Record Severe Poverty II
The Census Bureau has released estimates of poverty in 2010. Coverage focused on the headline poverty rate which is horrible enough. Much worse, 6.7% of people in the USA suffered severe poverty, that is lived in households with income less than half the poverty line. This is the highest severe poverty rate on record (the series only goes back to 1975 — I don’t know why).
I blame welfare reform. Yes the severe recession and slow recovery is a major factor, but the 2010 ratio of the severe poverty rate and the poverty rate is 0.444 which is also the highest on record. That ratio is a crude way of looking at the effect of welfare reform.
Like the poverty rate, the severe poverty rate goes up in recessions, goes up when inequality increases and goes down when per capita income grows. However, the pattern is very different with a long term trend of increasing severe poverty and no correspond trend of the headline poverty rate.
I think it is clear that this can be explained with two acronyms AFDC and TANF. In 1975 the economy was in bad shape, the poverty rate was 12.3 % which is not vastly lower than the 2010 poverty rate of 15.1%. The severe poverty rate was 3.7 % less than 56% of the current rate. The fraction of people in poverty but not severe poverty was 0.301 in 1975 much lower than it is now.
During the period of high inflation, the real value of welfare benefits declined. This explains at least part of the increase in severe poverty. In 1983 the poverty rate peaked at 15.2% and the severe poverty rate peaked at 5.9%. Compared to 1983 a smaller fraction of people are in poverty but a larger fraction of people are in severe poverty. I think that welfare reform is the only plausible explanation.
If the ratio of number in severe poverty to number in poverty were the same as in 1983 the severe poverty rate would be less than 5.9%.
This post is an update of my post about the 2009 severe poverty rate (I admit to cutting and pasting as if such an admission were necessary). The political debate has not taken the record severe poverty rate into consideration. Quite the opposite. As far as I know, no politician dares discuss reversing welfare reform.
I think the still widely accepted conclusion that welfare reform was a great success is based on two gross and obvious errors.
First the matter was considered to have been decided by 2000. Only specialists reconsidered the analysis of welfare reform with any data not collected during the amazing boom of the late 90s.
Second a huge amount of attention is focused on the poverty rate and almost no one ever looks at the severe poverty rate. It is as if people think that it doesn’t matter how poor one is once one is under the poverty line. This is more extreme than not caring about income distribution.
But it is accepted as a fact that welfare reform worked like a charm. Evidence which isn’t more than 11 years old, and the fact that $11,000
It’s almost as if most people had no clue what it is like to be poor so that they don’t even know that the poor are much poorer than they used to be.
Goddammit, please, can everyone get it through their heads that you cannot compare the US poverty rate over time in this manner!
The US poverty line is a calculation of who is living in poverty *before!* we help people living in poverty these days. We do a number of things to aid people who are poor. There’s tax credits like the EITC. There’s health care like Medicaid. There’s housing help like Section 8 vouchers. There’s food stamps for people who don’t have enough food.
When we calculate the number of people in poverty, those under the poverty line, we do not include all of these things that are done to help people living in poverty. We are measuring the number of people who need help, not the living standards of those we have already helped. Specifically, we do not include the $80 billion a year (or whatever) that the EITC costs, the however many billions Medicaid does, nor food stamps nor housing vouchers. In fact, we do not include any help at all that comes either in kind or through the tax system.
Now, back in 1975, the situation was very different. For the EITC was only just starting then. Most of the help that went to the poor back then, most of the aid to those under the poverty line, came in the form of cash welfare. TANF in fact. And that we do include in our calculations of who is in poverty. We do not include tax system or aid in kind: but we do include cash transfers.
So, the poverty rate in 1975 includes all of the people living in poverty *AFTER* we have helped people living in poverty by giving them cash. The poverty rate in 2011 includes all of the people living in poverty *BEFORE* we help people living in poverty by giving them things and services.
