Sun. Nov 29th, 2020

According to the US Census Bureau, the poverty rate in the United States hit a record low in 2019. Depending on whether you adjust for reporting issues due to Covid, it was either 10.5% or 11.1%.https://www.npr.org/sections/coronavirus-live-updates/2020/09/15/913131697/american-incomes-were-rising-until-the-pandemic-hitWhile it is certainly good news that poverty is decreasing, the poverty rate has stubbornly remained between 10-20% since the 1960's.However, I will argue that the way we officially measure poverty is misleading and causes us to falsely believe no progress has been made over the last 50 years. This is due to a couple of reasons:1) Inflation is overstatedThe official poverty threshold is adjusted annually based on inflation determined by the Consumer Price Index, or CPI. While the CPI is a useful measure for some purposes, it is known to overstate inflation.This is because: a) The CPI is calculated using a fixed basket of goods and does not allow for substitution. If the price of bread doubles, many people would buy similar produces such as pasta or rice instead. The CPI's methodology has people stick with certain goods despite many substituting into others.b) Technology has improved the quality of products over time, which is difficult to quantify. The average new car today is safer, more fuel-efficient, and all around better than the average new car year 20 years ago. Many of the features that come standard on cars today did not exist 20 years ago, making a direct comparison difficult. Consumers are not paying more for identical versions of some products they bought last year, they are paying more for something marginally better. In this way, CPI once again overstates inflation.and c) Outlet bias and the introduction of new goods, which are sufficiently explained in the link above.Together, these effects have essentially created a moving goal post, where the absolute material threshold required to be above the poverty line increases every year.2) The poverty threshold is based on income, not consumptionIf you're trying to see how many people are working jobs that don't pay well enough, then income is a good measurement for determining poverty. However, if you're trying to see how many people are living an impoverished lifestyle, consumption is a better measurement. This is because non-cash government assistance programs are not counted as a part of an individual's income.The government has a number of programs, such as food stamps, rent assistance, and Medicaid, that are designed to help those who are most in need. These services have an equivalent monetary value that can be assigned to them, but are not for the purposes of tracking poverty.If the poverty threshold for an individual is hypothetically $15,000/year, and an individual only earns $12,000/year, than they are below the poverty line. If that same individual receives the equivalent of an additional $6,000/year in non-cash benefits, bringing their effective income up to $18,000/year, they are still in poverty by the income method. However, if we use consumption poverty as our method of definition instead, the person is not in poverty (assuming they choose to spend enough of their earned income).Here's a link explaining what is considered income for determining the poverty rateThe reason people are earning incomes below the poverty line is a much larger and separate debate. The fact is, it is simpler and faster for the US government to give people welfare benefits to raise their standard of living than it is to fix the larger, systematic problems that cause people to earn so little in the first place. I am not saying this is something we shouldn't try. Rather, that government assistance programs have historically been the primary way in which the federal government has attempted (and succeeded) to reduce acute material deprivation among its least fortunate citizens.ConclusionWhen we look into poverty in the United States, a couple of methodological adjustments allow us to paint a more comprehensive picture. By adjusting for the CPI's tendency to overstate inflation and using consumption as a gauge for well-being instead of income, we see that poverty has fallen substantially in the last several decades.If we anchor ourselves to the 1980 poverty threshold, properly adjust for inflation, and go by consumption, the poverty rate in 2018 would be approximately 3%. This is much better than the official rate of 11.8% (see pages 9 & 11 of the link in the paragraph above).Similarly, if we took the 2018 threshold and looked back in time, we would note that poverty has fallen from over 50% in the early 1960's to only 11.8% in 2018 (see pages 10 & 12 of the same report).Either way, poverty has fallen markedly. I believe this talking point is largely missing in political discourse today. This is a development at least worth acknowledging, if not celebrating.The purpose of this post is not to trivialize the plight of poor people in the United States. Plenty of people face unique circumstances, financial and otherwise, that make their lives incredibly difficult. Rather, I hope to show that as a country, the US has been incredibly effective at raising the absolute material conditions for almost all of its citizens in the last half-century.TLDR: Poverty has fallen substantially in the United States the last several decades and this drop isn't picked up by the official measurementsSources:https://www.irp.wisc.edu/resources/how-is-poverty-measured/#:~:text=Poverty%20is%20measured%20in%20the,in%20charge%20of%20measuring%20poverty.-https://leo.nd.edu/assets/339909/2018_consumption_poverty_report_1_.pdf-https://www.frbsf.org/economic-research/publications/economic-letter/1997/may/bias-in-the-cpi-roughly-right-or-precisely-wrong/-https://www.npr.org/sections/coronavirus-live-updates/2020/09/15/913131697/american-incomes-were-rising-until-the-pandemic-hit-https://en.wikipedia.org/wiki/Poverty_in_the_United_States