Thursday, January 09, 2014

How to Actually Measure The Poverty Rate

Jordan Weissmann wrote in The Atlantic Why You Should Forget About the Poverty Rate "Well, don't forget it entirely. But do understand its limits. In 1964, the rate was 19 percent. Today, it's 15 percent, which, as my colleague Derek Thompson wrote yesterday, suggests we've barely made a dent in economic deprivation. But for such an influential and obsessed-over number, there's widespread agreement that the government's standard poverty measure is deeply flawed, and it almost certainly understates how much the social safety net has improved U.S. living standards over time."

"The poverty line itself is sort of the shag carpet of economic indicators—a poorly-aged, 1960s throwback. It was first set during the Johnson administration at three times the cost of a basic diet because, at the time, the typical family was thought to spend about one-third of its income on food. Since then, it has mostly been adjusted for inflation rather than our changing spending habits, which today are geared less towards groceries, and more towards things like housing and healthcare."

"Our current approach to calculating poverty is so full of holes that, for the past few years, the Census Bureau has produced an alternative number known as the "supplemental poverty measure" or "SPM"—which is bone-dry government speak for "the statistic you should really be paying attention to." Think of it as the official poverty rate's smarter, more realistic cousin. On the one hand, it accounts for additional expenses, like medical care and regional variations in housing. On the other, it better incorporates government benefits, like food stamps and housing subsidies. In the end, it usually comes out to be a little less than a percentage point higher than the official poverty rate."

Ec7d088d6 500

No comments: