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It's Time to Redefine U.S. Poverty

A February 18th article written by Erik Eckholm for The New York Times details a “reignited” debate about poverty measurements in the United States:

A brief report this week from the Census Bureau, highlighting how welfare programs and tax credits affect incomes among the poor, has fanned the politically charged debate on poverty in the United States and how best to measure it, with conservatives offering praise and liberals saying it underplays the extent of deprivation.

The report, “The Effects of Government Taxes and Transfers on Income and Poverty: 2004,” found that when noncash benefits like food stamps and housing subsidies were considered, as well as tax credits given to low-income workers, the share of Americans living under the poverty line last year was 8.3 percent.

This is well below the 12.7 percent of Americans that the government officially says lived below the poverty line in 2004, using the conventional methodology that only counts a family’s cash income.

What are the shortcomings of the conventional methodology?

The official poverty line was developed in 1960 and based on the simplest of calculations: the cost of feeding a family, multiplied by three. Since then, the original income cutoff has been adjusted for inflation but not for the radical changes in society and household expenses.

Many sociologists and other professionals have argued for years that the calculations require significant changes. One report from The CNSTAT Workshop on Experimental Poverty Measures noted the following last year:

Over the past 40 years … the poverty measure has become increasingly outdated. Poverty lines based on the cost of food no longer capture families’ basic needs because of the rapid growth in housing prices and other expenditures, such as medical care and child care, relative to food prices … In the 1960s, the official poverty threshold for a four-person family coincided with people’s views of the dollar amount needed to support such a family, as reported in public opinion surveys. By the 1990s this was no longer true … The unfortunate result is that the current official poverty measure no longer accurately captures either people’s perceptions of poverty or the effect of various policies on poverty.

While the Census Bureau has made some adjustments in its new report, it still underestimates expenses:

“Yes, the E.I.T.C. means a family has more money, and that’s good,” said Timothy Smeeding, an economist at the Maxwell School of Syracuse University, referring to the Earned-Income Tax Credit, which can pay thousands of dollars to a low-income worker. “But going to work can also mean high new expenses for travel and child care, for example, and these aren’t included.”

“They’ve added in the extra benefits people get, but not the extra costs,” Mr. Smeeding said of the Census Bureau, adding that the report gave an overly optimistic figure of living conditions on the bottom.

A second criticism of poverty measurement in the U.S. involves using income as a sole indicator of deprivation and hardship. Many countries in Europe, particularly England, utilize a more comprehensive approach to measure “social exclusion.”

These differing methodologies can be seen in a comparison of two government Web sites:

U.S. Census Bureau: Poverty

(UK) National Statistics Online: Social Inequalities

For a better understanding of the social exclusion framework, read “Social Exclusion: The European Approach to Social Disadvantage,” written by sociologists Hilary Silver and S.M. Miller.

Simply put, the EU recast exclusion as an inability to exercise “the social rights of citizens” to a basic standard of living and as barriers to “participation” in the major social and occupational opportunities of the society … In contrast to poverty, which is exclusively economic, material, or resource-based, social exclusion offers a more holistic understanding of deprivation …

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