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Who’s poor? It’s debatable

family around dinner table
REUTERS/Jessica Rinaldi
Who exactly is poor in America depends on how you define poverty.

Are we as poor as U.S. Census Bureau numbers suggest?

That’s a question that’s been getting attention lately, first in a piece in the New York Times Magazine by Paul Tough, and then in a paper presented in September by  a pair of academics who suggest consumption rather than income is a better measure of poverty.

Who’s poor and who’s not is a timely topic during election season, and  the U.S. Census Bureau just announced (in September) that 15 percent of the population — 46.2 million people — is officially poor. Asterisk: that’s about the same as last year’s accounting.

But defining poverty is complicated.

Using a poverty measure devised in the 1960s by Social Security analyst Mollie Orshansky, the government currently defines “poor” as a family of four trying to live on a little more than $23,000 a year.

Among those taking issue with that definition are economists James X. Sullivan from the University of Notre Dame and Bruce D. Meyer from the University of Chicago.

Sullivan and Meyer say the government’s official measure of poverty does not reflect “the full resources available to families,’’ such as tax credits — including the Earned Income Tax Credit and Child Tax Credit — or non-cash benefits like food stamps, housing subsidies or public health insurance.

Other measures

They argue that a better way to identify the most disadvantaged individuals is a method of real purchasing ability, and looking at assets and advantages, such as house size, car ownership and education level.

Paul Tough, a contributing writer to the New York Times Magazine, in a deeply researched article offering a sense of place about the inner-city poor in Chicago, also addresses the issue. 

From Tough’s article:

And while it is true that the Census Bureau’s official poverty figures have grown steadily worse under Obama, rising to 15.1 percent of Americans under the poverty line in 2010 from 13.2 percent in 2008, those dismal numbers come with a significant caveat. When government statisticians calculate the poverty rate, they include only cash income. And over the last two decades, and especially during the Obama administration, the way the federal government gives aid to poor people has shifted away from cash transfers toward noncash transfers — food stamps, Medicaid subsidies, housing vouchers — none of which are included in a family’s income for the purposes of poverty statistics. If you do count food stamps and other noncash aid, the poverty rate has, according to some calculations, not gone up much at all during the Obama administration, during the worst economic crisis in 70 years.

Well, yes and no. The Supplemental Poverty Measure rolled out late last year after 15 years of discussion and much hand-wringing does add in safety net programs and tax credits and things like child-care expenses for working parents to update the government formula developed in the 1960s.

Under the supplemental definition, the income level of America’s poor is slightly higher, says New York Times writer Teresa Tritch in a piece headlined “Reading Between the Poverty Lines,”  and their numbers increased and would be 16.1 percent of the population instead of 15.2 percent. New numbers are due in November.

“In the new formula, called the supplemental poverty measure, the poverty line, based on the cost of food, shelter, clothing and utilities, is $11,282 for an individual and $24,343 for a family of four, slightly higher than the official threshold,” Tritch writes.

Not used

Problem with this revised definition of poverty?

“It’s not used for anything,’’ says Kara Arzamendia, research director at Children’s Defense Fund- Minnesota.  “We’re still using the same old broken-down measure,’’ and it is still being used to measure eligibility for public assistance programs as well, she says. 

The Census Bureau does not use the Supplemental Poverty Measure for its official count. According to Pew Research analysts:

[The old]… guidelines–with relatively modest modifications -- remain the official word on who is and who isn’t poor in America. This is despite recurring criticism from both the left and right and the periodic convening, beginning in 1968, of numerous poverty-measure review committees, interagency task forces and expert bipartisan panels, along with the issuance of extensive technical reports on their findings and differences. And, on the basis of some of these deliberations, the Census Bureau has, in more recent years, published several alternative measures on its website, although these generally draw little attention.  

Why? There is no easy fix.

Says the Pew report: 

The most straightforward explanation for the durability of the Orshansky measure is that, while it is not difficult to point to its deficiencies, devising widely acceptable remedies is far from simple. The sources of controversy range from basic philosophical differences to practical difficulties in concept, measurement and data collection.

Enter Sullivan and Meyer, who add that the newer Supplemental Poverty Measure, which is meant to correct some of the flaws of the Census Bureau’s official poverty measure, too, falls short.  

“The new poverty measure that many people thought was going to be an improvement, in terms of figuring out who we should call ‘poor’ doesn’t seem to be an improvement,’’ says Meyer.

They say the supplemental measure is effective in accounting for after-tax income and non-cash benefits but doesn’t sort out the poorest and includes better-off people.  

From a news release from the University of Chicago, where Meyer does his research: 

“Meyer and Sullivan find their consumption-based measure better captures more of the most disadvantaged than those based on income, because it accounts for savings usage, ownership of durable goods, access to credit and the use of anti-poverty programs. The most disadvantaged families all appear to report their consumption more accurately than income.’’

'Pretty good'

But University of Minnesota economist Maria Hanratty from the Humphrey School of Public Affairs calls the supplemental measure “pretty good,’’ though being only a year old, it is difficult to analyze to any great degree, she says.

She applauds such definitions so society can determine whether so-called safety net benefits are working. That speaks to the role of government, she says, in determining: Are we doing enough to help the poor?

Adds Arzamendia, even Meyer and Sullivan say, and she quotes to me from their writings: “[T]he selection of a poverty cutoff is inherently arbitrary, so the finding that the poverty rate as calculated by the Supplemental Poverty Measures exceeds the official rate is a subjective or political decision, not a scientific one.’’

Still, she says, the Supplemental Poverty Measure “a step in the right direction.’’  Those numbers are due later this fall.

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Comments (9)

Federal poverty line is like a bathroom scale...

