Tag Archives: Poverty

The Percentage of Poor People: A Correction

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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.

Why the Percentage of Poor People in America Hasn’t Changed in 50 Years

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If you don’t subscribe to the New York Times, you might not be able to read an important article called “Why Poverty Persists in America”. But the Times and some other papers are making it possible to share “gift” articles, like this one to the poverty article.

By making the article available, I’m not exploiting you and you aren’t being exploited. I’m not making any money out of the transaction and you aren’t spending any. If anything, you’re exploiting the New York Times (it was their idea and they can afford it).

The thesis of the article, however, is that exploitation is rampant in America and it’s the key reason why poverty persists. The author, Matthew Desmond, a Princeton sociologist, discounts the idea that the poor aren’t really poor (“you can’t eat a cellphone”). He argues that the poor (and others) are being taken advantage of.

The primary reason for our stalled progress on poverty reduction has to do with the fact that we have not confronted the unrelenting exploitation of the poor in the labor, housing and financial markets.

… Social scientists have a fairly coolheaded way to measure exploitation: When we are underpaid relative to the value of what we produce, we experience labor exploitation; when we are overcharged relative to the value of something we purchase, we experience consumer exploitation….When we don’t own property or can’t access credit, we become dependent on people who do and can, which in turn invites exploitation….

The author explains in detail how exploitation works in these three markets and how we might insure there’s less of it. Maybe I’ll share more of the article later. For now, here’s how the article ends.

In Tommy Orange’s novel, There There, a man trying to describe the problem of suicides on Native American reservations says: “Kids are jumping out the windows of burning buildings, falling to their deaths. And we think the problem is that they’re jumping.”

The poverty debate has suffered from a similar kind of myopia. For the past half-century, we’ve approached the poverty question by pointing to poor people themselves — posing questions about their work ethic, say, or their welfare benefits — when we should have been focusing on the fire. The question that should serve as a looping incantation, the one we should ask every time we drive past a tent encampment, those tarped American slums smelling of asphalt and bodies, or every time we see someone asleep on the bus, slumped over in work clothes, is simply: Who benefits? Not: Why don’t you find a better job? Or: Why don’t you move? Or: Why don’t you stop taking out payday loans? But: Who is feeding off this?

Those who have amassed the most power and capital bear the most responsibility for America’s vast poverty: political elites who have utterly failed low-income Americans over the past half-century; corporate bosses who have spent and schemed to prioritize profits over families; lobbyists blocking the will of the American people with their self-serving interests; property owners who have exiled the poor from entire cities and fueled the affordable-housing crisis.

Acknowledging this is both crucial and deliciously absolving; it directs our attention upward and distracts us from all the ways (many unintentional) that we — we the secure, the insured, the housed, the college-educated, the protected, the lucky — also contribute to the problem.

Corporations benefit from worker exploitation, sure, but so do consumers, who buy the cheap goods and services the working poor produce, and so do those of us directly or indirectly invested in the stock market. Landlords are not the only ones who benefit from housing exploitation; many homeowners do, too, their property values propped up by the collective effort to make housing scarce and expensive. The banking and payday-lending industries profit from the financial exploitation of the poor, but so do those of us with free checking accounts, as those accounts are subsidized by billions of dollars in overdraft fees.

Living our daily lives in ways that express solidarity with the poor could mean we pay more; anti-exploitative investing could dampen our stock portfolios. By acknowledging those costs, we acknowledge our complicity. Unwinding ourselves from our neighbors’ deprivation and refusing to live as enemies of the poor will require us to pay a price. It’s the price of our restored humanity and a renewed country. 

One funny note. This is the article’s subtitle: “A Pulitzer Prize-winning sociologist offers a new explanation for an intractable problem”. I guess whoever wrote that has never heard of Karl Marx or Das Kapital.

Problems and Solutions: A Brief Recitation

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As 2022 fades away, David Rothkopf, an author and political analyst, presents a few facts to keep hold of in 2023:

Decades of research have conclusively shown that:

–The solution for homelessness is building homes for those who need them

–The solution for poverty is giving money to those who don’t have it

–The solution to our lack of mental health care is providing mental health care for those who need it

–The solution is to the climate crisis to stop using fossil fuels and stop carbon emissions.

I could go on. The point is that very often the solutions are obvious and politics is the art of obscuring them, distracting from them, making those common sense solutions impossible to achieve.

How Poverty Helps the Rest of Us

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Ezra Klein of The New York Times writes about poverty and the American economy:

I’m not going to pretend that I know how to interpret the jobs and inflation data of the past few months. My view is that this is still an economy warped by the pandemic, and that the dynamics are so strange and so unstable that it will be some time before we know its true state. But the reaction to the early numbers and anecdotes has revealed something deeper and more constant in our politics.

The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages. On the right, the barest glimmer of worker power is treated as a policy emergency, and the whip of poverty, not the lure of higher wages, is the appropriate response.

