What does poverty mean fifty years after the Federal government began systematically measuring it? This piece in The Atlantic points out some of the statistical problems with the way we measure poverty over time, but it misses what I think is the most important missing element. Here’s the problem pointed out in the article:
The Census Bureau’s method for deciding whether a family falls above or below the poverty line is also a problem, because it only considers pre-tax cash income—meaning wages and government benefits like Social Security payments. What’s wrong with that? Well, it ignores massive anti-poverty programs like food stamps, which families spend just like cash, or the Earned Income Tax Credit, which gives their finances a boost after tax season.
Our current approach to calculating poverty is so full of holes that, for the past few years, the Census Bureau has produced an alternative number known as the “supplemental poverty measure” or “SPM”—which is bone-dry government speak for “the statistic you should really be paying attention to.” Think of it as the official poverty rate’s smarter, more realistic cousin. On the one hand, it accounts for additional expenses, like medical care and regional variations in housing. On the other, it better incorporates government benefits, like food stamps and housing subsidies. In the end, it usually comes out to be a little less than a percentage point higher than the official poverty rate.
What’s also missing though is a more realistic measure of the steep decrease in the overall cost of living, as measured by our ability to obtain (cheaply) things that no one in 1965 was even dreaming of. This comparison from a previous article comes to mind:
In 1985, a top of the line Ford Mustang GT carried a sticker price of $14,000 which, adjusted for inflation, equals roughly $30,000 today. That car featured an AM/FM radio with an optional cassette deck. The finest Mustang you could buy in 1985 had no air bags, no anti-lock brakes, no remote electronic door locks, no CD player, USB port, or heated seats.
It had no cup holders.
Visit a Ford showroom today and you can drive away with their finest Mustang GT tricked out with advanced safety features, every imaginable gadget, excellent engineering and reliability, a spectacular warranty, and even cup holders for about $30,000.
The examples could go on and on. In 1985, not even Steve Jobs could afford to store and use all of his music and movies on a device the size of a credit card. Now you can get one on eBay cheaper than the relative cost of a Sony Walkman in the ‘80’s. Overseas travel, electricity, movies, stock trading, even fresh vegetables in the wintertime are cheaper, better and more broadly available than they were just a generation ago. The only things that are getting more expensive are services that still depend on direct, personalized interaction with a human expert, like health care and education.
An accurate measure of relative poverty over time is highly elusive. Measuring rising inequality may be a more practical way to determine how lifestyles and well-being have changed over time.
Balanced against the incredible economy of technology, the surest way to join the lower economic ranks is to become “insurance poor”. I still advocate “National Drop Your Insurance Day” just to give the proper economic shock to the robber barons who are the puppet masters of the show. It would only take a couple of days to bring them to their knees, and then the middle class would magically reappear in the U.S.A. No joke!
How about measuring ambition inequality? I have a issue that might help youth unemployment. Allow those 20 and under to work without regard to a minimum wage and lower the age for employment to 14*. And allow the minimum wage to be raised to whatever the most bug-eyed liberal declares it should be for those over 21.
Small business would get the cheaper labor they need while younger people would get job skills while employed. Employers could weed out the useless ones and reward the good ones per regular free market principals.
Two things will likely occur. The young will learn marketable skills and the market will decide early on who is worth employing. My hunch is the dynamics would be fascinating and rewarding.
Can you imagine a 23 year old guy that never worked, no college and no discernible skills applying for a $15/hour job and getting it? I can but he’d better have his game right. And imagine him being supervised by a 20 year old making $10? What happens on the younger kid’s birthday? He gets a 50% raise and hires another 19 year old for $8. That original $15 guy better be worth it or he’s gone but at least he learned early how distorting the market works out. He might even consider working for less than $15 if the law allowed it somehow.
Or depend on g’ment if the g’ment declares he must.
* I came up with 14 because at age 13 I was hired as a busboy at a restaurant and that was my very first paycheck outside of throwing papers, mowing yards, etc. I believe I was paid $1.35/hour plus tips. The tips were paid by the waiters and waitresses though. Believe me, if you didn’t make them happy you went home broke.
Just what country do you think you are living in? Our child labor laws protect kids that young from jackwagons like you who would have kids working a slave wages working hours that would prevent them from getting a good education. Unless you are 80 years old I seriously doubt that you worked anywhere wages were paid. I don’t buy your schtick so try again.
I’m not advocating slavery at all. It is totally voluntary. You want your kids sitting around playing X-box all day go for it.
You’re afraid my kids will out run yours. You’re right.
Dan, if you didn’t exist, we would have to invent you.
Leave the crib and check out the world someday gamer.
HSAH, good to see you here!
On the topic,
Definitely fighting a war on something is made more difficult by trouble in defining exactly what you are making war on. And then changing your yardstick has all sorts of political consequences.
great point flypusher, for class warriors in the war on poverty eliminating poverty is the MacGuffin, merely proclaiming the effort is enough to win the votes. Results don’t matter.