Measuring Poverty

In December of 2014 UNICEF and the Mailman School of Public Health at Columbia University released separate reports on Child Poverty. Media sources across the globe reported on these findings, focusing in particular on the more shocking statistics like, “one in three children in the US (the wealthiest country in the world) are living in poverty,” or, “nearly three children in five (58.6%) living in Detroit are poor.” These reports also had their doubters. Perhaps the most vocal of whom was Tim Worstall of Forbes magazine and the Adam Smith Institute, a Libertarian think tank in London. Worstall argued that the Mailman School has it all wrong and that, as far as he can tell, child poverty in the US hardly exists. 3

These recent studies and the subsequent reaction to them by the media present two important opportunities:

1) An opportunity to critically respond to arguments like Worstall’s, which we shall see is a terrific and dangerous distortion of truth.
2) More importantly, these reports and what appears to be a debate over their validity, offer an opportunity to think about poverty measurements more broadly – their history and some of the ideological assumptions that help to frame the discussion about what poverty is and how to best quantify it.

First, to Worstall. His central point is that the standard for measuring poverty in the U.S. does not include tax breaks and other forms of government assistance when it calculates income. According to Worstall, if it did then the number of poor would go down dramatically. He claims that child poverty in the US is actually closer to 2-3% (not 33%).

Worstall’s argument is very deceptive and incomplete. While it is true that the US poverty line does not include tax breaks and public assistance in the measurement of income, this is only one of its many problems.

Measuring Poverty in the US

The standard for measuring poverty in the U.S. is rooted in research that stretches as far back as the 1850s. This early research arose partly in response to the working class revolts in Europe in 1848. Throughout the 20th century different versions of the poverty line were explored and then in 1965 the U.S. officially adopted a standard developed by Mollie Orshanky, an economist working at the Social Security Administration. Apart from adjusting for inflation, no major changes have been made to Orshanky’s model since it was adopted.

Orshanky’s so-called “poverty thresholds” measure poverty by looking at the relationship between the size of a family, that family’s annual pre-tax income, and the annual cost of nutritious food. To designate a family as being “in poverty” one needs to determine two numbers. The first number is income, which is measured before taxes, depends on family size, and excludes tax breaks and other forms of government assistance (as Worstall points out). The second number is the annual cost of food multiplied by three. The annual cost of food is based on what is today termed the “Thrifty Food Plan,” which is the least expensive of four “nutritionally adequate” food budgets designed by the United States Department of Agriculture (USDA) These “food plans” are adjusted each year to account for consumer price increases (inflation) This cost of food figure is then multiplied by three. Why? Because a survey conducted by the USDA in 1955 showed that an average US family spent one third of its income on food. In other words, one number is approximately what a family makes in a year and another is approximately what it costs to live for a year.

If the first number – annual income for a particular family size – is less than the annual cost of food multiplied by three, then that family is considered to be below the “poverty line.” In 2014 the “poverty line” was $23,850 for a family of four, so the cost of food would be $7,950 a year ($165/week). In 2013, According to the US Census Bureau, 45.3 million people (14.5% of the US population) live below the poverty line.

Almost everyone who pays attentions to these measurements (including the Census Bureau) agrees that this methodology is severely outdated. During her lifetime Orshanksy herself expressed concern that it hadn’t been modified. One of the fundamental problems with the measurement is its assumption that the average family in the US spends 33% of their income on food. Estimates today show that the annual cost of food has decreased to only 7% of annual income. Furthermore, while food costs have gone down, new expenses have emerged and/or old one’s have increased: housing, healthcare, service on loans, cost of education, transportation, communication, childcare, etc. Another significant factor is that the US doesn’t take into consideration the geographic variations in costs and resources. For example, many studies show that average income and cost of living are much higher in urban areas.

In addition to ignoring these many factors, Worstall also fails to mention that in 2010 the Census bureau actually attempted to address these and other issues through what has been designated the Supplemental Poverty Measurement (SPM). The SPM is a non-official measurement that uses many of the recommendations that came out of a 1995 National Academy of Science study on US Poverty Measurements. Those recommendations included: taking account of some geographic differences, adjusting income to include tax breaks and other assistance programs (Worstall’s point), and a more realistic assessment of modern expenses. After all these adjustments the US poverty rate goes up overall from 15% to 16% in 2012. While there is a slight decrease in the percentage for children if you use the SPM (22% to 18% in 2012), child poverty is nowhere near the 2-3% that Worstall comes up with.

