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As I’ve said countless times, everyone knows the official measure is outdated — and was over-simple to begin with.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