May 28, 2013

Actual US Poverty Twice Official Figure

Jeannette Wicks-Lim: According to official figures 15 percent of Americans live in poverty, real numbers are over 33 percent of Americans cannot meet basic needs
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Jeannette Wicks-Lim is an economist at PERI, the Political Economy Research Institute. She completed her Ph.D. in economics at the University of Massachusetts Amherst in 2005. Wicks-Lim specializes in labor economics with an emphasis on the low-wage labor market and has an overlapping interest in the political economy of race. Her dissertation, Mandated wage floors and the wage structure: Analyzing the ripple effects of minimum and prevailing wage laws, is a study of the overall impact of mandated wage floors on wages. Specifically, she provides empirical estimates of the extent to which mandated wage floors cause wage changes beyond those required by law, either through wage effects that ripple across the wage distribution or spillover to workers that are not covered by mandated wage floors. Jeannette regularly publishes commentary in Dollars & Sense.


Actual US Poverty Twice Official FigurePAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

According to American official figures, 15 percent of Americans live in poverty. Our next guest think it's more like one in three, over 33 percent of Americans living in poverty.

Now joining us from Amherst, Massachusetts, is Jeanette Wicks-Lim. She's an assistant research professor at PERI institute at the University of Massachusetts Amherst.

Thanks for joining us again, Jeannette.


JAY: So how do you get to your number? And how does anybody get to their numbers? I guess, first of all, how does the quote-unquote official number come to be?

WICKS-LIM: Well, it's interesting. The official poverty statistic comes from a measure that was created in the mid--well, early 1960s. And it was really put together quickly, and it was kind of considered a placeholder, just 'cause the federal government wanted to have some way to measure poverty and basically took a very low-cost food plan and just multiplied it by three and decided that that was what would account for what a family would need just to be at a poverty-level standard of living. So that has been the measure over all this time, so about 50 years now.

But this official count has been criticized widely by, you know, many poverty experts. And in the mid 1990s, the National Academy of Sciences put together a panel of poverty experts to take a look, take a real close look at this measure and figure out what's wrong with it and how do we improve it. Based on this panel, there were a lot a lot of recommendations. The panel itself said, we know that the official count is wrong and we know that we need to replace it.

Now, two decades later, after that, about 2011, the U.S. Census Bureau, which publishes the official count, came up with a new measure, called the supplemental poverty measure, as a way to correct for the official count. And so, unfortunately, I've taken a look at this measure, and it doesn't look--in terms of the number of people who are--count as poor, it doesn't look a whole lot different than the official count. So, like you said, about 15 percent of the American public is considered poor under the official count. With this new measure, it's only 16 percent.

Now, when I've looked at this measure, I've tried to think about, well, what would people reasonably consider to be poor. And I think it's pretty reasonable to describe being poor as somebody who can't meet their basic needs--food, shelter, their necessary medical care, that sort of thing. And if you actually tally up what the costs are for those things and see what the incomes actually would look like just to meet those basic needs, you're looking at something that's more on the order of two times the official poverty line. So I think that a much more accurate poverty line would be something on the order of double what the official poverty line is. And that would get us to a number of one in three Americans being considered poor as opposed to the current official statistic of 15 percent.

JAY: What changes city by city? It costs a lot more to live in New York than someplace in the south.


JAY: But given that, what kind of numbers are we looking at in terms of family income? What family income, for example, in the Northeast is considered poor?

WICKS-LIM: Right. Well, this is really interesting, 'cause, you know, I don't want to just wholly criticize this new measure that the Census Bureau has come out with. The supplemental poverty measure actually tries to take into account costs of living differences, which the official count actually doesn't do at all. So, for example, a family of four with the official poverty line is about $23,000 a year whether or not you live in New York City or if you live in Utica, New York, or if you live in, you know, a small rural town in Nebraska. The same income--poverty income threshold applies. The supplemental poverty measure tries to differentiate between those things. So they take into account especially the housing costs, that they're double in New York versus in other average-cost towns. So the supplemental poverty measure does make improvements, takes into account these costs of living differences across the country.

