Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Definitions of what it means to be poor in the United States
Published on August 30, 2004 By Draginol In Politics

This past week the 2003 report on the poverty rate for the United States came out.  The poverty rate grew slightly for the third straight year from its its all time low in 2000 (right when the stock bubble about about to burst).  It is now back to where it was during most of the 90s -- 12.5%.

In addition to the link below, you can also find out more on this from the US census bureau: http://www.census.gov/hhes/www/poverty.html

The problem with the poverty rate is that it seems politicized. I mean who exactly decides what poverty is?  In the United States, you are living in poverty if your household income is $9,573.  That seems pretty high as that would mean I spent quite a bit of my time in "poverty" in college.  Sure didn't seem like that.

But it gets better, you see, that amount only counts as cash income. If you receive help and aid that isn't actual cash (or on the books) then it doesn't get counted as part of this.  So someone receiving credits, scholarships, grants, etc. will not get counted here. And obviously unreported income (tips, gifts, etc.) won't be counted here either.

When I was in college, I lived with 4 women in a house.  The rent was roughly $500 per month so that left $100 per person per month.  Add $20 per person for utilities, $80 per month for food and you had the basics for $200 per month per person.  That's $2,400.  Still, you have insurance, gas, and other necesities but there's a big gulf between $2,400 and $9,573.

The problem people in the United States have is that we have ridiculous expectations on lifestyle.  On $9,573 you might have a tough time having your own apartment (even though roughly 40% of people who live in "poverty" own a home according to the bureau).  But you're not starving. You might (gasp) have to have roommates.

Getting back to the politicizinig of this issue, the problem is that this number grows each year and it's not merely adjusted for inflation. And the term "poverty" is thrown to represent something it's not.  I don't know about you, but when I think of poverty I think of people who are barely getting by. Can't afford food. Worried about having shelter. Can't get clothing (and remember, donated goods don't count as income so you can't affect the poverty rate by donating clothes and other goods).

Even compared to first world countries, what we consider poverty seems a bit absurd.  For instance, Australians, on average, make only 73% as much as the average American.  So if you're making $24k per year here in the US, the Australian equivalent of you is making only $17k.  Taking this to its logical conclusion, the Australian equivalent of someone working full time at $8 per hour would be essentially living in poverty by our standards. And that's ridiculous.

It's not that there aren't people who are really poor. It's just that becuase of politics, the tools for actually measuring and finding these people are woefully inadequate. 

What we need is for the government or some agency to sit down and figure out how much it costs to live in a given country. That is, how much food, rent, clothing, car insurance, heat, electricity cost. Then draw the line there and anyone below that is living in poverty.

Then we need to figure out why they're in poverty and see what we can do to help them -- if we can.


Comments (Page 1)
on Aug 30, 2004
Good article on the whole, but there are a couple of issues I think are important. Firstly, there is a difference between absolute poverty and relative poverty. You address relative poverty, which is fine, but the kind of grinding, might-not-be-able-to-eat-today kind of poverty is covered by absolute poverty, not relative. There should be seperate figures for this group. If there isn't, then that's a problem. Relative poverty is usually defined as the absence of an ability to engage in life to the same extent that other people of the country do.

Absolute poverty is the most important measure of poverty; relative poverty really only measures equality.
on Aug 30, 2004
Hi Brad,

A couple of comments and observations:

1. You rented a whole house for $500 a month - wow! Most places I know of you couldn't get a one or two bedroom apartment for that price.
2. Utilities of $100 per month would be also very, very, cheap. My tenants average $100-$120 month, for an 800 sq.ft. unit - with mild winters (much milder than Michigan).

So as far as that goes, I very much doubt that would be the norm. However, your comments about expectations are quite right in my view - an aunt of mine and my father both got divorced quite late in life, but enjoy living conditions that most people in the third world would be ecstatic about - but both lived/live with roommates, even after retirement. I don't think either of them felt they lived in poverty, although statistically speaking, they might.

