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Defining Poverty

01 Jun 2010
Posted by Bruce Bartlett
Yesterday, columnist Bob Samuelson criticized the Obama administration’s plans to change the definition of poverty that underlies calculation of the poverty rate. The official definition has been largely unchanged since the 1960s and a variety of experts on the left and the right have suggested improvements. The central problem, historically, is that all reforms proposed by conservatives would tend to lower the official poverty rate, while those proposed by liberals would tend to raise it. This has led to a long-term détente between both sides to maintain the status quo. Following are some Internet resources on the definition of poverty.
 
On May 26, the Census Bureau published a Federal Register notice regarding development of a supplementary definition of poverty. In March, a working group studied this issue and its report is here. The Census poverty web page is here. The latest official poverty report is here, along with experimental definitions of poverty that adjust for things like taxes and noncash transfers that are not included in the official definition of poverty.
 
In 1992, HHS economist Gordon Fisher wrote a thorough history of development of the poverty threshold by Social Security Administration economist Mollie Orshansky in the early 1960s. Ms. Orshansky, who died in 2007, had data from the Department of Agriculture showing what percentage of family budgets went for food based on income and family size. From this she developed a hypothetical poverty threshold in 1963 that Lyndon Johnson used to launch his “War on Poverty.” The conversion of Orshansky’s theoretical construct into a rigid definition that survives to the present day (adjusted only for inflation) was basically done by the Council of Economic Advisers in its 1964 annual report.
 
In 1995, the National Academy of Sciences published an in-depth study on measuring poverty. The entire report is online here. The proceedings of a 2005 NAS workshop are available here.
 
On August 1, 2007, the Subcommittee on Income Security and Family Support of the House Ways and Means Committee held a hearing on how to measure poverty with Patricia Ruggles, Douglas Besharov and other experts.
 
Conservative economist Nick Eberstadt’s 2008 book, The Poverty of “The Poverty Rate,” is available online here.
 
One issue that has divided researchers is the changing public perception of what goods and services are “necessary” and which ones are “luxuries.” Over the years, of course, many items such as cell phones were once considered extravagant luxuries only available to the rich, but are now ubiquitous even among the poor and would be considered a necessity by many people.
 
            ● A 1993 study by the Social Security Administration looked at changes in the public’s view of what constitutes poverty over time.
 
            ● A 2006 study from Pew surveyed people on items that were considered necessities in 1996 and 2006. Among increases in the percentage of people defining items as necessities: cable/satellite television, 16%; home air conditioning, 19%; dishwashers, 22%; home computers, 25%; microwave ovens, 36%. Having a high-speed Internet connection did not register in 1996, but was viewed as a necessity by 29% of people in 2006.
 
            ● A 2007 Census study looked at the ownership of once-luxurious appliances among households with incomes below the poverty level. Among the findings: 36% of households in poverty owned computers in 2003 versus 67% not in poverty, and 35% of poverty households owned cell phones versus 67% of non-poverty households.
 
            ● A 2009 MetLife study found the following percentages of people identifying these items as necessities: high definition TV, 8%; mp3 player, 8%; cable TV, 42%; cell phone, 62%; and home Internet access, 75%.

Internet Resources

I like the idea of brief guides to Internet resources like you did here and with corruption before. I hope you'll do more on other topics. Thanks.


Another resource

Becky Blank has thought a lot about poverty measurement and is surely a prime mover behind the new proposal (she's undersecretary of commerce). Here is a very good lecture on the issues involved in poverty measurement she gave a couple of years ago. http://www.npc.umich.edu/news/events/pdf/Blank-PovertyMeasure%20(2).pdf


Blank

She was on the CEA staff back when I was at Treasury. 


Poverty Defined

I define poverty as living in a runaway tax state like NY with it's own mind boggling future liability problems and inheriting a national debt from older generations so large my great great grandchildren will still have to pay off. And I dont even have kids yet




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