’s not income poverty that is the real concern, it’s consumption poverty that ought to be. And as chart 2 shows us this is around and about zero now in the US.
So, I think it perfectly justifiable to insist that the correct US poverty rate is around and about zero.
However, this isn’t the end of the story as the NYT points out to us:
But this is hardly the only way to do it. Other advanced nations go about it in an entirely different way. In Europe, for instance, few countries measure a poverty line in the American sense of the minimum income needed to avoid extreme hardship.
Less tolerant of inequity than the United States, they prefer to measure deprivation in terms of people’s relative position: the poor are those who earn less than half the income of a typical citizen in the middle of the income distribution.
“They think of social isolation and cultural poverty,” said Timothy M. Smeeding, who heads the Institute for Research on Poverty at the University of Wisconsin. “If you get further and further from the median, you get socially isolated.”
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