Finally, Worstall goes on to suggest that the US poverty line should learn from England’s standard, because the UK measurement includes benefits and tax breaks in its calculation of income. The UK also uses what is sometimes called a “relative” standard for measuring poverty, which means that one is deemed to be “in poverty” if one’s income is less than 60% of the national median income (The Organization for Economic Co-operation and Development [OECD] standard is 50% of median income). What Worstall does not say is that recent and reputable studies show that if the US were to adopt a “relative” measurement its poverty rate would nearly double. In 2009 the official US poverty line was only 28% of median income (in 1965 it was closer 50%).

All told, it is clear that Worstall’s argument is at best incomplete, but is more likely a deliberately evasive and deceptive attempt to support a deeper ideology about people, poverty, and social change. His arguments are in line with the fairly common position that poverty statistics and measurements are skewed to favor flawed liberal ideology of taxing and spending social problems away. From this point of view Government and other anti-poverty programs are seen as wasteful, ineffective, and as incentivizing people not to work. According to this understanding, poverty is an individual problem and therefore can best be addressed through individual effort, an unfettered “free” market and, at most, a very light hand of government regulation.

It is important to discredit arguments like Worstall’s, but it is more important to ask what his argument reveals about the broader dominant discussion about poverty. What are the ideological assumptions inherent both in his argument and in the arguments of those he opposes and how do these assumptions frame the discussion of poverty? What are the acceptable methods and standards for measuring the problem of poverty and what is the range of acceptable solutions put forward for addressing it?

Before getting into these ideological questions it is important to briefly survey some of the other standards for quantifying poverty, in particular those that look at so-called “global poverty.” The above measurements only attempt to measure poverty in the “developed” world – the US and the rest of the OECD, a distinction that, as we’ll see, gives important clues as to the broader ideological framing of poverty in our world today.

Dollar-a-day
In the 1980’s the World Bank helped to develop the now well-known “dollar-a-day” standard. World Bank economists observed that for many of the poorest countries the poverty line (50% of median income) was around $370. The World Bank economists averaged the ten poorest countries’ poverty lines, adjusted for purchasing price parity (PPP), and then designated $1/day as the threshold for global “extreme” poverty. In 2005 they adjusted it to $1.25/day. This threshold is widely believed to under-represent the reality of poverty and has mainly been used as a tactic for drawing attention to the issue of “extreme” poverty and framing it as more pressing than the poverty in “developed” countries. Today many of the reports that the World Bank publishes use a $2/day standard. In 2013, according the World Bank, 2.7 billion people in the “developing world” (nearly 40% of the global population) live on less than $2/day.

Multi-Dimensional Poverty
Many recent global poverty measurements acknowledge the complexity of quantifying poverty and try to incorporate more than just income into their analysis. For example, the Multi-dimensional Poverty Index (MPI) tries to assess “acute” (extreme) poverty on a more individualized basis. It takes into consideration a list of “deprivations,” in areas like education, healthcare, or other living standards, for example whether one lives in a home with a dirt floor. This calculation is meant to “complement traditional income-based poverty measures.” According to its most recent data there are 1.5 billion people in the 91 “developing” countries measured who are deprived in 1/3 or more of these categories, making them “Multi-dimensionally poor.” This number far exceeds the 1.2billion in those countries that meet the World Bank’s extreme poverty threshold of $1.25/day. In part, this measurement was developed to better understand the complexity of poverty and account for its great variability, but it is also the result of pressure that donor nations and institutions feel to accurately assess how well their money is being spent. The OECD reports that $134.8 billion in Official Development Assistance (ODA) was made in 2013. For reasons far too complex to discuss here, the past few decades have seen an unprecedented amount of assistance channeled to “developing” countries. Suffice it to say that it is not good-will alone that motivates this transfer of money and resources.

Ethically Poor
The Ethical Poverty Line (EPL) is an alternative poverty measurement that further expands the definition of global poverty beyond income. The EPL ties income to life-span, recognizing that for changes in income to really matter they must correlate to increased quality of life. The Ethical Poverty Line seeks to find that point of income below which life span begins to significantly decrease and above which lifespan only marginally increases. According to their analysis, $2.7/day becomes the “global poverty line.” In 2010 the number living at or below this threshold was 3 billion.

