More Earnings May Not Mean Less Hardship

August 20, 2014

Everyone with even a passing interest knows that the Census Bureau’s poverty thresholds are far too low — in part because they’re based on a long-outdated spending pattern.

The Urban Institute’s Molly Scott has a more fundamental objection. “All our national poverty statistics,” she says, “reflect economic poverty.” In other words, they measure total household income — both earnings and payments from programs like unemployment insurance and SSI.

The Census Bureau’s Supplemental Poverty Measure also includes the value of some near-cash benefits, e.g., SNAP (food stamps), housing subsidies, home energy assistance.

But Scott has something quite different in mind than a better version of our poverty measure. “The problem,” she says, is that “the arbitrary poverty line is a bad measure of material poverty, the amount of hardship people experience meeting their basic needs.”

People both above and below the poverty line often struggle to get through the month. The only difference between them is “the mix of resources they use and the costs associated with work,” Scott says.

She gives us two hypothetical single mothers in the District of Columbia. Both have two school-age children. They live next door to each other, so the rent on their apartments is the same. They both have minimum wage jobs. The difference is that one works part time, the other 60 hours a week.

The part-time mom’s family gets a larger SNAP benefit because the household’s income is lower. She’s somehow managed to get a housing voucher — again because her income is extremely low.

At the same time, her transportation costs are lower, presumably because she doesn’t work every day. And she doesn’t have to pay for child care because she works only while her kids are in school.

The end result is that her gross income is much lower, but her family is actually somewhat better off. Probably still facing struggles, but not actually in the hole, like the family headed by the other mom, whose earnings put them nearly $10,000 above the federal poverty line.

The moral of this story is that policymakers — and others — who champion work requirements and other strategies “to get people to work more” are often actually looking for more ways to minimize spending on programs that help poor people make ends meet.

We may spend less, but achieve little or nothing to alleviate hardship, as Scott’s time-and-a-half working mom’s situation shows.

Scott’s conclusion is more cautionary than prescriptive. “[W]e need to make sure our policies and programs do more than swap out subsidies for low-income wages that won’t change people’s quality of life.”

She refers to “real ladders of opportunity and supports along the way.” Which is all very well and good, but we need to do something about those low-wage jobs as well — and about supports for people who, for various reasons, can’t climb a ladder into a genuine living wage job.

For our single mothers in the District, that would be a job paying $32.95 an hour, assuming full-time, year round work. This would give them an annual income nearly three and a half times higher than the poverty line for their families — and about $1,950 more than the median for all households in D.C.

We’ve got bills in Congress that would raise the floor the “ladders of opportunity” rest on. There’s the long-stalled minimum wage increase, of course, but also a pair of bills that would, among other things, ensure that workers don’t get shorted if they’re sent home early or required to work for awhile and then again later because their employers go in for “just-in-time” scheduling.

We’ve got bills that would guarantee most workers some time off with pay so they could stay home when they were sick or for other compelling reasons, e.g., childbirth, an ill family member who needs care.

We’ve even now got a bill that would help ensure that some of the 26 million or so workers employed by federal contractors get paid what they earn.

And, of course, President Obama has used his pen — or as some Republicans say, disregarded the Constitution — to both raise their wage floor and better protect them against wage theft, as well as some other prohibited labor practices.

But the mighty pen can’t boost federal funding for child care — the second largest item in the living wage budget for our D.C. single-mother families. It can’t do anything about the cost of housing, which, as you might expect, is the largest.

And it’s highly doubtful Congress will either — any more than it will raise the minimum wage or pass all the other bills that would somewhat improve the financial circumstances of low-wage workers.

What’s more frustrating, in a way, is that there is no silver bullet — or round of silver bullets — ready for policymakers to fire, if they choose. Material poverty seems to me even more complex than plain vanilla economic poverty.

Which isn’t an argument for doing nothing. There’s a lot that can be done, much of which we already know. It is an argument, however, as Scott implies, for rejecting out of hand solutions that rely solely on getting more people into the workforce.

 

 


Who Is Poor? Depends Who’s Asking and Why.

May 30, 2013

New York Times columnist Thomas Edsall recently took a thoughtful tour through a vexatious question: Who is poor? Or more precisely, what measure should we use to decide?

