Economics, U.S. Economy

In defense of the official poverty measure

Image Credit: census.gov

Image Credit: census.gov

It is by now very well accepted that the nation’s official poverty measure is seriously flawed. Most significantly it fails to take into account the value of the whole panoply of government assistance programs which are designed to alleviate the effects of having very low income. Both sides of the political debate agree on this although for slightly different reasons. People from the right point out the measure’s failure to count EITC benefits, or SNAP benefits, two government programs that provide enormous assistance to low income Americans, because they don’t want Americans to be persuaded to invest still more into programs for the poor by the use of measure that exaggerates the extent to which people are suffering.

And, people from the left herald an alternative to the official measure because they want Americans to recognize the substantial progress that has been made because of government programs designed to help the poor – they want Americans to know that investments in poor people’s programs actually pay off. Liberal commentators will often talk about how many millions of Americans have been “lifted out of poverty” by the EITC or Food Stamp benefits and they are right to say so.

I’m fine with both perspectives. In leaving out what government does for poor Americans, the official measure gives a seriously misleading portrayal of the material well-being of Americans with low incomes.

But the condition of America, and more specifically, the condition of poor Americans, is not fully captured by measures of material well-being. And here is where the official measure still has some usefulness. In leaving out all that government does to help the poor, the official measure focuses on what poor Americans are able to earn for themselves. It is a measure of their independence and ability to work and earn a sufficient amount to support themselves and their families on their own – which is what they want.

And that is why it is so troubling that America’s official poverty measure now stands at 15% or 46.5 million Americans. This measure of the extent to which American can support themselves is up by 2.5 percentage points from 2007; back to where it was before welfare reform led to significant reductions; and basically about the same it was in 1965.

So while government programs are clearly helping the poor escape the material want that comes with low earnings, our economy and our government interventions are not providing sufficient opportunity for them to do what they want to do more than anything
else — earn their livelihood on their own. And that’s why we should still keep an eye on the nation’s official measure, and it is also why our nation’s very weak labor market should be deeply disturbing to anyone who wants to help the poor.

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4 thoughts on “In defense of the official poverty measure

    • No, because the general population of the US has risen over time. This is why the Poverty Rate is a better indicator than Number in Poverty.

      This failure to “move the needle” despite many good intentions and huge investments is sobering. It may well be that 15% of the population will remain in poverty, perhaps even by choice, no matter what we do. What a sad thought. I guess the only upside to that conclusion is that the US poverty rate is almost certainly lower than that of many other countries around the world.

  1. “…our government interventions are not providing sufficient opportunity for them to do what they want to do more than anything else — earn their livelihood on their own.”

    Fallacy.

  2. The U.S. Census Bureau determines poverty status by comparing pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index, and adjusted for family size, composition, and age of householder.

    Gee, a threshold defined 50 years ago and updated by CPI. Ever wonder why the rate stays about the same?

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