No win-win solution to poverty, no matter how you measure it

Poverty has new currency in American politics, with some candidates worrying about growing income inequality and others using the persistence of an economic underclass as an indictment of everything the government has done for the past 50 years. One problem is that people don’t agree on a definition of poverty. Beginning in 1963, the federal government has officially defined a household as being in poverty if its income is less than three times the cost of a simple food budget. Almost no economist considers this a practical measure today, but there’s no consensus on an alternative—partly because each alternative has political implications.

In a Boston Globe article (“Who’s poor? Depends how you measure it”), Amy Crawford explains why the official measure of poverty is outdated: “[It] made sense in the 1960s, when the typical household spent a third of its budget on food. But today food makes up only about 6 percent of our expenses; we spend much more on housing and transportation…. Meanwhile, other things, like cellphones and health insurance, have been added to the average person’s list of bare necessities.”

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Food and clothing have fallen dramatically as a percentage of household spending, from a combined 57 percent in 1900 to 17 percent in 2003, thanks to lower manufacturing costs and more chain stores (both developments raising moral questions of their own). This has meant a bit more spending for “entertainment,” but 21st-century households have taken on some new costs that are unavoidable for anyone trying to find and keep a job: child care, additional education such as an associate’s degree, a car and plenty of gas (for when you can’t afford a house anywhere near your employer), and a cellphone and e-mail account (employers expect to reach you instantaneously).

Crawford writes that the Census Bureau has come up with a new tool, the Supplemental Poverty Measure, that considers costs for food, clothing, shelter, and utilities, plus work expenses such as commuting and child care. By this yardstick, 48.7 million Americans live in poverty, or make less than the equivalent of $25,639 for a family of four. This measure bumps the 2013 poverty rate to 15.5 percent (a percentage point higher than under the older, food-only measure), but it also significantly changes the face of the disadvantaged: “[F]ewer children are ranked as poor—child poverty goes down by 20 percent compared to the official rate. While child poverty is still higher by both measures, more elderly people are poor by the supplemental one; for people over 65, poverty was more than 50 percent higher than the official rate.”

With the new definition, more people over 65 are considered poor in large part because of their health-care expenses. This could mean more political pressure for healthcare spending to benefit the elderly. And this alarms economists like the University of Chicago’s Bruce D. Meyer and Notre Dame’s James X. Sullivan. They argue in an academic paper that the Supplemental Poverty Measure counts too many people as poor who enjoy a high standard of living (i.e., a large home with modern appliances). They may have low incomes, but many are drawing from retirement savings or taking advantage of the equity in their homes. In contrast, some families may have higher incomes but still not enough money to afford a home in a safe neighborhood, or enough to buy new clothes when children grow or their shoes fall apart.

Crawford writes that the two economists have come up with yet another way to measure poverty: “[They argue] that we need to look at how much people spend, rather than how much they earn, in deciding whether they are poor. This would knock many older people off the poverty rolls while adding children, and if used as a guide for aid could mean more money for families. But it would be politically risky, because it might take a bite out of programs to help the elderly, who are famous for turning out to vote.”

Indeed, the political benefits of stirring up fear and resentment among older voters are probably too great for any significant change to the definition of poverty. And a Census report released this week suggests that older voters are only going to become more powerful: “Overall, the percentage of the total population that is under the age of 18 is projected to decrease from 23 percent to 20 percent between 2014 and 2060…. In contrast, the percentage of the population that is aged 65 and over is expected to grow from 15 percent to 24 percent, an increase of 9 percentage points.”

Add the fact that a growing percentage of children will be non-white and foreign-born, and the generational tussle over who should benefit from anti-poverty programs may only intensify over the new few decades.

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