As he indicates, this is more than an abstract issue for wonks to debate. It has immediate consequences for public policy decisions — most immediately perhaps, for the moves toward “reforming” Social Security and Medicare.

Because if fewer seniors are poor than the Census Bureau’s official poverty measure indicates, there’s a case to be made for reducing their benefits and funneling the savings to children and youth.

Not necessarily a good one. And not what Congressional Republicans want to do with the savings. But these are separate stories.

As I’ve said countless times, everyone knows the official measure is outdated — and was over-simple to begin with.

The Census Bureau’s Supplemental Poverty Measure aims for greater accuracy.

One the one hand, it takes account of more income sources and, on the other hand, certain necessary expenses, e.g., taxes, out-of-pocket medical costs, child care and work-related transportation.

Then it adds and subtracts from what families at the 33% spending level pay for four basic needs — food, clothing, shelter and utilities.

The end result is a significant increase in senior poverty and a smaller drop in the child poverty rate.

Right-wing conservatives have argued for some time that the official poverty rate is grossly misleading — and the SPM rate worse — because people they classify as poor enjoy a standard of living that’s a far cry from what we think of as genuine deprivation.

Look, says the Heritage Foundation, at all the “amenities” officially poor households have — refrigerators, TVs, cell phones, etc.

This is a crude — and misleading — version of a consumption-based poverty measure. The details of what economists have done to come up with such a measure — or in some cases, a framework for developing one — are far beyond my expertise.

The basic notion, however, is that what people consume or spend is, over time, a better measure of their material well-being (or lack of same) than their income, whether it includes the value of in-kind benefits or not.

And besides, people often understate their income on surveys like those the Census Bureau uses, says economist Bruce Meyer, a lead proponent of the consumption-based method.

He and James Sullivan, also an economist, argue, among other things, that both the official poverty measure and the SPM overstate poverty among the elderly, mainly because seniors are more likely than others to be spending out of savings and not spending on some big-ticket items because they own them outright, e.g., homes and cars.

When Meyer and Sullivan use their method, the poverty rate for seniors becomes 3.2% in 2010, as compared to 9% according to the official measure and 15.9% according to the SPM.

Shawn Fremstad at the Center for Economic and Policy Research has proposed an even more complex framework. The object, if I understand it correctly, would be to capture both a lack of basic economic security and deprivation — or hardship — based on our evolving standard of living.

Thus, the “amenities” that the Heritage Foundation cites as proof that most officially-poor Americans aren’t poor become necessities when experts and we, the general public, view them as such.

This hearkens back to a very old idea. Adam Smith wrote, in 1776, that he understood “necessaries” as “not only the commodities necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even the poorest, to be without.”

James Cassidy, among others, has used it to argue for a relative definition of poverty — somewhat like the SPM, but with a far higher poverty threshold.

Cassidy suggests half the median household income. This could be adjusted for different household sizes, he says, as the Census Bureau already does for its poverty thresholds.

The OECD, an organization consisting mainly of highly-developed countries, does something of this sort for its poverty measure. It sets its poverty line at 50% of median income and then calculates the gap between that and the average income of people who fall below it.

Countries within the European Union also use a percent of median or average income. The percents vary, and some countries use multiple measures.

Ireland, for example, begins with the EU-wide at-risk of poverty line — 60% of median income. Then it calculates the percent of people below it who can’t afford 11 specific items and activities, e.g., new clothes, keeping the house warm.

In all these cases, poverty is conceived of as deprivation, relative to the country’s standard of living.

EU policy, however, pairs low income and/or material hardship with common consequences — not only practical disadvantages like unemployment, social exclusion and restricted access to “fundamental rights.”

This concern with inequality and social exclusion is the fundamental rationale for a measure that will always define some people as poor.

Exactly what the Heritage Foundation so ferociously objects to, since it tends to justify continuing government spending on anti-poverty and upward-mobility programs.

The basic issue, in other words, isn’t how to most accurately measure poverty. It’s how we want to define poverty itself — and to what end.

As Professor Robert Haveman wrote about 20 years ago, “Defining poverty is not just a matter of measuring things in the right way; it also requires fundamental social judgments, many of them with moral implications.”

This is why I think the measurement debate won’t get settled — and why it’s something we all have a stake in.