Towards a new understanding of poverty

Studies and statistics about poverty are abundant these days. There is no shortage of poverty or methods for measuring it. It is important to critically analyze these reports and their methods in order to effectively understand and engage the current debate about poverty, including both the shortcomings of the US poverty measurements and the misleading nature of Worstall’s critique of them.

Yet, this analysis must not stop there. In the US in 2012 there were 46.5 million people below the “poverty line,” but there are an additional 97.3 million who are designated, “near poor,” which is defined as twice the poverty line (so $330/week for food for a family of four). If you add these two figures together nearly half of the US population is poor or near poor, and remember, this is a calculation made using the significantly flawed US Census Bureau’s standards.

Measuring poverty is deeply ideological. It reveals our beliefs about what allows humans to live life fully and what can and should be done to ensure and preserve life. Raising these deeper ideological and political questions can help to recall what is truly at stake in these measurements, i.e., fundamental moral questions about how the resources of life are produced and shared. As mentioned above, some of these ideological questions include: What is the definition of poverty implied by the way it is being measured and discussed? What is emphasized or left out of these measurements? What moral and ideological assumptions are people, especially the poor, are made by these measurements? What solutions to poverty are deemed appropriate in this framework?

Who is poor?

In the measurements discussed above there is a clear distinction between how poverty is measured in the “developed” and the “developing” world. The obvious assumption behind such a distinction is that poverty in these two contexts is different, and more specifically that it is more severe or “extreme” in the “developing” parts of the world. There are undoubtedly differences between poverty in rural West Africa and poverty in urban New York City. And these differences must be closely scrutinized and understood in their own terms and context in order to accurately comprehend and propose effective solutions to ending poverty. But, the separation that this distinction produces has the effect of portraying poverty as something that occurs in numerous unrelated situations. Distinguishing poverty in the “developed” world from that in the “developing” leads away from thinking about the larger systemic causes of poverty, while also creating antagonisms between these supposedly different categories of the poor as we are forced to debate who is more deserving of limited resources.

Just as there are important differences, there are also important similarities to the poverty experienced in different contexts across the world. The poverty in West Africa is closely related to the poverty experienced in Europe or the United States. The same globalized structures and systems of economic and political power are responsible for holding people all over the world in the same types of exploitive and dependent relationships as we seek out the necessities of life. In order for methods of quantifying poverty to be accurate they must acknowledge the reality and impact of these larger systemic forces. Poverty measurements must reflect a deep understanding of what these forces are and how they work, and they must strive for such an understanding to come out of and to inform specific local analyses of poverty and efforts to end it.

Why income?

Being in poverty means not having enough of what we need, whether it is food, a house, money, years of life, etc. The amount of income we have may change our ability to access these things, but it does nothing to explain why we don’t have them in the first place. Income inequality does not help explain why there is poverty. To get at the fundamental causes we must begin to view poverty as something that is produced in and through historically specific economic, political, and cultural systems and structures and not as something that is strictly the consequence of individual behavior or the unavoidable twists of fate or geography. From this point of view “poverty” becomes an indication that society is breaking down, that those economic and political systems are moral failures because they aren’t meeting our human needs.

Economic and political systems directly determine the way that necessary resources, those things that hold the promise of life, are produced and distributed to the people living within a given society. Our relationship to that system is therefore critical to determining whether we can get the resources needed to survive and thrive. Income alone does not explain this relationship. Part of how this relationship can be better understood is by looking not only at how much income a person does or doesn’t have, but also at what kind of wealth they do or do not have. Wealth is a measure of the value of the assets (things one owns: property, real estate, stocks, businesses, etc.) minus debt (what is owed). In other words, wealth shows who owns and therefore controls those things necessary to produce what all humans need to live. A recent report from Oxfam showed that globally, “the combined wealth of the richest one percent will over take that of the other 99 percent of people next year (2016).”

There is a direct relationship between wealth and poverty. Understanding that relationship is critical to accurately defining and assessing poverty. Focusing on wealth helps to clarify who possess power over society’s resources and who does not.Focusing on income alone does not reveal that relationship and instead emphasizes the effects of poverty not the causes.