Because there’s been, for the last 36 years, a bipartisan consensus that we should move help to those in poverty from direct cash grants to aid in kind and through the tax system. And we do count direct cash as income when we calculate poverty and we do not include aid in kind or through the tax system as income when calculating those who are under the poverty line.
Now, maybe this system should change. Maybe we should just send cash to everyone, Maybe we should measure those in poverty after we’ve helped, not before. Or even measure both numbers.
But the one obvious and absolutely true thing is that you cannot compare the damn poverty rate in 1975 with the damn poverty rate in 2011. Because they’re simply measuring entirely different things. One is those in poverty after we’ve helped them. The other is those in poverty before we’ve helped them.
BTW, it is this artefact of the statistics which explains why the US spends hundreds of billions of $ each and every year on poverty reduction and never seems to reduce poverty. Because the measurement system doesn’t count the hundreds of billions of $ spent each year on reducing poverty when measuring poverty.
It really would be much, much, simpler if the US did as every other country does. Poverty is measured AFTER all the things that are done to alleviate poverty.
After all the things are done to elleviate poverty they still live in poverty. Going by what I see, not statistics, American poverty is much more brutal on people, families and children than what you would see in the so-called nanny states of Europe.
Clinton’s welfare reform was easy as long as there were jobs, the brutality would show with high unemployment. Yes they are not poor if one compares with people in developing countries. But what I see here, you don’t see in Europe, at least not yet.
Well the real issue as I see it is what are you going to do when 9+% of working age people who want to work are chronically unemployed and another 7 or 8% are chronically underemployed and that is if we manage to avoid another round of job cuts which I figure is less than 50-50 at this point. The only way to reduce poverty as opposed to softening its impact through the various in kind programsd referenced is to put people to work at wages that can support families. That has not happened since the Clinton years and once the credit bubble burst we saw how truly miserable things have been for the middle class since 2000. I have absolutely no hope that either party can/will do anything to reverse course in the forseeable future. i do, however, expect the rich to get richer and income inequality to continue to increase.
I lived in poverty in the 1970s… and I am now living in a van in SoCal. The difference is that in the 70s, there were opportunities to rise up out of poverty. In 1973, I worked as a level 1 apprentice roofer and I earned $6.73 per hour… adjusted for inflation, that equates to about $36. per hour now. But, an apprentice working in the same area(SoCal), doing the same work, earns about $10. per hour now.
So the problem is actually much worse now considering ‘opportunities’. In my situation, it is not that a job is all that difficult to find, it is instead that the available jobs pay so little in relation to costs that upward mobility is nearly impossible. Wages are the problem, not welfare reform.
More Americans Are Doubling-Up – the Census Bureau noted a big jump in the number of individuals and families doubling up. Census says 69.2 million, or 30%, were doubled-up in 2011, up from 61.7 million adults, or 27.7%, in 2007. “Doubled-up” households include at least one person 18 or older who isn’t enrolled in school and isn’t the householder, spouse or cohabiting partner of the householder. Much of the increase comes from young people, ages 25-34, living with their parents. Some 5.9 million, or 14.2% of 25-to-34 year olds, lived with their parents in 2011, up from 4.7 million before the recession. “These young adults who lived with their parents had an official poverty rate of only 8.4%, since the income of their entire family is compared with the poverty threshold,” “If their poverty status were determined by their own income, 45.3% would have had income falling below the poverty threshold for a single person under age 65.”
Worstall
I am not in a position to dispute your statistics, but I think I will challenge your conception of what it means to be in poverty. If I don’t have a job and live in a slum, all the foodstamps in the world won’t make me not-poor.
Obama’s closet socialist sharia law based policies are clearly to blame.
Lys
back around 1910 Bernard Shaw made the point that urban poverty in London was much nastier than rural poverty in Ireland.
Anti poverty programs are not designed to reduce levels of poverty per se. They are designed to reduce the visibility of poor people. The lesson of the 30s was you had to get the destitute off the streets and out of the way of the remaining viable economic activity.
