How high is the U.S. poverty rate?

Here is some wisdom, from the non-libertarian, non-right-wing,  never-asked-to-contribute-to-the-WSJ-Op-Ed-page Lane Kenworthy:

Poverty comparisons across affluent nations typically use a “relative”
measure of poverty. For each country the poverty line – the amount of
income below which a household is defined as poor – is set at 50%
(sometimes 60%) of that country’s median income. In a country with a
high median, such as the United States, the poverty line thus will be
comparatively high, making a high poverty rate more likely…

Using a relative measure, the U.S. poverty rate is higher than Romania’s and only slightly lower than Mexico’s (see here). Similarly, Mississippi’s relative poverty rate is the same as Connecticut’s.

So when you hear that the U.S. poverty rate is about 20 percent, keep this in mind.  Here is more, including links to research.  Here is a response from Paul Krugman.  Note that Krugman’s initial Op-Ed stresses how the measured rate has not fallen over (some periods of) time, but his response simply cites a ranking of the U.S. among other wealthy nations, based on an absolute poverty rate.  Have the time series comparisons been jettisoned or should we stand by them?

Here is more useful information.  It’s also worth noting that poverty rate numbers do not take into account food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, among other benefits.  Not to mention black market income and underreported income (often for EITC reasons); yes it is worth referring back to consumption data which show that the poor do quite a bit better than income data alone would indicate.  That said, a very good case can be made that we overinvest in fighting the poverty of the elderly and underinvest in fighting the poverty of children.

The bottom line: Be very suspicious when you hear talk about the poverty rate.  The real question, as stressed by James Heckman, is what rate of return we can hope to achieve from feasible interventions in favor of poor, young children.  That’s a much harder question to argue.  Heckman of course finds a high rate of return, so I suspect the key question centers around what is "feasible" given the imperfections of politics.  It’s worth noting that many federal anti-poverty programs have in fact failed, or so changed that we don’t even call them anti-poverty programs any more.  At the end of the day that calls for "better action" rather than inaction, but softening people up with overly pessimistic and uncritically presented numbers will probably make a good program less rather than more likely. 


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