Re: Putting poverty stats in perspective (excellent Wash Post article)

What is the poverty line today? Unless I missed it, this article didn't
state it.

"SMBalloon" <smballoon@xxxxxxx> wrote in message
news:jpllf2114nbj6b9mf4akgq56r1f5d8pv9g@xxxxxxxxxx
The Washington Post
Why Poverty Doesn't Rate

By Nicholas Eberstadt
Sunday, September 3, 2006; B01

The Census Bureau last week released its latest estimate of the U.S.
poverty rate -- the country's most important official statistic on
domestic want and deprivation. The figure was sobering, signaling
short-run stagnation and deterioration over the past generation. The
2005 poverty rate of 12.6 percent barely budged from the previous
year's number, and was substantially higher than the 11.1 percent
level registered back in 1973, the lowest on record. No less
disturbing, the official measure indicates that a greater portion of
families and children live in poverty in America today than three
decades ago.

The results seem to suggest a prolonged failure of national policies
to address poverty in the United States. However, the problem here
lies less with actual living conditions than with the flawed and
misleading poverty measure itself. The index that Washington has long
used to assess progress in the struggle against poverty is a broken
compass, and its misdirection has worsened steadily over time.
Hurricane Katrina's destruction of the Gulf Coast one year ago
revealed in devastating fashion the poverty and hardships that many
people in the United States still endure. Unfortunately, the official
poverty rate is utterly incapable of tracking material deprivation in
the United States with any accuracy.

The nation's poverty indicator first emerged in 1965, when the Johnson
administration launched the War on Poverty. This then-novel measure
determined a family's poverty status by comparing its annual income to
a federal "poverty threshold" -- set at about three times the cost of
a nutritionally adequate food budget and tailored to a family's size.
The percentage of people falling below that threshold was deemed the
"poverty rate." The threshold is adjusted each year to take into
account changing prices.

But much more than prices has changed since 1965 -- and the
government's poverty measures have failed to adapt to and recognize
the new conditions. With more access to credit, greater income swings
from year to year, and improved nutrition, housing and health care,
the life of America's poor is radically different today. Unless the
nation's basic poverty indicators take into account such new
conditions, any efforts to effectively redress poverty in America are
bound to fail.

To understand the problems with the official poverty rate, compare the
America of 1973 to the America of 2001. In 2001, the country's per
capita income was far higher than in 1973 -- according to the Census
Bureau, roughly 60 percent higher -- and unemployment rates were
lower. In 2001, only one in six adults lacked a high-school diploma;
in 1973, two-fifths had not finished high school. And government
anti-poverty spending was more than twice as high in 2001 as in 1973.

So, in a richer, more fully employed and better educated nation with a
bigger safety net, shouldn't the poverty rate be lower? Wrong. The way
the official rate is calculated, the fraction of Americans living
below the poverty line was higher in 2001 (11.7 percent) than in 1973
(11.1 percent). For some reason, our official statisticians insist
that America's best year for combating poverty -- ever -- was 1973. Go
figure.

Indeed, since 1973, the official poverty rate has usually moved in the
opposite, counterintuitive direction from other common-sense
indicators of progress and poverty. When the rate of high school
dropouts among America's adult population falls, the official poverty
rate rises. When anti-poverty spending increases, so does poverty. And
even when per capita income in the United States goes up, official
poverty somehow increases, too.

Obviously, the official poverty rate isn't reflecting shifting living
conditions in the United States. A wealth of evidence shows that those
who are counted as poor today have dramatically higher living
standards than their counterparts in the 1960s, when the poverty rate
was originally devised:

Food and nutrition: In the early 1960s, the poorest fifth of American
families were forced to devote nearly 30 percent of their expenditures
to buying food; by 2004, the proportion was down to one-sixth of
spending. Undernourishment and hunger were common among the most
vulnerable elements of society 40 years ago; today, by contrast,
obesity is the main nutritional problem facing adult Americans, rich
and poor alike. And even children considered poor by official
standards are better nourished today than in the 1960s. As recently as
1973, about 8 percent of low-income children surveyed by the Centers
for Disease Control were judged underweight; by 2004 the figure had
dropped below 5 percent. The prevalence of anemia among poorer
American children likewise fell by more than half during those same
years.

