Poverty In America

Monday, September 12th, 2005 1:04 pm by cyclops

During the first week of September, I remember that both the Washington Post and the New York Times carried many articles on the recently-released poverty statistics by the Census Bureau. It seems that on August 30, the Census Bureau’s statistics showed that the poverty level had increased to 12.7% in 2004, higher than in 1974. At the same time, leading economic indicators showed continued strong growth in the US economy.

As I recall, the gist of most of the articles was an attempt to reconcile these two statistics. How can it be that the economy is growing, but the poverty rate is higher? According to most of the articles I read, the answer is that while the economy roars on and enriches those in the highest income brackets, the poor continue to be left behind. In other words, the rich get richer and at the expense of the poor. It’s the perfect way to explain both statistics.

I have always read these articles with a great deal of skepticism. It defies common sense and my real-world experience to believe that poverty is increasing in this country. From my point of view as a native Southerner, the US has made great strides in fighting poverty. So, how could it be that poverty is increasing?

The short answer is that poverty is not increasing. The government just doesn’t know how to measure poverty, as explained by Nicholas Eberstadt in his recent op-ed piece, Broken Yardstick. According to Mr. Eberstadt

The profound flaws in our officially calculated poverty rate are revealed by its very intimation that the poverty situation in America was “better” in 1974 than it is today. Those of us of a certain age remember the year 1974 – in all its recession-plagued, “stagflation”-burdened glory. But even the most basic facts bearing on poverty alleviation confute the proposition that material circumstances in America are harsher for the vulnerable today than three decades ago. Per capita income adjusted for inflation is over 60 percent higher today than in 1974. The unemployment rate is lower, and the percentage of adults with paying jobs is distinctly higher. Thirty years ago, the proportion of adults without a high school diploma was more than twice as high as today (39 percent versus 16 percent). And antipoverty spending is vastly higher today than in 1974, even after inflation adjustments.

In the face of such evidence, what do you call an indicator that stubbornly insists that the percentage of Americans below a fixed poverty threshold has increased? How about “a broken compass?”

The soundings from the poverty rate are further belied by information on actual living standards for low-income Americans. In 1972-73, for example, just 42 percent of the bottom fifth of American households owned a car; in 2003, almost three-quarters of “poverty households” had one. By 2001, only 6 percent of “poverty households” lived in “crowded” homes (more than one person per room) – down from 26 percent in 1970. By 2003, the fraction of poverty households with central air-conditioning (45 percent) was much higher than the 1980 level for the non-poor (29 percent).

Besides these living trends, there are what we might call the “dying trends”: that is to say, America’s health and mortality patterns. All strata of America – including the disadvantaged – are markedly healthier today than three decades ago. Though the officially calculated poverty rate for children was higher in 2004 than 1974 (17.8 percent versus 15.4 percent), the infant mortality rate – that most telling measure of wellbeing – fell by almost three-fifths over those same years, to 6.7 per 1,000 births from 16.7 per 1,000.

So, what accounts for this?

The poverty rate is out of step with all these other readings about deprivation in modern America because it was designed to measure the wrong thing. The poverty rate has always been derived from reported household income. (Exigency played a role here: at the start of the war on poverty 40 years ago, those income numbers were already available from the Census Bureau.) But a better gauge of a household’s material deprivation is not what it earns, but what it spends. When we look at spending patterns, we immediately see a huge discrepancy between reported incomes and reported expenditures for low-income Americans.

In the Labor Department’s latest Consumer Expenditure Survey (2003), the average reported income for the bottom fifth of households was $8,201, while reported outlays came to $18,492 – well over twice that amount. Over the past generation, that discrepancy widened significantly: back in the early 1970’s, the poorest fifth’s reported spending exceeded income by 40 percent.

Of course, the more cynical among us (count me in) can reasonably argue that the US government knows that the statistic is flawed, but it is flawed in such a way to assure that agencies and the bureaucrats who work there are always able to justify their existence. After all, according to the numbers, we have to keep fighting the war on poverty because we’re still losing.

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