Reports that low-wage employers were having trouble filling open jobs sent Republican policymakers into a tizzy and led at least 25 Republican governors — and one Democratic governor [the one in Louisiana] — to announce plans to cut off expanded unemployment benefits early. Chipotle said that it would increase prices by about 4 percent to cover the cost of higher wages, prompting the National Republican Congressional Committee to issue a blistering response: “Democrats’ socialist stimulus bill caused a labor shortage, and now burrito lovers everywhere are footing the bill.” The [right-wing] outlet The Federalist  complained, “Restaurants have had to bribe current and prospective workers with fatter paychecks to lure them off their backsides and back to work.”

But it’s not just the right. The financial press, the cable news squawkers and even many on the center-left greet news of labor shortages and price increases with an alarm they rarely bring to the ongoing agonies of poverty or low-wage toil.

As it happened, just as I was watching Republican governors try to immiserate low-wage workers who weren’t yet jumping at the chance to return to poorly ventilated kitchens for $9 an hour, I was sent “A Guaranteed Income for the 21st Century,” a plan that seeks to make poverty a thing of the past. The proposal, developed . . .  for the New School’s Institute on Race and Political Economy, would guarantee a $12,500 annual income for every adult and a $4,500 allowance for every child. It’s what wonks call a “negative income tax” plan — unlike a universal basic income, it phases out as households rise into the middle class.

“With poverty, to address it, you just eliminate it,” [one of the authors, Darrick Hamilton] told me. “You give people enough resources so they’re not poor.” Simple, but not cheap. The team estimates that its proposal would cost $876 billion annually. To give a sense of scale, total federal spending in 2019 was about $4.4 trillion, with $1 trillion of that financing Social Security payments and another $1.1 trillion support Medicaid, Medicare, the Affordable Care Act and the Children’s Health Insurance Program.

Beyond writing that the plan “would require new sources of revenue, additional borrowing or trade-offs with other government funding priorities,” [the authors] don’t say how they’d pay for it, [but] it’s clearly possible. Even if the entire thing was funded by taxes, it would only bring America’s tax burden to roughly the average of our peer nations.

I suspect the real political problem for a guaranteed income isn’t the costs, but the benefits. A policy like this would give workers the power to make real choices. They could say no to a job they didn’t want, or quit one that exploited them. They could, and would, demand better wages, or take time off to attend school or simply to rest. When we spoke, Hamilton tried to sell it to me as a truer form of capitalism. “People can’t reap the returns of their effort without some baseline level of resources,” he said. “If you lack basic necessities with regards to economic well-being, you have no agency. You’re dictated to by others or live in a miserable state.”

But those in the economy with the power to do the dictating profit from the desperation of low-wage workers. One man’s misery is another man’s quick and affordable at-home lunch delivery. “It is a fact that when we pay workers less and don’t have social insurance programs that, say, cover Uber and Lyft drivers, we are able to consume goods and services at lower prices,” Hilary Hoynes, an economist at the University of California at Berkeley . . . 

This is the conversation about poverty that we don’t like to have: We discuss the poor as a pity or a blight, but we rarely admit that America’s high rate of poverty is a policy choice, and there are reasons we choose it over and over again. We typically frame those reasons as questions of fairness (“Why should I have to pay for someone else’s laziness?”) or tough-minded paternalism (“Work is good for people, and if they can live on the dole, they would”). But there’s more to it than that.

It is true, of course, that some might use a guaranteed income to play video games or melt into Netflix. But why are they the center of this conversation? We know full well that America is full of hardworking people who are kept poor by very low wages and harsh circumstance. We know many who want a job can’t find one, and many of the jobs people can find are cruel in ways that would appall anyone sitting comfortably behind a desk. We know the absence of child care and affordable housing and decent public transit makes work, to say nothing of advancement, impossible for many. We know people lose jobs they value because of mental illness or physical disability or other factors beyond their control. We are not so naïve as to believe near-poverty and joblessness to be a comfortable condition or an attractive choice.

Most Americans don’t think of themselves as benefiting from the poverty of others, and I don’t think objections to a guaranteed income would manifest as arguments in favor of impoverishment. Instead, we would see much of what we’re seeing now, only magnified: Fears of inflation, lectures about how the government is subsidizing indolence, paeans to the character-building qualities of low-wage labor, worries that the economy will be strangled by taxes or deficits, anger that Uber and Lyft rides have gotten more expensive, sympathy for the struggling employers who can’t fill open roles rather than for the workers who had good reason not to take those jobs. These would reflect not America’s love of poverty but opposition to the inconveniences that would accompany its elimination.

Nor would these costs be merely imagined. Inflation would be a real risk, as prices often rise when wages rise, and some small businesses would shutter if they had to pay their workers more. There are services many of us enjoy now that would become rarer or costlier if workers had more bargaining power. We’d see more investments in automation and possibly in outsourcing. The truth of our politics lies in the risks we refuse to accept, and it is rising worker power, not continued poverty, that we treat as intolerable. You can see it happening right now, driven by policies far smaller and with effects far more modest than a guaranteed income.

Hamilton, to his credit, was honest about these trade-offs. “Progressives don’t like to talk about this,” he told me. “They want this kumbaya moment. They want to say equity is great for everyone when it’s not. We need to shift our values. The capitalist class stands to lose from this policy, that’s unambiguous. They will have better resourced workers they can’t exploit through wages. Their consumer products and services would be more expensive.”