...it may be exactly right, but if either one shows you an increase in what it is measuring, that is probably not a good thing! Thankfully the most recent census numbers suggest that MN's poverty rate leveled off in 2011, after increases for the last half decade. Still, nearly 1 in 5 MN pre-schoolers are in poverty (see http://www.mncompass.org/demographics/key-measures.php?km=Poverty#1-6770-g). Lets hope we can bend this trend back in a downward trajectory -- no matter how flawed the measure!

Poverty is hard to define

because it’s determined by where you’re coming from.

The digital ad agency McKinney created a virtual game for Urban Ministries of Durham. “Spent” puts you in the role of a person working a low-wage job and having to make it to the end of the month without going in the hole. The premise: you’re out of work, you’ve lost your home, you’re a single parent and you’re down to your last $1,000. (Try your hand at the game at playspent.org.)

For many people, being down to one’s last $1,000 is dire straits. For others, $1,000 is Flush City.

Given the green light to

Given the green light to include the cornucopia of government subisidies available, I'm surprised Obama isn't calling a "Mission Accomplished" on the war on poverty.

On the other hand, crowing of such accomplishments might force the media to open the books again on Obama's gutting of the 1996 welfare overhaul, which would in turn open the books on the faithlessness of the left's favorite "fact checkers".

And no good would come of that.

http://www.weeklystandard.com/articles/obama-s-palace-guard_652895.html?...

Main use of the poverty number

I'm a little confused about the usefulness of an alternative poverty measure. Isn't the main reason for looking at and using the poverty measure to determine who is elegible for the various programs, tax breaks and subsidies? Why would you then include those items in reaching the measure itself. It makes my head swim to think of tht boomerang effect of someone no longer being elegible for the programs and subsidies because of those subsidies themselves. So, they get removed from the programs and suddenly they are elegible again. What am I missing?

It wouldn't take long to get over $24k a year

If you included food supports, housing and Medicaid. Medicaid in particular must cost the government something similar to what private persons pay. Maybe $10k per year for individuals and $16k for families.

What?

By definition if you need public assistance to supplement your income you are poor. What we're saying here is that even with public assistance, a lot of people are still living in poverty, and for a smaller number such assistance puts them over the line.

Those poverty incomes are all artificially low and always have been. consequently we're really underestimating poverty in the US. If we want to define poverty we need to talk about how much it actually cost to live in the US, and what kind of lifestyle a given income provides. Then we can decide what lifestyle defines "poor".

We Need BOTH Numbers

If we publish only a number which adds in the programs designed to alleviate poverty, the "no new taxes, the only good government is a dead government" crowd will use that figure to proclaim that the very programs that help so many people survive poverty are no longer needed.

We need the original poverty number to show where we are, as far as the need for anti-poverty programs goes, published side-by-side with the number that counts in the effects of those programs so that we realize how much good they're doing and how necessary they still are.

Of course we ALSO need to redefine the line where poverty begins in order to keep up with the inflation that's happened since that line was originally established.

Of course if American Businesses would stop sitting on wads of cash and realize that, if they're going to have customers, they need to actually find ways to employ people so that those people will have money to spend,...

poverty would be greatly reduced.

A few thoughts for American CEOs, corporate boards, etc....

No amount of cash sitting in your bank accounts, whether in the US or overseas, is going to save your business if you don't employ enough people to provide yourselves with paying customers. Without customers, your stock and your stock options eventually won't be worth the energy it takes to paint their pixels on your display device(s).

The tax breaks you demand and successfully receive aren't going to do you much good if the country in which you live is falling down around your ears and coming apart at the seams.

If you want to be prosperous long term, you have to make your employees prosperous, too.

If our business leaders had the brains to pay attention to those basic facts, government poverty programs would shrink to almost nothing. That they don't is testament to the fact that their perspective on reality has holes in it big enough to float a gas giant planet through.

Exellent observation Mr. Kapphahn

"Of course if American Businesses would stop sitting on wads of cash and realize that, if they're going to have customers, they need to actually find ways to employ people so that those people will have money to spend,,...

poverty would be greatly reduced.." .......

If our business leaders had the brains to pay attention to those basic facts, government poverty programs would shrink to almost nothing. That they don't is testament to the fact that their perspective on reality has holes in it big enough to float a gas giant planet through."

I worked in an industry that could have made million dollar mistakes and not known it. I find a lot of big businesses are like that. They watch the pennies as the millions float out the door. That's the problem with having managers not leaders in key positions.

I think I have shared my late father's story about Mr. Dayton during the depression. As the story goes: Mr. Dayton hired people to open doors and carry packages, he said it was the only way to get people out of a depression was to put them to work. It still seems like a good formula.

But that doesn't mean giving more money to the job creators means giving money to the wealthy. Many of the wealthy don't produce anything any longer. They aren't in business.

I have been re reading Heilbonner's "Worldly Philosopher's", Capitalism was the response to the industrial age and could only happen because of that change, and the development of "surplus". Now we have an excess of "surplus" that is not engaged in productive pursuits - what's next?

poverty wages

If businesses would pay a living wage, a sustaining wage, a wage that possibly could be adapted to each area's general living costs (what works here would not work in NYCity, for example), that also included benefits like sick time and required vacation days we wouldn't have much poverty. Many jobs are going begging not because the company can't find qualified people to take them, but they are offering wages that are far too low. The assets of the well off and rich have increased since the great recession or whatever we're calling it now, but the wages of the middle class and below are either stagnant---and have been for more than 30 years--or they have even lost income.
Do any of you know people who are using government benefits like food stamps and Medicare? I doubt it. It's hardly a bowl of cherries.