In that regard I predict future anti poverty efforts will have to include vouchers for basic cable and internet service. Whatever it takes to get the unattractively destitute out of the public eye.
GOP Magical Thinking? what’s more Magical Thinking then the Democratic Keynesian Multiplier Effect? it it were true why not spend $5 Trillion Dollars on Government make work? the economy would expand 50% and we could pay this $5 Trillion Debt off from the added growth–you got to be kidding….have you ever seen a Government worker buy their home, car or groceries from a government agency? of course not.it’s the real Keynesian Democratic multiplier effect …. the government price is 50% higher and quality is 50% lower…
Thanks for sharing the information. I hope you get a good job soon.
Last June the house voted to reduce funding for nutrition for pregnant and nursing women and infants and children up to 5 years. The poverty level for a familyof four is what, $22K and a few kveched ones. At the same time the house opposed any tax increase for the poor and suffering top income people.
The wealthiest nation on earth has no excuse to whine and be proud of how much better the poor do in the USA than say India. The poor are poor by our standards, that should be what counts.
Robert
I think you may be making the same mistake that Worstall is. The fact that we have programs that somewhat alleviate the effects of poverty is not the same as having reduced poverty.
If I need food stamps to survive, I am poor.
Lys
Bernard Shaw tried to get people to understand in 1910 that urban poverty in England was much nastier than rural poverty in Ireland.
And nothing has changed since. They still believe charity, church and neighbors will take care.
Lys
up to a point you are exactly correct. the greed and selfishness that characterizes our times in the name of “limited government” or “the horrible deficit” is simply evil. a sickness we may die of.
but i would quibble a bit with “by out standards.” i think we can make a case for something like “absolute poverty”… when people don’t have what is necessary to live a human life in this time and this place. those could sound like “by out standards” but i think we need to keep in mind that if the jones have six cars and go to Vegas twice a year, we don’t need to be sure “our standards” don’t force the poor to have two cars and go to Vegas every other year.
I am trying to avoid two dangers here. One is the “equality” meme (i use the word meme to mean “word in place of thought”) that would require us to rob from the rich to give to the poor.
and the other danger i might as well call the Rosser fallacy and get my friends to hate me… those who understand what i am talking about. that is the same as the “chained CPI” lie, or the “price indexing” lie to fix SS… which assumes that you can hold benefits constant at a “real” level indexed to some start year. the assumption is always “this year” but it might as well be 1936.. so you can see it’s result would be that retirees would be forced to live by 1936 standards in 2036.
I would make a distinction between welfare and social security here. If someone needs to be on welfare, we would hope it is a temporary condition and might stop with sufficient food and decent housing. if we are considering solving “poverty”, we would need to go on to provide decent “rewarding” work, humanzing education, and generally the possibilities of living as a real human being, though not necessarily one who is rich or even “middle class.” as for Social Security, since the workers pay for it themselves, they ought to be able to decide where they want to establish the balance between “what i can buy today” and “what i will need (want) to buy when i am retired… the latter would undoubtedly include the ability to live in the same housing with the same amenities as they have their whole lives in the society they are used to.”
sorry if this is too long, but there is much here that is worth thinking about and not stopping with an emotive sound bite that makes us feel better for ten seconds.
Coberly, we don’t disagree at all. By our standards I do mean a minimum to live a humane way of life. That is shelter, food, clothing and yes health care. I don’t advocate robbing the wealthy at all, but we should not advocate and protecting the wealthy from robbing the poor. And they do exactly that when they push low middle class working people into poverty.
I do believe, when people who are wealthy, cheat their domestic employees by not paying the pay roll deductions, by calling union members thugs, by telling nursing women to use the public bathroom to pump their milk, by denying the rights of collective bargaining, safety on the job, in short not paying fair wages, they are robbing working people.
You are so right to mention the ” chained CPI lie” and you know more than I do on that subject. But it is government that is robbing the people, and the shame of it when honest politicians, (there are not many left) stay silent. The whole subject of ponzi scheme in the first so-called debate was dancing around with the lies about SS. It was disgusting, wealthy people with all advantages lying about SS, they are robbing the people. Perry is the biggest shyster of them all, to put it bluntly. For Obama and the Democrats to put SS on the table is unforgivable.