What is the value of a human life?

Whether it is the US Poverty line, the World Bank’s dollar-a-day standard, or the clearly distorted numbers Worstall puts out, all the sources we have surveyed thus far share a common starting point: they attempt to measure how much it takes to barely survive, but not how much is needed to live life fully. The line or threshold that is debated by these different measurements and methodologies is the point at which people might not have the necessary calories or adequate shelter to survive. These measurements are not debating what it would require to allow a person to develop their full potential as a human being. While the Ethical Poverty Line is marginally better in that it seeks a standard that meets an ethical definition of what it means to be human, it still equates this standard with simply surviving, i.e., lifespan, and therefore avoids the complex discussion about what constitutes a fully lived life. Even if a measurement like the Ethical Poverty Line is marginally better at assessing what constitutes poverty, it is not a measurement that has much influence. The measurements that are actually used to define poverty and distribute resources are often the most conservative and problematic.

The current dominant political and economic systems, which use and support the development of these problematic measurements, only value human life enough to keep us from dying. This conception of life is not only highly cynical, but it is not how most of us value human life. It is, however, in line with an economic and political system that prioritizes the production of wealth over universal access to that wealth – in other words, that chooses profits over people. In this type of world, humans are mainly needed to do the work of producing and consuming. A dead human, or one who is barely alive, cannot work or consume, or at least not very much.

Under circumstances where there is a shortage of those things that people need to survive and thrive it might make more sense to be primarily concerned with knowing what is required for humans to barely make it. In other words, if we were in a situation where we had a shortage of food, then organizing society around the most basic of our needs might be useful and even appropriate. But our reality is quite different: for some time now, there has been more than enough food (and other resources) for everyone. Human productivity capacity is higher today than it ever has been. Indeed, indicators show that in most economic categories today there is a problem of over-production. For example, the world produces 1½ times the amount of food required to feed every person on the planet. We can no longer point to scarcity of resources as a way to organize our society, let alone as a reason for continuing to allow poverty to exist on such a mass scale. We produce more than enough food, shelter and medicine for the entire world and have developed amazing technologies that could potentially allow people to work less and spend more time learning, making art, grieving, loving, and laughing together.

Understanding poverty as the minimum it takes to survive encourages us to have low expectations from life as well as from society in terms of how it should be organized to sustain and nurture life.

If we continue to abide by these expectations and assumptions, we will quickly confront a situation where social and individual values of equality and human dignity – hard fought victories against systems of exploitation and oppression – no longer have their universal quality. The frightening reality is that under the current system humans are becoming less and less needed. Economic and political systems have always required people to fight wars, to work, to care for other people, etc., but increasingly these human tasks are being done with non-human technology. This is not because of the ill will of a few evil people, but because of the absurd logic of Capitalism, whereby humans become expendable parts of the system that produces profits first and the things humans need second. It doesn’t have to continue this way. The great productivity and technology unleashed under Capitalism can be re-directed to uphold life and allow it to flourish for all humans instead of degrading and exploiting it. Moving the direction of our society towards nurturing human life means changing our economy’s relationship to our environment as well. There’s no way to secure life with dignity for all humanity while continuing to destroy our planet’s ability to sustain life.

Changing beliefs about what poverty is and, consequently, how it should be measured will not result from reports, statistics, and intellectual argument alone. As has been shown in this short survey of poverty measurements, whether you side with Worstall, the World Bank, or the Ethical Poverty Line, there is an ideology behind the discussion of poverty that has a low appraisal of human life and a cynical view of what society can and should do to nurture life. To see and be moved by the real human suffering that lies behind these numbers, to have the vision of something better and the commitment to fight for it, we need nothing less than what the Rev. Dr. Martin Luther King Jr. called a “revolution of values.” A revolution of values is an awakening of our better natures: a remembrance of the sacredness and interconnectedness of all life. The moral clarity that results from such an awakening will not tolerate measurements that degrade the value of life. It will be a measurement that seeks to understand the fundamental causes of poverty and strive for solutions that end poverty by realizing our full potential. The insights and wisdom for such moral vision, often preserved in our ancient religious and philosophical traditions, can be clarified and reinvigorated through seeing, learning from, and being part of the living struggles of the poor and dispossessed that surround us today, who fight everyday for exactly this.