Economics

New Census Bureau classification of ‘near poor’ is virtually useless

Mickey Kaus has a blog post up ripping the New York Times’s headline, “Older, Suburban and Struggling, ‘New Poor’ Startle the Census.” As Kaus points out with characteristic snarkiness, the Census Bureau wasn’t startled by its findings that there are a lot of people classified as “near poor” by defining the group as those with incomes under 150 percent of its newly devised Supplemental Poverty Measure. That’s because the SPM defines everyone under the 33rd percentile of income as poor, including government benefits but excluding medical expenses and taxes and taking into account regional cost of living. In other words, one-third of everyone is defined as living in poverty under the SPM, a percentage that is destined never to decline.

Kaus’s skewering of the Times story and the SPM is deft and amusing, starting with the first full sentence: “Let’s just suppose, as a thought experiment, that the New York Times is a liberal conspiracy.” He points out, for example, that 20 percent of the “near poor” own their houses free of mortgage, and argues that taking regional cost of living differences into account ignores the fact that some people (including him) choose to live in expensive places—or, as The Atlantic’s Megan McArdle puts it in a delicious blog post, “Expensive Real Estate is a Consumption Choice.”

But there’s a weakness in Kaus’s argument. He seems unaware of the work of AEI’s Nick Eberstadt, like this AEI paper or his 2008 book The Poverty of the Poverty Rate: Measure and Mismeasure of Material Deprivation in America. One of Nick’s central points is that the poverty definition first developed in the 1960s measures income rather than consumption, and—here Mickey provides some nice examples—low-income people tend to spend more than their dollar income (by drawing on savings, borrowing on credit cards, depending on relatives or charity, etc.). So neither the poverty definition nor the Supplemental Poverty Measure can ever meaningfully measure the actual degree of deprivation. Most people the government classifies as poor have air conditioning, cars, cell phones, color television. As Mickey writes, “the vast diversity of the ‘near poor’ category makes it virtually useless.” Virtually rather than entirely, if you believe that the New York Times is a liberal conspiracy.

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