But my main concern about the new measure is that it doesn't take into account the fact that just the poverty line itself is just too low. You're not--when you actually add up what the costs are for families to meet their basic needs, it's really not just, you know, a little bit more than the official poverty line. It's actually substantially more than the poverty line.

You know, there was a study done in the mid 1990s where--a national survey done of families to see what kind of economic hardships they experience. And what one study found looking at this survey data was that if you look at people who are officially poor, about 29 percent of them reported having some sort of critical hardship like having their utilities cut off or missing meals or not getting the necessary medical care.

Now, if you look at people who are between the poverty line and twice the poverty line, you saw a very similar rate of people experiencing critical hardships like this. It went down to, I think, something like 23 percent. So, you know, it went down a little bit but not a lot. And so it was only when you got above twice the poverty line did you actually see this number drop substantially to [incompr.] 11 percent. So I think that's a pretty good marker, you know, twice the poverty line, of when families are actually getting to a point where they're meeting their very basic needs. And so I think that is a much more accurate measure of what people need in order to meet their food, shelter, medical care, you know--.

JAY: So you're saying $23,000 per family, that's the official number for how many dollars a family of four should have. So you're saying it should actually be more than $40,000 if you're actually going to have someone out of poverty if it's a family of four.

WICKS-LIM: Right. Exactly. Right. The official poverty income threshold is about $23,000, and I'm saying about double that is a much more reasonable threshold, something on the order of $45,000, to cover the basic needs of a family of four.

JAY: And how does this affect public policy? Does it trigger anything? I guess what I'm getting at other than us understanding how many poor people there are in the society, how does this, you know, what you're saying is a wrongfully low number in the official estimation of poverty, how does that affect public policy?

WICKS-LIM: Right. Well, what's interesting is that, you know, there are, you know, [incompr.] large-scale social welfare programs that recognize that people who are at twice the poverty line and below that need help, federal assistance. If you look at, like, the National School Lunch Program, you know, subsidized lunches for kids and subsidized breakfasts, you look at the low-income housing energy program, you know, that gives subsidies for energy bills, those programs actually consider people who are twice the poverty line and below to be in need. So there [incompr.] the poverty--the official poverty line is way too low. And you see programs that actually count people who are twice the poverty line and below as needing subsidies, needing help from the federal government in order to meet their basic needs. So in terms of public policy, I mean, you already have programs who are recognizing what poverty actually is [incompr.] something like twice the poverty line.

I think what's really important for people to think about is that I know that, you know, calling yourself poor doesn't feel very good. You know, it's a pretty stigmatized label. And so it feels more comfortable to think about, you know, 15 percent, you know, something like one in seven, around there, Americans being poor, and you can sort of count yourself out of that. But when you start to think about what it is that people actually need to meet their basic needs and you recognize that it's something more like twice the poverty line, then you see that one in three Americans are actually poor, then you're looking at you--you know, you and a group of friends, a substantial number of you are going to be considered poor. And I think that to recognize that, to know that people are struggling that much, is really important for public policymakers to consider [crosstalk]

JAY: Right. And how does one in three number compare to other industrialized countries if you try to use similar measurements?

WICKS-LIM: Right. You know, I don't have international comparisons off the top of my head, so I would have to go back and take a look at those numbers. But I think if, you know, the number itself, one in three, I think might sound startling to people, but if you really think about how people are sort of getting by these days, it starts to sound a bit more realistic. You know, people, you know, worried about whether or not they're going to be able to make their rent, you know, worried about whether or not they can cover a health care bill, you know, worried about whether or not they're going to be able to put the food on the tables that they need to, you know, that sounds a little bit more like what reality is for most Americans.

JAY: Right. Okay. Thanks for joining us, Jeannette.

WICKS-LIM: Thanks a lot, Paul.

JAY: And thank you for joining us on The Real News Network.


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