Study contradicts official USA poverty figures

Poverty in the USA has fallen by 12.5 percentage points over the past 40 years, according to a new paper – contrary to official government statistics showing a rise in the number of people in poverty. Researchers argue that a more accurate picture is given by looking at changes in consumption rather than income. They also advocate improved income measures that remove bias in official price indices. On the basis of these alternative measures, they conclude: 'We may not have won the war on poverty, but we are certainly winning'.

 

Key points

  • Consumption-based measures are in principle a better measure of well-being than income-based measures. In addition, consumption is better reported than income by families with few resources.
  • Trends for consumption-based measures of poverty, along with broader income-based measures, differ considerably from the official measure. A consumption-based poverty measure that also adjusts for bias in price indices shows poverty falling by 12.5 percentage points between 1972 and 2010, whereas official figures show a rise of more than 2 percentage points over a similar period.
  • These results are corroborated by other indicators of well-being for those on low incomes, such as increased car ownership and improved living conditions (including larger living units with air conditioning).
  • Explanations for these improvements in poverty include the use of tax cuts and credits to reduce income poverty, along with increases in social security on the spending side.
  • The composition of the 'consumption-poor' is very different from that of the 'income-poor'. Compared with the latter, the consumption-poor are less educated, less likely to own a home, much more likely to live in married-parent families, and much less likely to be single or elderly.
  • Married-parent families with children have fared less well in recent decades than income data indicate, whereas older people have done better. This suggests that future anti-poverty efforts should focus more on families with children.

Source: Bruce Meyer and James Sullivan, Dimensions of Progress: Poverty from the Great Society to the Great Recession, Conference presentation to Brookings Panel on Economic Activity, 13–14 September 2012
LinksPaper | Notre Dame University press release

Category: