Better Measures of Poverty

Timothy Taylor writes,

Meyer and Sullivan used consumption data, and again they set up the calculation so that the poverty rate for consumption data is the same as the poverty rate for income data as of 1980…By this measure, the poverty rate almost reaches zero percent in 2007, before the Great Recession.

He is referring to a paper by Bruce D. Meyer and James X. Sullivan. Since it comes from a Brookings conference, you can read comments by others at the end of the paper. The commenters did not shoot it down.

The main reason for using a consumption-based measure is that poor people tend to under-report much of their income, such as the value of government-provided benefits. In other words, even if you think that income is the right variable to use for measuring poverty, consumption might be the best available proxy for income.

If the substance of the paper is correct, and poverty is at low levels in the United States, then there is a case for reducing benefits in order to reduce the high marginal tax rate that deters low-income people from working.

However, my own opinion, driven by anecdotal observation rather than data, is that poverty in the U.S. is nowhere near zero. Perhaps if people with low incomes made really good decisions about how to spend their money, then poverty would be near zero. However, over the course of their lifetimes, many people make many bad decisions, and as a result they will spend a lot of time dealing with financial adversity. The moral and practical implications of this view of poverty are not as clearcut as either a progressive or a conservative would like.

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4 Responses to Better Measures of Poverty

  1. Bryan Willman says:

    There’s are also problems of scale and status.

    Scale – suppose objective physical poverty (living circumstances nobody should have to put up with) blights only 0.5% of the population. In the US that’s more than 1.5 million people – or about 1/2 the total population of Seattle metro. Since 0% is unachieveable, in a large population there will always be numerically large groups of poor people.

    Status – to some degree poverty is about status – being unemployed or underemployed is surely partly this – and by definition the lowest 10% will have the lowest 10% status on this scale. This cannot be fixed, ever.

    An observation – there’s a book by a fellow who did an experiment to see what he could earn standing on the side of the road with a “please give me money” sign. I’ve read only the summary, but the gist is, better than minimum wage, on average, for at least some locations. BUT would any of us consider this an acceptable life position? It might be taken in a heartbeat by many people throughout the world, and instantly shunned by many others. But to what degree is “begging at the side of the road for twice the minimum wage” actual “poverty” even if the net consumption is not?

  2. ColoComment says:

    Building on Mr. Willman’s comment that zero poverty is unachievable, why do we continually EXPAND the population covered by “anti-poverty” programs instead of concentrating our efforts on improving the situation of those who live in the most dire straits? Ironically, we are beggaring the country to transfer money we must borrow to people who are actually NOT going hungry, or shelterless, or unclothed.

    As Bill Voegeli suggested in his book, Never Enough, all of this anti-poverty spending and the “War on Poverty” programs are designed to never succeed. There is no “completion date” when the program goal has been met and the program can terminate, and its bureaucracy can turn out the lights, lock the door, and go home.

    I guess I’m not sure that any measurement whatsoever is worth the time and effort involved in creating and validating it. If there is no definable end state, then what’s the purpose in measuring progress? It will never be enough.

    I’ve asked friends, “When can we end this War on Poverty?” and have never gotten a supportable answer. Have you ever seen an explanation of what triumph looks like in this War? There will always be a bottom quintile of income, wealth, consumption, etc., so beyond offering food to the hungry and shelter to the homeless, aren’t these [very expensive] anti-poverty, aid and welfare programs simply ongoing wealth transfer spigots with no “turn off” valve?

    Or am I simply ‘way too cynical?

  3. theyenguy says:

    You write, my own opinion, driven by anecdotal observation rather than data, is that poverty in the U.S. is nowhere near zero.

    Well, I suggest that you come and spend a week where I reside, that is in the Sea Breeze Apartments, in downtown Bellingham; its the bottom of the social pyramid, specifically Claritas Prizm Sector 65, Inner City Blues 66; the most economically challenged of all demographic areas.

    There is a lot of poverty here. Most individual here have physical health, emotional health, and mental health handicaps, and live below the $10,000 income level required to obtain a credit card.

    Mike Sauter of 24/7 Wall St lists America’s Richest (and Poorest) States Maryland is the wealthiest state; Mississippi, Arkansas, West Virginia, Alabama and Kentucky are the places of greatest poverty …

    As for me, I reside in deep poverty, yet I blog on wealth management presenting the concepts of sovereignty and seigniorage from the dispensation of Christ perspective, so that others might be wealthy.

    I think in saying “poverty in the U.S. is nowhere near zero”, is about as detached from reality as possible and represents a skewed bias

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