Recent research suggests ...

By IAIN MURRAY, Special to UPI  |  Sept. 20, 2002 at 9:11 AM
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WASHINGTON, Sept. 20 (UPI) -- An article published in The Washington Post's Outlook section Sunday suggested that federal statistical methods used to measure poverty in the United States are inadequate.

Deepak Bhargava, executive director of the National Campaign for Jobs and Income Support, and Joan Kuriansky, executive director of Wider Opportunities for Women, argued that the income calculations used to define the official federal poverty level since the 1960s are out-of-date and insensitive to regional change. Bhargava and Kuriansky may have a point, but the issue is far more complicated than even they suggest.

One of their central points is that the structure of family budgets has changed since the '60s, when it was assumed that one-third of a needy family's budget should be spent on food. They claim that, "for most families today, food constitutes less than a fifth of their budgets," because costs of other items such as transportation, housing, health care and so on have either risen or make greater demands. However, according to a report for the Bureau of Labor Statistics (BLS) in 1996, families below the poverty line spend 30 percent of their income on food, while single-parent poor families actually spend slightly more than a third. Families receiving welfare spend less -- 25 percent. That is probably because food stamps are not included in the measure of income -- which is an important point.

The federal measure uses a narrow definition of income that could even be called misleading. It assigns no value to a host of in-kind benefits received by the poor, such as food stamps, Medicare and Medicaid, and government-subsidized housing. Tax breaks such as Earned Income Tax Credit are not included either. This deficiency led Harvard University sociologist Christopher Jencks to call the official poverty statistics faulty because "they do not take account of changes in families' need for money (that result from receiving in-kind benefits). They make no adjustment for the fact that Medicare and Medicaid now provide many families with low-cost medical care, or for the fact that food stamps have reduced families' need for cash, or for the fact that more families now live in government-subsidized housing."

So there are arguments that the official poverty measure might overestimate poverty, rather than underestimate it as Bhargava and Kuriansky allege. Yet both these lines of questioning suggest the same answer: that the official poverty level is flawed because, in defining poverty by income, it is using the wrong measure.

It is true that when we think of the poor we tend to think of those with little cash, but the paradox emerges that many people have low incomes because they are not poor. Those with substantial savings, for instance, do not require substantial earnings. One can have substantial assets, but still be poor. The BLS report referred to above, for example, found that 41 percent of poor families owned their own home. Even a quarter of families receiving welfare benefits did so.

So the poverty measure encompasses many that are quite well-off: retirees who are homeowners, with limited incomes but substantial assets to draw off, Ivy League graduates just entering the workforce, whose incomes are supplemented informally by their parents, or small business owners who have suffered a bad year but who still possess substantial assets and whose cash flow is adequate to meet their needs.

Thus, the BLS can report every year that the poor spend far more than they report earning. In 1989, for example, the mean income of people in the lowest income quintile was $5,720, but they reported spending over twice as much ($12,378) during the year.

We therefore need to think about other measures than income that we can use to measure poverty. What, for example, makes a family poor? Jencks has suggested a range of indicators: "How many Americans are going to bed hungry, how many have had their gas or electricity cut off, how many have been evicted from their homes, how many live in housing that their fellow citizens judge unacceptably crowded, how many think they need medical care they are not getting, or how many have untreated toothaches?"

All these, and more, could feed into an index of poverty based on actual needs that are not met. At present, because we use an inadequate proxy to determine where poverty exists in this country, we are aiming at the wrong target. Increasing the size of the target does nothing to address that central problem.

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