September 09, 2005

Quantifying Poverty: The "Broken Yardstick"

Nicholas Eberstadt has on op-ed in the NYT that looks at the outdated way the Federal Govt. defines "poverty rate". The untold story, of course, is the fact that the Johnson Administration began the so-called "War on Poverty" in 1965 and, forty years and $3 Billion later, Poverty won. An objective analysis of these policies shows what an utter failure they have been.

The Census Bureau's lastest poverty rate estimates released on Aug. 30 determined that the percentage of Americans living in poverty was 12.7% compared to 11.2% in 1974. The problem is that the standards being applied were created in 1974 and don't take into consideration changes in economic trends or standard of living. For example:

The unemployment rate is lower, and the percentage of adults with paying jobs is distinctly higher. Thirty years ago, the proportion of adults without a high school diploma was more than twice as high as today (39 percent versus 16 percent). And antipoverty spending is vastly higher today than in 1974, even after inflation adjustments.

In the face of such evidence, what do you call an indicator that stubbornly insists that the percentage of Americans below a fixed poverty threshold has increased? How about "a broken compass?"

Sometime late in July, I received the very Census form on which this study is based. It was very tedious to fill out for a family of five persons but, after several prodding phone calls from the Census Bureau, I managed to complete it and return it in time for the August 25th deadline. The questions were focused on employment, household income, and home ownership. Here are some of the questions that the form did not ask me:

- How many cars I owned
- What is my weekly/monthly grocery bill estimate and do I belong to any warehouse/wholesale outlets, like Costco or Sam's Club
- How much do I estimate that I spend on entertainment
- How many televisions do I own and do I subscribe to cable or pay TV service
- Do I own a DVD player
- Do I pay for special education services for my dependents
- Have I taken any vacations in the last year and what are the cost estimates for them

I could go on and on, but the bottom line is that the answers to such questions would go a long way to determining my standard of living. I define "poor" as being barely able to meet the minimum standard of living - food, shelter, clothing, etc.

As Eberstadt explains:

The poverty rate is out of step with all these other readings about deprivation in modern America because it was designed to measure the wrong thing. The poverty rate has always been derived from reported household income. (Exigency played a role here: at the start of the war on poverty 40 years ago, those income numbers were already available from the Census Bureau.) But a better gauge of a household's material deprivation is not what it earns, but what it spends. When we look at spending patterns, we immediately see a huge discrepancy between reported incomes and reported expenditures for low-income Americans.
Hey, I'm no Rockefeller (or Kerry or Kennedy for that matter) and I have to make hard choices all the time between what I want and what I really need. But I can personally attest to the fact that the gauge that the Federal Government uses to quantify "poverty rate" is - in the words of Eberstadt - the "single worst measure in our government's statistical arsenal".

Posted by: Gary at 09:20 AM | No Comments | Add Comment
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