The latest poverty numbers were released this week. According to a U.S. Census Bureau press release:
“Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median. The nation”s official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009 ─ the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009 ─ the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published.”
As if the jobless numbers aren’t dreadful enough, the higher poverty rate and lower median income add insult to injury. The way media headlines tell it, the United States is becoming a third world country.
But in spite of an official income threshold used by the federal government to define who is in poverty (at or below $22,350 for a family of
four for the 48 contiguous states), economists disagree as to how poverty should be measured. (See the NCPA publication). Some argue that poverty is understated. A new Supplemental Poverty Measure, which will be released in October, is based on expenditures, not earnings and shows a higher poverty rate for working-age adults.
Others claim that the poverty rate is overstated because it measures only money income and not the value of in-kind benefits such as Medicaid, food stamps and subsidized housing.
The measure of poverty is highly political; how people wish to measure it depends on what camp they’re in, as advocates for more federal intervention or advocates for cutting spending on programs that have not been particularly effective in reducing the poverty rate. But regardless of how anybody wants the numbers to tilt, there are two points that can be agreed upon:
First, a federal level income measure to determine poverty is highly inaccurate. While it is adjusted for overall inflation, it does not account for the variations in the cost of living among regional and local areas. For example, when adjusted for the cost of living:
- In Harlingen, Texas, $22,350 buys $27,725 worth of goods and services.
- In Manhattan, however, $22,350 buys only $10,125 worth of goods and services.
Using the federal income thresholds, the poverty rate in Texas is 18.4 percent while in New York it is only 14.5 percent. But does this mean that Texas has more people who cannot afford basic necessities than New York does? Maybe not. It depends on what money can buy in each state and what level of in-kind transfers each state offers to its poverty population.
This brings me to the second point that we can all agree on. Today’s “poverty population” is not the same as it was 50 years ago. As the Boston Herald article points out, fully 96 percent of children living in poverty are not going hungry, 80 percent have air conditioning, two-thirds have cable TV and half have a computer. The expectations for what are considered “basic necessities” have likely become more numerous as more goods and services have become available.
On a personal note, several years ago I did volunteer work for an organization in my community helping low-income people get out of poverty. One day I met with a young woman who was interested in going to college and becoming a nurse. She was a single mom with four children that she had beared in her teenage years. She received several in-kind benefits, including subsidized housing, Medicaid, food assistance and cash. When I went to visit her home, I saw a fairly well-kept three-bedroom, two-bath home with heat, air conditioning and standard kitchen appliances. She had furniture, a flat-screen TV and a computer with hi-speed Internet. The neighborhood was about 30 years old, but it in no way resembled a rundown government high-rise that people often envision when they think of subsidized housing. She was also eligible for a variety of grants for the economically disadvantaged to help her pay for college.
The concept of “relative deprivation” was first described by Adam Smith in “The Wealth of Nations,” in a passage on the “necessaries” of daily life:
“By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-laborer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England.”
I am in no way implying that this single mother was living the high life, nor am I suggesting that every poor person lives in a decent neighborhood and has the things that she had. But let’s be realistic about what the face of poverty looks like in the year 2011.