Housing: In 2001, only about 6 percent of the country's poor
households lived in "crowded" dwellings (homes with more than one
inhabitant per room), compared with more than 25 percent in 1970,
according to the Census Bureau. Today's poor households are more
likely to have telephone service and television sets than even
non-poor households in 1970; they are much more likely to have central
air conditioning than the typical American home of 1980, and almost as
likely to have a dishwasher. Moreover, according to a Department of
Energy survey in 2001, most poverty households have microwaves, VCRs
or DVDs, and cable television -- conveniences unavailable in even the
most affluent homes at the time the poverty rate measure was first
released.

Autos and motor travel : In 1973, a majority of the households in the
bottom fifth of income earners did not own a car. By 2003, nearly
three-fourths of all poverty households had a car, truck or van, and a
rising fraction owned two or more such vehicles.

Health care: For the affluent and the disadvantaged alike, life
expectancy in America has risen significantly since the nation's
poverty measures were first developed. The CDC's National Center for
Health Statistics has found a broad improvement in national health
conditions over the past four decades. Since 1965, for example, the
U.S. infant mortality rate (the risk of death in the year after birth)
has dropped by more than 70 percent. And regardless of the
availability of health insurance, access to medical treatment has
risen markedly for poorer Americans: Children in poor families are
more likely today to have an annual medical visit or checkup with a
doctor than even non-poor children did just 20 years ago.

Why does the official poverty rate fail to quantify the steady
improvement in the living standards of America's poor? The answer lies
in a simple mistake built into the poverty measure -- one that
reflects a misunderstanding of how Americans live, spend and consume.
Contradicting both economic theory and readily observable facts, the
poverty rate assumes that a household's annual spending cannot, by
definition, exceed its annual income.

Of course, this is not true, and economists have won Nobel prizes
explaining why spending can far exceed income, particularly in
advanced societies. For instance, when families are experiencing an
unusually bad year, they may spend more than they earn if they see
better prospects in the future. Similarly, a young worker may go into
debt if she anticipates increases in her pay or benefits. Living
standards, in other words, are linked to purchasing power -- and a
family's purchasing power is not limited to its annual earnings.

Among low-income households in the United States, the gap between
reported income and reported spending has widened gradually since the
1960s and now has taken on chasm-like dimensions. In the early 1960s,
the poorest quarter of U.S. households spent 12 percent more than
their annual incomes. In 1973, spending by America's poorest fifth
surpassed their income by almost 40 percent. And in 2004, spending by
the poorest fifth of American families exceeded income by a whopping
95 percent; in effect, spending was nearly twice as much as income.

These patterns might be due to easy access to credit, with many
consumers maxing out their credit cards or engaging in other
unsustainable borrowing. (Curiously, however, recent credit surveys
suggest that the net worth of poorer Americans has been rising, not
falling.)

Another important factor could be the increasing instability of
American incomes. Scholars such as Jacob Hacker at Yale University and
Robert Moffitt at Johns Hopkins University have noted that the income
of American families is likely to bounce around much more today than
it did three decades ago -- whether due to greater global competition,
increasing rewards for education or other factors. Intensified swings,
in turn, mean that more households may, in any given year, earn low
incomes and be temporarily classified as living in poverty. But they
continue to spend as they did before, anticipating that their incomes
will bounce back. Such oscillations also mean that the incomes
reported by families in annual surveys -- the backbone for the
official poverty estimate -- are a steadily less accurate indicator of
true living standards.

These criticisms of the official U.S. poverty rate should not be
confused with indifference to the plight of America's disadvantaged
and poor. Indeed, the opposite is true. In the richest society
humanity has ever known, material deprivation still afflicts too many
Americans. We cannot expect to make progress, however, without
adequate and accurate information. Advocates of social and economic
justice in the United States should be in the front ranks of those
demanding more accurate assessments of U.S. poverty. Without a clearer
sense of where we stand, how we got here and where we are headed, most
initiatives aimed at reducing poverty in the United States will be
needlessly ineffective.

(end of article)


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