In terms of direct comparisons to other first world countries, most economists like to consider purchasing power parity (PPP). It compares the price of a service in one country to another and then compares that basket of goods against the average income in that country. The Economist magazine does this frequently, and even amusingly (and relatively accurately) does a PPP on a Big Mac in various countries around the world.

Typically, the PPP shows that while people in the US make more, they also pay more (using PPP) for many of their goods. Using the Australian example, the exchange rate might show, 73% as you mention, but the PPP comparison usually narrows, and might be something more like 85%-90%. This was particularly true when the USD was rising in strength in the late 1980s and through the 1990s. I'm not sure how it's been faring since the US dollar has been weakening over the past few years.

A recent article in the Globe and Mail discusses some other relative poverty rankings (although I realize you are talking about absolute poverty) of various countries around the world, including the US, which is nonetheless, interesting.

Link

and I totally agree with your last comments ...

What we need is for the government or some agency to sit down and figure out how much it costs to live in a given country. That is, how much food, rent, clothing, car insurance, heat, electricity cost. Then draw the line there and anyone below that is living in poverty.Then we need to figure out why they're in poverty and see what we can do to help them -- if we can.

Rock on ...

JW



on Aug 31, 2004

1. This was back in 1994 in the "student ghetto". But I doubt it's higher than say $800 to $1000 today. Let's say it's $1000 today. That's still only $200 per month - $2,400 per year.

2. I think your tenants need to save up.  I live in a 6000 square foot house today and our utilities aren't much more than that.

But for the sake of argument, let's assume everything I wrote is too cheap by 50%.  There's still a huge difference between that and the "poverty" rate.

I actually used the PPP stat for Australia and USA. That's why Australia did as well as it did. 

But ultimately, my point boils down to the "poverty rate" having become non-useful.  If we want to really go after poverty, we need to come up with a reasonable definition of it.

on Aug 31, 2004

BTW, that report you link to shows just how socialistic the UN is:

The highest income poverty rate was in the United States, where 17 per cent of households fell below the half-the-median mark. Australia, at 14.3 per cent, was second worst, and Canada, at 12.8 per cent, was third. Canada had plenty of company; our income poverty rate was only slightly worse than those of Italy, Britain and Ireland.

What a meaningless measurement.  The less regulated an economy is, the greater the distance between the richest and "poorest". But that's not necessarly a bad thing.  The question is one of quality of life.  We shouldnt' be worrying how rich people are.  We should be making sure that our poor have the essentials -- and they do.

But when you manufacture statistics based on what % of the households fall below the half-the-median mark, that is meaningless.

If you put two great runners together and have them run for an hour, odds are one of them will be quite ahead of the other.  That doesn't mean the guy behind is some sort of loser. He'd still kick my ass. 

Poverty cna't be measured by how far away from the richest people are. If one falls into that kind of thinking, it encourages regulation in which we start confiscating from the top wealth creators to "slow them down" to give it to the poor to "speed them up".  And when you do that, in the long run, you end up with everyone doing poorer.

on Aug 31, 2004
Draginol: Surprisingly, I am agreeing with you here on many points.

But ultimately, my point boils down to the "poverty rate" having become non-useful. If we want to really go after poverty, we need to come up with a reasonable definition of it.


I agree completely that true poverty is not what is being described by the newly released poverty figures.

Depending on what portion of our military income is taken into account, which would likely be just the "base pay" taxable income that my husband receives, we are beneath the poverty line for the state of Hawaii. However, our standard of living (particularly when you consider free housing, non-taxed allowances, and free health care) is more than double the base pay amount. We very well could be reflected in the poverty numbers, yet we live a very comfortable life with a newish vehicle, nice clothes, groceries aplenty, etc. Using the term "poverty" in this way is very misleading. I also agree that the cut off numbers for considering an individual or a family to be living in "poverty" are high and do not reflect the living conditions that the word "poverty" might suggest.

Poverty cna't be measured by how far away from the richest people are.


