May 26, 2001
How to Define Poverty? Let Us Count the Ways
By LOUIS UCHITELLE
he Census Bureau each fall goes through a ritual that is as Americana as the World Series. A press conference is convened, and senior officials, illustrating their numbers with colorful charts, disclose to the nation the latest income data. None gets more attention than the poverty level. A family of four that falls below $17,062 in annual income falls into poverty, the bureau declared last September.
Federal aid programs indexed to the poverty line — Head Start, food stamps and children's health insurance, among others — are then doled out accordingly, which is a lot of power for a statistic that is out of touch with reality.
In public opinion polls, most Americans say that poverty begins north of an annual income of $20,000 for a family of four. Not even the Census Bureau believes its poverty numbers. Since 1995 the bureau has been developing a new measure, one pegged more closely to the actual cost of getting by. A progress report is due in July, but building the new income and expenditure procedures and testing them take time, Census Bureau officials say. A final proposal is not likely to reach the White House for approval in President Bush's current term.
Not that he minds. His predecessor didn't. "Whenever the question of the poverty data came up informally," said Robert B. Reich, who was President Bill Clinton's first secretary of labor, "the consensus was not to change the standard for fear the poverty rate would look worse" — although the present poverty figures, as Mr. Reich put it, "are almost meaningless."
Defining poverty is not easy. Even if the Census Bureau's new measure calculates necessary expenditures more accurately than the current formula, the new approach, like the current one, still uses income as the single criterion for judging who is poor. That leaves out neighborhoods, for instance. Is a ghetto family impoverished because of its crime-ridden surroundings and poor schools, although the family has enough income to rise above the official poverty threshold? And there is the issue of responsibility. Should the family of a hardworking full-time employee earning the minimum wage be blamed for poverty because the minimum no longer lifts the worker's income above the poverty level, as it did in the 1960's and early 70's?
"Poverty is really the lack of freedom to have or to do basic things that you value," said Amartya Sen, the Nobel laureate in economics. By that definition, a ghetto family that wants to move to an adequate neighborhood but cannot afford to do so or is prevented by discrimination from doing so is impoverished.
Or try this definition from Benjamin I. Page and James R. Simmons, political scientists at Northwestern University and the University of Wisconsin, Oshkosh, respectively, and the authors of "What Government Can Do." (University of Chicago Press): "A person deprived of things that everyone around him has is likely to suffer a sense of inadequacy, a loss of dignity and self-respect."
That brings state of mind into the mix, introducing all kinds of judgments that few people agree on. For all their concern about living standards, Americans have left the definition of poverty to politicians, who have defined it narrowly.
Income levels have been the only criterion since 1965, when President Lyndon B. Johnson adopted the present poverty formula. The latest figures show that 11.8 percent of the population lived in poverty in 1999, the lowest percentage in 20 years. The formula is not merely a statistical statement, however; it carries a particular viewpoint as well, about who is responsible for poverty — government, society or the individual.
You neutralize poverty "by keeping the focus on the characteristics of poor people rather than on the economy, politics and society more broadly construed," writes Alice O'Connor, a historian at the University of California in Santa Barbara and the author of the recently published "Poverty Knowledge" (Princeton University Press).
For Lawrence Katz, a Harvard economist, and William Julius Wilson, a sociologist at Harvard, ghetto neighborhoods reinforce poverty and contribute to it. But dismantling ghettos and integrating neighborhoods, a hugely complicated endeavor, has not been high on the agenda of any administration in 20 years. Nor has the minimum wage. Adjusted for inflation, it has declined from more than $6 an hour in the 1960's to $5.25 today.
"Rather than a single poverty measure, what you really want is to develop multiple measures of deprivation and look at them on a regular basis," said Rebecca Blank, dean of the University of Michigan's School of Public Policy. "For example, you might have a level of neighborhood crime that is some threshold level of acceptability, and then you determine how many people live in neighborhoods where the crime rate is above the acceptable level."