For the most part, America finds the money to pay for the things it values. In recent decades, and despite deep gridlock in Washington, we have spent trillions of dollars on wars in the Middle East and tax cuts for the wealthy. We have also spent trillions of dollars on health insurance subsidies and coronavirus relief. It is in our power to wipe out poverty. It simply isn’t among our priorities.

“Ultimately, it’s about us as a society saying these privileges and luxuries and comforts that folks in the middle class — or however we describe these economic classes — have, how much are they worth to us?” Jamila Michener, co-director of the Cornell Center for Health Equity, told me. “And are they worth certain levels of deprivation or suffering or even just inequality among people who are living often very different lives from us? That’s a question we often don’t even ask ourselves” . . . 

Helping Helps

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The Biden administration and House Democrats are working on legislation that would send monthly checks to people with children:

In one draft of the proposal, the IRS would deposit checks worth $300 every month per child younger than 6 and $250 every month per child age 6 to 17. This would give parents $3,000 per year for each child between the ages of 6 to 17, and $3,600 per child under age 6. . . .

Eligibility for the benefit, similar to the stimulus checks, would be based on family income for the prior tax year and be phased out at a certain income amount . . . 

Paul Krugman thinks it’s a very good idea: “it could, among other things, cut child poverty in half”:

America stands out among wealthy countries for its failure to provide much help to families with children. U.S. expenditures on family benefits as a share of G.D.P. are less than a third the rich-nation average. Largely as a consequence, we have a much higher rate of child poverty than our peers.

Our stinginess does a lot of harm. Economists have shown that previous extensions of aid to families with children, like the gradual rollout of food stamps in the 1960s and 1970s and the expansion of Medicaid in the 1980s, didn’t just improve children’s lives in the short run; children who received the aid grew into healthier, more productive adults than those who didn’t receive the aid. By not doing even more for children, we are stunting their future, and that of the nation as a whole.

And aid to children would achieve what proponents of the tax cut promised but failed to deliver: an improvement in America’s long-run economic prospects. If the children we help today grow up into healthier, more productive adults than they would otherwise — which they will — that will eventually mean higher G.D.P.

And aid to children would also indirectly help the budget, because those children would later pay more in taxes and be less likely to call on safety net programs. These fiscal benefits might even be big enough that helping children pays for itself, and in any case they mean that the true cost of aiding children, even in narrowly fiscal terms, would be less than it might appear.

All in all, then, increased aid to families with children is a really good idea. It would immediately improve millions of Americans’ lives, it would make us stronger in the future, and it would have only modest budget costs. 

By “modest”, Krugman means it would cost around half of the 2017 Republican tax cut, which mainly benefited the rich. Of course, there will be Republican opposition:

We’ll surely hear some version of the standard conservative argument that any policy reducing misery reduces the incentive to be self-sufficient — you know, unemployment insurance encourages people to stay unemployed, food stamps encourage them to be lazy, and so on. Making this argument about a broad-based program to help children will be hard, but they’ll find a way.

He discusses a broader issue in his NY Times newsletter:

What should we do about Americans with low income — and their children? Should we make a new push to reduce or eliminate poverty, and if so, what should it involve?

. . . As with everything else in modern America, the two parties have starkly different positions on this issue. . . . I don’t believe that the Republican position on this, or for that matter on any major policy issue I can think of, reflects a good-faith attempt to figure out what works best. But the expressed views of the parties do show a big divide about how the world works.

The Republican view is basically that anti-poverty programs aren’t the solution, they’re the problem. How so? When you have “means-tested” programs — programs that are only available to people with sufficiently low incomes, or that phase out as income rises — you are in effect imposing high marginal tax rates on the relatively poor. That is if, say, a single mother manages to increase her earnings from $15,000 to $20,000 a year, she will find much of that extra $5,000 taken away in the form of reduced benefits.

This high de facto taxation, conservatives say, discourages efforts to break out of poverty. And they also say that it fosters a culture of dependency. So they argue that to help the poor we should, well, offer them less help.

Progressives don’t deny that incentives can matter. To use one of my favorite examples, countries that offer generous benefits to people who retire early, like France, end up with many people, you guessed it, retiring early.

But economists on the center left generally argue that the disincentives created by anti-poverty programs are exaggerated, and that the main thing actually trapping people in poverty is a lack of resources: It’s hard to get an education, start a business, even move to a place where jobs are available, when you have no money in the bank and are living hand-to-mouth.

Also, being poor imposes a lot of cognitive stress: It’s hard to focus on self-improvement when you’re constantly worrying about where the next rent check will come from or how to pay medical bills.

If you see resources as the main problem for the poor, the answer to poverty is to provide more resources; this doesn’t just improve the lives of the poor in the short run, it also increases their chances of breaking free of the poverty cycle.

This is the kind of debate that should be settled with evidence. And for what it’s worth, there is growing evidence that the resources view of poverty is much closer to the truth than the incentives view. . . . This is especially true for programs that help families with children, which seem to improve the lives of those children long after they’ve matured past receiving aid.