Whaddaya know, I agree with that, too.

The question is one of quality of life. We shouldnt' be worrying how rich people are. We should be making sure that our poor have the essentials -- and they do.


Another good point. Interesting post, Draginol.

on Aug 31, 2004
Sounds a bit like the formula used to determine unemployment levels, they are both designed by public servants to please their masters.

I was pleased to see however that I myself am not poor just because I am Australian.
on Aug 31, 2004

I think it all comes down to standard of living. I did a blog on this a good while back, asking that politicians leave me out of their statistics. While I am not technically in the poverty zone, I am among the more-abused class of "low income" Americans.

I think what is obscenely overlooked is that many Americans aren't all that upset about it. I have 3 computers in my house, cable, air conditioning, good insurance, all the food I can eat. With the skills I have, I could spend more time away from my family and make a great deal more. The difference, however, would be minimal in terms of how I live my life. I would have money invested, instead of sitting in a savings account, basically. Perhaps I would go on more vacations, to more preferable places.

In the end, though, the wealthy in America don't live very differently than "low income" Americans. I always tell my wife that the wealthy find ways of equalizing their lifestyle with ours, spending much more money and having basically the same stuff. Instead of spending 2 or 3 thousand on a used car, they spend 20k or 50k, or just lease (rent) one. Instead of buying a 20 dollar toaster, they buy one for $100. In the end, when you add up all these "upgrades", we all have the same stuff, the wealthy just pay more for theirs.

I know people who are really living in poverty. Some, frankly, deserve their misery, while others have fallen on hard times and need help getting back on their feet. The government is there for both groups. I believe though, that when you exclude students not yet in the workforce, and people like myself who are satisfied living simply, the real "poverty" rate in this country would hover somewhere around the unemployment rate, or even less.

One issue that causes the most pain and anger in the US is location ( location... location... ) Some places in the US have cost-of-living- so high that those in the Middle Class struggle as hard as those in poverty. People are so glued to their locales that they refuse to accept there are places they can get rent on an equivalent house or apartment for a third, or a fourth of what they pay there. I see people talk about their bills in NYC and I shudder. I live here comfortably, but in many areas I wouldn't be able to live at all on what we make.

I suppose it demands that people make hard decisions on where they want to live. Fly-over America is no doubt more boring, but most of us don't spend our time needing more money and angry at the government, either.

on Aug 31, 2004
But when you manufacture statistics based on what % of the households fall below the half-the-median mark, that is meaningless.


I'm not disagreeing with much of what you say - absolute poverty is what counts the most - but to say that this statistic is meaningless isn't quite true either, imo. Countries that are relatively wealthy (first world nations) and have the LEAST income disparity, have consistently been show to have the happiest people there. This is a different, or course, than what you're talking about, but important nevertheless.

JW
on Aug 31, 2004
Getting back to the politicizinig of this issue, the problem is that this number grows each year and it's not merely adjusted for inflation


I'm pretty sure it *is* merely adjusted for inflation... or at least so says this week's Economist:
http://www.economist.com/agenda/displayStory.cfm?story_id=3146724

though it is pretty arbitrary since the rationale for the original poverty line is obsolete.

Yes, the actual *rate* of poverty is pretty meaningless. What *is* meaningful is *changes* in the rate. If more people fall below some line, however arbitrary that line may be, that means that people at the lower end of the income scale are doing worse. So it is useful as a crude measure of how the economy is doing.

I'm not sure what your gripe is, really. The poverty line is just one yardstick by which you can measure the economy. Government aid to people isn't determined by the poverty line, but by other measures. Is it just that you think that the high "poverty rate" gives people a distorted view of how well/poorly the economy is doing? If so, I think you're asking too much of a single number...
on Aug 31, 2004
"I'm not sure what your gripe is, really. The poverty line is just one yardstick by which you can measure the economy."

It only becomes a problem when it is subjectively used to propel one's self into the Presidency. Not unlike the stigma that Bush is hated and yet has pretty much the same approval rating as Reagan and Clinton at the end of their first terms.