That is certainly not the current approach. The present system is based on a minimally nutritious food budget devised decades ago by the Department of Agriculture. The food budget is multiplied by three because back in the 1950's and 60's food was considered one-third of an average family's outlays.
Neither the food budget nor the multiplier have changed in all these years, although food is less than 20 percent of the average family budget today. Poverty thresholds have remained static, as a result, since 1965, except for the annual inflation adjustment, which the Census Bureau ceremoniously announces at the fall news conference. So every time household incomes have risen faster than inflation — and thus faster than the Census Bureau's poverty level incomes — the percentage of households in poverty has naturally fallen. That happened in the Johnson years and in the late 1990's, which helped President Bill Clinton.
Some poverty experts see virtue in the present system despite its faults. "There is a reason to have a dozen poverty lines, including the one we have, which tells us many things," said Douglas Besharov, a resident fellow at the American Enterprise Institute.
"There is a political battle, a minor skirmish, going on here," he added, "with a number of people favoring the new measure because it would raise the count of poor and thus the need for more programs and more spending."
The Census Bureau's experimental measure, based on the six-year- old recommendations of a panel on poverty organized by the National Academy of Science, is likely to raise the poverty rate, many experts say. The reason is embedded in its structure.
The new measure relies on actual expenditures for food, clothing, shelter and utilities plus "a little bit more," as the Census Bureau puts it, for life's other necessities. The bureau would draw on the Labor Department's annual survey of consumer expenditures, not on an outdated, unchanging food budget.
"Basically we are asking the question, if we look back to last year, how many families were not able to purchase food, clothing, shelter, utilities and a little bit more — that basic bundle," said Kathleen Short, a senior researcher at the Census Bureau. She is working on a way to adjust the new poverty measure also for regional differences in living costs, particularly for housing.
A special calculation would keep the initial poverty rate in line with the current one to avoid alarming politicians, but the new poverty rate would fluctuate more than the current one as expenditures rose and fell with the business cycle. It would probably average one or two percentage points above what the current formula produces, based on the Census Bureau's preliminary calculations.
"If consumer expenditures go up 10 percent," said Angus Deaton, a Princeton University economist, "then the poverty rate will drift up 5 percent, because food, shelter and clothing do not go up as fast as other expenditures."
That is all straightforward enough. Calculating income is not. The current system counts only cash wages before taxes and other cash payments as income. The new system would also count noncash benefits like food stamps. "The rationale is that because we are allowing for food stamps and so on, we are taking account of public policy," Ms. Short said. "Under the current system, you can distribute billions in noncash benefits and it does not count."
While those benefits would raise a family's official income, some expenses would be subtracted, lowering it. Taxes, child care, other work- related expenses and out-of-pocket medical outlays would all be excluded from income. But there are still gaps, say poverty researchers. For example, 40 million Americans do not have health insurance, not even Medicaid. With enough income, many of these people can rise above the official poverty threshold, although in Mr. Sen's view, they are not "free" to afford quality medical care.
While the Census Bureau struggles to give birth to a poverty formula more realistic than the present one, ad hoc poverty measures pop up frequently from academics, nonprofit organizations and regional development groups. Nearly all conclude that a family of four needs at least $25,000 a year to afford the basics, including a car to commute to work, an item overlooked in the Census Bureau's new measure. At least $25,000 is the income featured in the "basic needs" budget developed by Indiana's Economic Development Council, one goal being to draw jobs to the state that pay at least that much.
The United Way of Central Indiana now uses the basic needs budget as a guideline in awarding grants. The Urban League of Indianapolis just got $97,000 to develop a training program that will qualify black men for jobs paying at least $25,000.
"That is self-sufficiency," said David Weinschrott, a United Way director. "Poverty is all about stereotypes. Families with less than $25,000 fall below self-sufficiency."
Adam Smith would have agreed. There's more to poverty than lacking the bare necessities, he argued. "A linen shirt, for example, is, strictly speaking, not a necessary of life," Smith wrote in 1776. "The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day laborer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct."