Crossing the line: New models differ on what it means to be poor

Published: Saturday, Dec. 29 2012 9:24 a.m. MST

“It was quite an ingenious concoction considering how few ingredients she had in the statistical kitchen,” said Nicholas Eberstadt, an economist at the American Enterprise Institute. “It’s kind of like a glorified all-nighter in college.”

Most agree this approach was reasonable at the time. “But nowadays Americans are spending scarcely 10 percent of their income on food,” said Eberstadt. By failing to capture the rise of payroll taxes, transportation, childcare and out-of-pocket health care, critics argue, the official poverty line understates burdens on poor households.

On the other hand, the old standard also ignores help offered by government anti-poverty programs. Food stamps, earned income tax credits, childcare credits and housing subsidies do not count in measuring poverty.

“So we are not really looking how successful the War on Poverty has been,” Eberstadt said.

In short, the 50-year-old poverty measure understates costs but also understates government assistance. The two balance out in a rough way.

Real progress

Bruce Meyer argues that the rough balance still grossly understates the progress that has been made. “What the official measure says,” Meyer said, “is that poverty is worse today than it was in 1981. And that's nonsense.”

In a curious political alignment, both conservatives opposed to anti-poverty programs and liberals who want to bolster them try to downplay success in fighting poverty, according to Meyer. “The majority view among poverty researcher colleagues seems to be if we don't say poverty is worse today than it was 30 years ago people will not be interested in supporting antipoverty efforts."

“If you believe those numbers,” echoed Nicholas Eberstadt, “that suggests that over 50 years of pretty steady economic growth we have made no progress for the poorest strata of society.” Eberstadt, like Meyer, calls this “nonsense.”

Meyer notes that in 1981, just 15 percent of Americans had central air and only 41 percent had either window units or central air. By 2009, with the official poverty rate actually higher than in 1981, 55 percent had central air and 83 percent had some form of air conditioning. “To be poor today in the U.S. is nothing like what it was to be poor 40 years ago,” Meyer said.

Richer poor

One key question is whether poverty should be measured as an absolute standard of need, or whether it should be calculated relative to what others enjoy. David Betson argues the latter.

“We wanted to get away from what experts believe people should be consuming and look more at what American people actually are doing,” said Betson, a Notre Dame public policy professor who helped develop the new supplementary poverty measure.

The National Academy of Sciences panel that framed the new measure decided that the “needs of a person in a population are relative to what the consumption of that population is," Betson said. "So as people spend more, to participate in that society, they will actually need more. As the society gets wealthier, they need more income.”

Thus, the new poverty standard uses a complex formula that ties the needs of the poor to income levels of the general population. If Americans get richer, so do the poor.

“It depends on how you view what poverty means,” Betson said, admitting that this formula is a “debatable point” and a “bone of contention.”

Eberstadt would like to pick that bone, arguing that under Betson's method “poverty rates would fall if the country as a whole became less wealthy.”

Betson conceded the point but would not apologize. “If we as a nation over the long run became less wealthy, then the answer would be yes, needs would start to fall — in real terms," Betson said.

Simply put, in Betson's vision, the poor in a richer nation are richer than the poor in a poorer nation.

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