My gripe is if you listen to Kerry you'd think we were in the midst of the Great Depression. It is how these figures are spun that is dishonest and damaging.

on Aug 31, 2004
The fact that poverty has *increased* really does reflect badly on Bush though. It's a legitimate thing for Kerry to discuss.

Every statistic has its flaws. For example, the "unemployment rate" is too optimistic: it is lower than "true" unemployment, since it does not count people who feel they have no chance of getting work and thus have given up trying to find it. This is a significant effect, though it's been a while since I took econ so I don't remember exactly how big it is, but would add a couple percent to the headline unemployment rate. But if, hypothetically, unemployment fell, it would still reflect well on Bush and he would have a right to talk about it--even though the number given would be "too good." And conversely, if unemployment rose, it would reflect badly on Bush.

(All of this applies only to the extent that you believe the government affects the economy, of course. But Bush made grandiose claims about his tax cuts as economic stimulus, and has to live or die by them.)
on Aug 31, 2004
I agree with vincible. Clearly, what defines actual poverty is subjective. Choose any arbitrary income number and use it as a way to determine who is doing better with the current administration and who is doing worse. The political left is producing numbers to convince people that the current adminstration is causing inreasingly more wealth to be in a decreasingly smaller minorty's hands. To argue the semantics of a word in the face of an actual challenge to the quality of governership seems to me to be the worst form of sophism. In the formal philosophy of logic, we call that a "Straw man."

I think it is even possible that you could think that a smaller and smaller elite controlling the wealth and power of a nation is a good thing (Plato had some good arguements for this). On the other hand, how you could proffess to be radically in favor of freedom and democracy (enough to kill and be killed for it) in the same breath is a little bit beyond me.
on Aug 31, 2004
What a meaningless measurement. The less regulated an economy is, the greater the distance between the richest and "poorest". But that's not necessarly a bad thing. The question is one of quality of life. We shouldnt' be worrying how rich people are. We should be making sure that our poor have the essentials -- and they do.


I agree. Yet too many resent the rich because they see them as "winning" the race or such.

I'm one of poorer people it seems, (appox 4,400 per year) but I have a place to live at, reasonable clothes, etc. I have very nice laptop and car just because I got insurance from my father, and I decided to invest on useful things for college. Sometimes I go out and help people fix computers and etc to earn some money. In fact, I recently helped someone around the yard to get 25$.

Whats the point of explaining my life? Basically, with all that, I do not resent the rich at all. I do resent the poor that does nothing but sit and watch tv. I hate those with no disability but extreme overweight getting SSI/SSDI.

My definition of "poverty line" is this: If a person can afford an apartment on his or her own, can afford food, sometimes clothes and once a while enjoyment, then that person is at or slightly higher than poverty line. Clearly, I'm below that line.
on Aug 31, 2004
We should be making sure that our poor have the essentials -- and they do.


I thought I'd comment on this, in light of the UN report - here, they show that a person with an income at less than one half the median is more likely to die early (before 60 years old) in the US than in any other westernized country. eg, 12.6% compared to the best nation, Sweden, where only 7.3% of those below that half the median mark are expected to die before age 60.

One can reasonably argue that life itself is the most basic essential - and on that measure, that is clearly a failing mark compared to other wealthy nations - which becomes even more stark when you consider that the US has the highest GDP per person on the entire planet.

Link

JW

on Aug 31, 2004
"they show that a person with an income at less than one half the median is more likely to die early (before 60 years old) in the US than in any other westernized country."


That statistic is akin to the "healthier" statistics that have been brought up. When you consider the percent of US citizens that are obese, especially considering obesity is as or more rampant among those in poverty, it takes the edge off the idea that the poor in the US are worse off.

If 5% more people below the poverty line in the US are obese than in Sweden, it would make sense that 5% are in worse health and are apt to die sooner. I think that the figure would be much more than 5%, personally.