“Ponzi Scheme” Keeps Nearly 14 Million Seniors Out Of Poverty

September 27, 2011

I’ve remarked before that the measure the Census Bureau uses for its annual poverty reports was crude from the get-go. Three times the cost of what was then the U.S. Department of Agriculture’s lowest-cost food plan.

The measure has become increasingly inappropriate over time, as food costs have come to represent a smaller portion of basic living costs and living standards have risen.

Shawn Fremstad at the Center on Economic and Policy Research tells us that, in the early 1960s, the poverty line was nearly half the median average income. It’s now slightly under one-third.

Other research, he says, suggests that twice the applicable poverty threshold would be a better indicator. That would put 33.9% of Americans, rather than 15.1%, into the poverty category.

Well, the Census Bureau will be issuing poverty figures based on an alternative measure it’s developing. In the interim, it gives us a bit of a preview, with three “alternative resource measures” pulled from its 2010 Income, Poverty and Health Insurance Coverage report.

One shows how poverty figures would rise if the current measure didn’t include Social Security benefits. Hence the headline.

In 2010, these benefits kept a total of 20.3 million Americans from falling below the poverty threshold. The largest number — 13.8 million — were 65 and older.

In other words, without Social Security benefits, five times as many seniors would have been officially poor — and therefore very poor indeed.

Specifically, a senior living alone would have had to get along on no more than $10,458 for the year, a couple on no more than $13,194.

To put this in perspective, an elderly couple in the Washington, D.C. area would have had only $678 left after paying the rent for a modest efficiency unit.

The other alternative measures show similar, if somewhat less dramatic impacts. For example, 3.2 million people had enough income to lift them above the poverty threshold because at least one household member received unemployment insurance benefits.

The current poverty measure includes Social Security and UI benefits because they’re cash income. Food stamp benefits aren’t.

But, as the Center on Budget and Policy Priorities reports, 3.9 million fewer people would have been counted as poor if they were part of the Census measure.

These figures ought to send a message to policymakers who want to bring the long-term deficit down by drastic cuts in Social Security, as well as key safety net programs.

Also, I think, provide useful perspectives on what they’re hearing from some conservative economists and columnists.

Professor Edward Glaser, for example, argues that the temporary payroll tax cuts in the President’s jobs plan should be paid for by increasing the eligibility age for Social Security retirement benefits because that “was always going to be part of any sensible entitlement reform.”

So much for those with other ideas.

Washington Post columnist Charles Krauthammer puts a new spin on his long-standing insistence that Social Security (and Medicare) benefits have to be cut because too many of us older folks are living too long — and didn’t have enough kids when we were younger.

Social Security is a Ponzi scheme, he says, implicitly endorsing the view of that well-known economist Governor Rick Perry.

This, I take it, is because Social Security operates like other insurance programs, with premiums some people pay, plus returns on investments, funding payouts on claims by others.

Still, Krauthammer allows that Social Security is “vital” and “humane.” Just needs to be adapted to “new demographics.”

Most important fix is to raise the retirement age — “an absurd anachronism” he calls it, using life expectancy figures that the Social Security Administration itself has shown to be misleading.

This isn’t to say that the Social Security Trust Fund won’t eventually lack funds to pay full benefits if we do nothing to change the system. Only that a further increase in the retirement age is hardly the only way to fix it, let alone the best.

What the new Census figures tell us is that a further hike in the retirement age will almost certainly increase the over-65 poverty rate.

What, pray tell, are older workers supposed to do if they lose their jobs or find the tasks too physically demanding?

Just hang in there in until they’re 70? Take a big cut in benefits at a bumped-up early retirement age — a likely companion to an increase in the full retirement age?

Why not instead address the future shortfall by lifting the cap on the payroll tax? Or at least, as Senator Barney Frank (I-VT) proposes, requiring the highest-earning workers to pay more?


How Many Poor People In America? Heritage Foundation Says Damn Few.

August 9, 2011

Seems that the Heritage Foundation has dusted off some old rhetoric and shaped some new data to fit it. Thus it proclaims, much as it did in 2007, that “many of the 30 million Americans defined as ‘poor’ and in need of government assistance” are actually doing very nicely, thank you.

First, a word of clarification. The reference to 30 million is just sloppy blogging. The Foundation’s actual report says “over 30 million.” Technically accurate, but minimizing. The latest Census Bureau income and poverty report tell us that there were nearly 43.6 million people in poverty in 2009.