Coberly, if the average people would have as much as just a small chance to rob the wealthiest of a little of their wealth, I really would not care. I would tell them, life is not fair, deal with it. I am sorry, I have no sympathy with the top income earners, can’t comprehend their greed. Don’t mind if some poor sucker gets a few crumbs from the big cake.
We all know, people do want to work, as soon as there are jobs the unemployment rate will go down. Many of our social problems will disappear too, jobs are a good medicine for mental health and functioning and healthy families.
Since employers fight against living wages, I support food stamps, rent support for low income wage earners too. People with minimum SS need help too, even Medicare is expensive for people who get just $1000 per month and nothing else.
Coberly, it is a big subject, not enough space here.
Lys
yes, we are in complete agreement. i have nothing against taxing the rich to pay for what the country needs. i do object to a soak the rich attitude, and i do object to seeing poverty as something that needs to be “fixed” by taking from the rich and giving to the poor… fixing it might indeed involve taking and giving… but if it stops there is won’t get fixed. and i do think that some people stop thinking with the idea of “taking” from the rich to “make things fair”… that is, “give me more.”
i think that is the same sickness that you describe among the rich… simple stupid greed.. only greedy poor (ish) people proving they are just as stupid and greedy as the rich.
but your description of “the party of the rich” now fully supported by the party that pretends to be for the poor is right on the mark.
i don’t seem to be able to say this so the people i agree with can understand me: all against the stupid greed of the rich and the damned lies of our politicians. all for “solving” the poverty problem and taking care of the needy… the more or less permanently needy all the time, and the temporarily needy temporarily… while we find better ways to avoid the temporary neediness, and better ways to cure the more or less permanent neediness..
but not a simple, and greedy, just make the rich give their money the poor.
it doesn’t work, and it’s bad mental hygiene.
but you are right… the answer ultimately is not tax transfers or bank robbery.. but collective bargaining, fair wages, humane working conditions, decent housing at fair prices…
its a big job.
Did you hear that fool Ron Paul talking about the individual who neglected to buy medical insurance and later came to need expensive medical care. Of course it was all hypothetical as an answer to a moderator’s question. Of course the individual neglected to buy coverage as a matter of choice. At least that’s the way the question seemed to be posed and the way Paul sought to answer it. The audience in the background was heard yelling out, “Let him die.” No one addressed the issue of the person who can’t afford the insurance. Does that mean some on us may be too poor to live? Nor did the issue of medical insurance that runs out before your cured come up. “Sorry you’ve got cancer, but your annual maximum has already been reached and there is still six months left in the year. Call Dr. Paul and see if he can come up with a solution.”
Jack
i’d take it a little further. i, even i, would not buy insurance by choice. because i am as stupid as all those others, and because to some extent i regard the whole medical insurance establishment as a kind of criminal fraud.
worser and worser. i, even i, would not have saved for my own retirement until it was too late, or i would have made bad investment decisions. because i am no smarter than anyone else.
both of these behaviors, when practiced by a large percent of the population, as they will always be, partly because people are not very smart, but also because “today’s needs” always overwhelm “saving for tomorrow” and even “insuring against” low probability catastrophes.
so this country has invented mandator insurance. pretty much a rip off in the case of auto insurance, very good in the case of Social Security, sort of good going bad in the case of Medicare.
point of this long winded argument is that we need ‘mandatory” insurance because we are only human, and without it the poverty and the tragedy would become too much to bear… even for those of us smart enough to plan ahead. just kicking the bodies out of the doorways would be not worth the small difference we would save between the cost of “insurance” and the tremendous returns we could get from “investing our own money.”
i suspect the “let him die” attitude is more real, and frightening, than you might suppose. hitler didn’t get where he got without a lot of germans thinking “right on, Aryan brother!”