Economics

Poor Poverty Statistics

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An article at AEI's web site by Nicholas Eberstadt was a big nostalgia experience for me, as I recall that conservative and libertarian mags were full of this sort of debunking of poverty rate figures during the Reagan '80s/decade of greed when I first started reading them. Apparently, certain anomalies in how we measure official poverty that seem to make things sound worse than they are continue to abound, as Eberstadt explains.

Official U.S. government poverty measures show that the proportion of Americans living in poverty has actually increased some since the early 1970s:

To go by the OPR, then, America, through three decades of both Democratic and Republican administrations, has utterly failed to improve the material lot of the more vulnerable elements of society–to raise them above the income line where, according to the author of the federal poverty measure, "everyday living implied choosing between an adequate diet of the most economical sort and some other necessity, because there was not money enough to have both."

Eberstadt thinks there is much to doubt about this, though.

Since 1973, the behavior of the OPR looks increasingly aberrant when compared to other indices widely thought to bear on the risk of poverty in a modern urbanized society. In 1973, nearly 40 percent of adults over the age of twenty-five lacked a high school degree; by 2001, the figure was under 16 percent. Or consider trends in means-tested benefit programs–food stamps, housing subsidies, Medicaid, the Earned Income Tax Credit, and other programs that benefit the poor. Between the 1973 and 2001 fiscal years, spending on those programs more than tripled from $163 billion to $507 billion (in 2004 dollars) and increased by over 130 percent in real, per-capita terms.

Eberstadt goes on to show data indicating that expenditures by those under the poverty line are a more accurate measure of their actual deprivation than their reported income, and that "there is good evidence that, for the lowest fifth of Americans on the income ladder, reported expenditures are almost twice their incomes." When it comes to food, housing, transportation, health care, and home appliances, data indicates great improvements in overall American well-being that seem to belie stagnant or increasing poverty in the sense of absolute deprivation.

Eberstadt also notes that

the average net worth of households in the bottom fifth has actually grown in the last decade. Additionally, the gains in wealth have been broadly shared, with the portion of bottom fifth households reporting no assets whatever falling from 21 percent in 1989 to just 8 percent in 2004.

He ends with a call for better statistical well-being tracking based more on consumption than reported income, and some tentative praise for alternative poverty measures undertaken by New York's Mayor (for life?) Michael Bloomberg, though even that only offers a snapshot at a moment in time. Given what we know about the great churn in relative well-being among American families and households, and that Eberstadt thinks there is some reason to believe such volatility might be growing, it's mistaken to imagine that there's a large permanent underclass mired in misery being captured in official poverty stats.