How America made a mess of measuring poverty


Since 1963, the United States has been measuring what percentage of its population is in poverty. But it hasn’t changed the way it measures poverty since 1963, either. Outside of annual adjustments for inflation, the Official Poverty Measure (OPM) works the same way now that it did six decades ago.

Rep. Alexandria Ocasio-Cortez (D-N.Y.) aims to fix that. She introduced her Recognizing Real Poverty Act in September of last year, part of a larger suite of measures to aid low-income Americans. According to her office, the bill requires federal agencies to “adjust the federal poverty line to account for geographic cost variation, costs related to health insurance, work expenses for the family, child care needs, and new necessities, like internet access.”

Granted, this is a call for a reform, and a study of what that reform should be. It doesn’t lay out precise end goals. But Ocasio-Cortez is right: The way America defines poverty right now is a conceptual trainwreck.

Let’s run through the problems.

First off, the OPM focuses solely on food: Using 1955 data, it defined a basket of foodstuffs any household would need for basic living, adjusted for family size, and determined that a household was in poverty if that basket cost more than a third of its overall budget. Basically, the Johnson administration needed some way to set eligibility for its new welfare programs, so it grabbed some work being done by government statisticians and retrofit it as an overall poverty measure. Other than the inflation adjustments, that’s still how we define the poverty line. And it’s still what we use to decide eligibility for a whole bunch of programs, from Medicaid to food stamps, school lunch programs, Obamacare’s subsidies, and other grants and forms of assistance.

But focusing on food leaves out things that existed at the time that any reasonable person would also consider necessary for basic dignified living standards (health care, child care). And, of course, it leaves out other needs that have arisen since (like internet access or mobile phone service). Yet another problem is what sources of income are and aren’t counted towards the total family budget, which the food budget is then measured against.

The answer to this last question is basically a random hodgepodge: Wage income is counted, along with dividends and interest payments; but capital gains from selling assets are not. Granted, capital gains aren’t exactly relevant to the average low-income American, but government aid certainly is: The OPM counts unemployment insurance, Social Security, workers’ compensation, and other benefits that are straight cash aid. It does not count assistance that isn’t simple cash — say, health coverage in the form of Medicaid, or benefits linked to certain needs, like food stamps or housing assistance. Nor does the OPM count government aid that is distributed via the tax code, like the Earned Income Tax Credit or the Child Tax Credit.

This creates a perverse situation: Lawmakers, citizens and journalists all cite the OPM in discussions and arguments …read more

Source:: The Week – Business


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