As I (and many others) have written before, this figure is based on a rather primitive and woefully outdated measure, i.e., the inflation-adjusted cost of what used to be the U.S. Department of Agriculture’s cheapest meal plan.

The Census Bureau is developing an alternative measure based on recommendations from the National Academy of Sciences.

But the Heritage Foundation doesn’t care for that — indeed, has delivered its latest blast in part to argue (again) that the new measure is a sneaky scheme by the Obama administration to advance a “spread the wealth” agenda.

Its main goal, however, is to give aid and comfort to Republicans in Congress who want to slash spending on public benefits.

As with the House budget plan and Congressman Paul Ryan’s defense thereof, the Foundation aims to foster to view that they’re now going to people who aren’t “truly in need.”

Also apparently to gain currency for the Republican Study Committee’s uniquely expansive view of “welfare.”

As in 2007, the Foundation makes a big deal of the results of a 2005 survey the U.S. Energy Department conducted to find out, among other things, what energy-consuming appliances and other equipment different types of households had.

The Foundation calculated a median average for what it calls “household amenities” in households below the federal poverty line. This becomes “the typical poor household” — a slippery piece of rhetoric, I think.

The household had a lot of “amenities” — not just refrigerators, stoves and the like, but a washer and dryer, two color TVs and more. Not, however, a personal computer, unless there were children in the family, or an internet connection, even if there were.

Still, it’s certainly the case that lots of poor households have “modern conveniences” that were unaffordable to the middle class some years ago. A main reason, as Derek Thompson at The Atlantic shows, is that productivity increases have made consumer electronics extremely cheap.

Not the case for basic necessities like housing. Well, the Heritage Foundation has something to say about that too.

“Poor Americans,” it asserts, “are well housed and rarely overcrowded.” In fact, they’ve got more space than the average European — a dubious shorthand for the average resident of a major city like Paris or London.

Moreover, “nearly all the houses and apartments of the poor are in good condition.” This, the numbers show, means that “only” 12% have moderate or severe physical problems.

The Foundation constructs its rosy picture from the reported results of a national survey conducted for the U.S. Department of Housing and Urban Development in 2009.

I find some of the relevant data difficult to parse. And, frankly, there are good reasons, in this report as well as others, to mistrust the Foundation’s analyses.

But say, for the sake of argument, that it’s reporting the housing data accurately. What do they tell us?

One important thing, I think, is that federal housing assistance programs are working, though not so well as they might.

For example, HUD requires public housing authorities to ensure that vouchers are used to help pay rental costs only for units that “meet minimum standards of health and safety.” And it charges them with determining the appropriate unit size “based on family size and composition.”

This could help explain the relatively low percent of houses and apartments with more than minimal physical problems. The fact that vouchers enable recipients to rent in the private market could explain more, e.g., the high percentage of poor households with air conditioning.

The Foundation handles homelessness and hunger in similar ways. It uses reports issued by federal agencies and highlights the relatively few Americans in the worst-case categories.

The figures, it says, show that the Census Bureau, news media and “liberal advocacy groups” are misleading the American public. True poverty, it claims, means “serious material deprivation.” And, by its showing, there’s not much of that.

Does it follow then that Congress should slash federal safety net spending? The Heritage Foundation clearly thinks so. But the argument it’s constructed is built on a hill of sand.

We don’t have vast numbers of people living on the streets or literally starving to death because we’ve decided that public assistance in the richest country in the world should meet basic human needs.

Our safety net doesn’t do this as well as it should. We see this even in the Foundation’s data points.

But if we backtrack, as it all but recommends, we’ll surely have millions more Americans who meet its willfully minimizing definition of poverty.

UPDATE: As the above indicates, I was suspicious of the Heritage Foundation’s uses of survey data, but I didn’t have the in-depth knowledge to identify specific ways it was manipulating them.

I’ve just come upon a letter from two organizations that do — the National Energy Assistance Directors’ Association and the National Association for State Community Services Programs.

They confirm the point I made in my followup posting, i.e., that a number of the “amenities” the Foundation cites are included in rental units, not purchased by the households. They also identify some other considerations it overlooks and what seem to be out-and-out errors.

The Foundation nevertheless has just trotted out the same argument to discount the Census Bureau’s new poverty data. This, I think, is further evidence that it’s not a responsible research organization.

 


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