The Percentage of Poor People: A Correction

A couple days ago, I shared a NY Times article that claims the percentage of poor people in the US hasn’t changed much in 50 years, despite the fact that we have lots of government anti-poverty programs now. Dylan Matthews of Vox quickly responded to the Times article. He argues that it all depends on how we measure poverty, a claim that Matthew Desmond, the author of the Times article, rejected. From Vox:

To come up with a poverty measure, one generally needs two things: a threshold at which a household becomes “poor” and a definition of income. For instance, in 2023, a family of four is defined by the government as officially in poverty in the US if they earn $30,000 or less. That’s the Official Poverty Measure’s threshold….

But what does it mean to earn $30,000 or less? Should we just count cash from a job? What about pensions and retirement accounts? What about Social Security, which is kind of like a pension? What about resources like the Supplemental Nutrition Assistance Program (SNAP) that aren’t money but can be spent in some ways like money? What about health insurance?

These aren’t simple questions to answer … but I think it’s fair to say there’s a broad consensus among researchers that income should be defined very broadly. It should at the very least include things like tax refunds and SNAP that are close to cash, and simpler to include than benefits like health insurance.

That’s why there’s also near-unanimous consensus among poverty researchers that the official poverty measure (OPM) in the United States is a disaster. I have … never heard even one expert argue it is well-designed. I was frankly a little shocked to see Desmond cite it without qualification in his article.

Its biggest flaw is that it uses a restrictive and incoherent definition of income. Some government benefits, like Social Security, Supplemental Security Income (SSI), and Temporary Assistance to Needy Families (TANF), count. But others, like tax credits, SNAP, and health care, don’t count at all. So many programs designed to cut poverty, like SNAP or Medicaid or the earned income tax credit, therefore by definition cannot reduce the official poverty rate because they do not count as income.

The Census Bureau now publishes a supplemental poverty measure (SPM), which uses a much more comprehensive definition of income that includes the social programs the Official Poverty Measure excludes. It also varies thresholds regionally to account for different costs of living….

Using the Official Poverty Measure, poverty hasn’t changed much since 1970. From the Times article:

As estimated by the federal government’s poverty line, 12.6 percent of the U.S. population was poor in 1970; two decades later, it was 13.5 percent; in 2010, it was 15.1 percent; and in 2019 [before COVID], it was 10.5 percent. To graph the share of Americans living in poverty over the past half-century amounts to drawing a line that resembles gently rolling hills.

For 2021, the last year for which the government has released official numbers, the rate was 11.6%, only 1% less than in 1970.

However, researchers using the updated Supplemental Poverty Measure calculated the poverty rate people between 1967 and 2020. They found that 25% of Americans were poor in 1967 (roughly twice as many as the Official Poverty Measure calculated), but — taking into account income from government programs created since 1967 — the percentage had dropped to 11.2% by 2019.

One odd thing about these numbers is that the official poverty rate, which is supposed to be obsolete, and the new, improved rate were almost the same for 2019 (10.5% vs. 11.2%). That’s even though the old calculation doesn’t include income from government programs and the new calculation does. Maybe that’s a statistical fluke, because the official rate is calculated very strangely. As Mr. Matthews explained in an earlier Vox article, “The Official Poverty Rate Is Garbage. The Census Has Found a Better Way”:

It’s worth dwelling on this for a second. The way we measure poverty is based on a 51-year-old analysis of 59-year-old data on food consumption, with no changes other than inflation adjustment. That’s bananas.

Yes, the official government calculation was devised in 1963 based on an estimate of what people ate in 1955. A few things have changed since then.

I conclude from all this that, using the best measure of poverty we have now, the one that takes into account income from government programs, the poverty rate has been cut in half in the past 50 years. (The government releases both sets of numbers these days, although which numbers are reported is another story.)

On the other hand, there are a lot more of us now. In 1967, when there were 197 million of us, a poverty rate of 25% meant America had 49 million poor people. In 2021, there were 332 million of us, so a rate of 11.2% meant the number was still 37 million.

Should there be almost 40 million Americans living in poverty today? According to the Times article, which I still recommend, there wouldn’t be that many if there wasn’t so much exploitation, so many people being taken advantage of, especially poor people, in the labor, housing and financial markets. Or if, for example, Republican senators and one “Democrat” (Joe Manchin of West Virginia) hadn’t refused to keep the expanded Child Tax Credit in effect after it expired at the end of 2021. That change in the law is said to have lifted 3 million children out of poverty. President Biden wants to restore the expanded credit in his 2024 budget but will have to overcome the usual opposition from politicians who claim to support family values.