Attitudes Towards Poverty

At a seminar in Germany last week, a statistical difference illustrated a crucial E.U.-U.S. difference in politico-economic attitudes. In the U.S., we define the poverty line as absolute: three times the income needed for a minimally nutritious food budget. In Europe, the poverty line is based on relative income, typically 50 percent of the median income.

This transatlantic difference says something about political/cultural differences. With our definition, in a growing economy, so long as inequality doesn’t increase too much and food prices don’t increase more than average prices, poverty will eventually disappear. We will not always have the poor with us in America. What an optimistic view — and what lack of concern about inequality! In Europe, even with income growth, unless inequality decreases, the fraction of households in poverty won’t change. How pessimistic, yet how concerned about equality! (HT: MB)

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  1. Mike B says:

    The difference stems from Europe’s past history of rigid class systems and class warfare resulting in a subjective view of poverty. In Europe the poor are the people who have the least and occupy the lowest social rungs. Because you can never have a ladder without a bottom rung there will always be lower classes deemed worthy of special attention. The reason for this is because no matter how much the lowest rungs has objectively, they still had to avert their eyes when subjectively wealthy people showed up.

    In America where we don’t have rigid social classes we use an objective measure of poverty. You are poor if you have less than a certain basket of stuff. The only downsides to being on the lower rungs in America is that you lack some of the stuff that the wealthy have.

    Seeing as how happiness tends to level off once a person’s basic needs have been met I would support the American style objective measure. Money does not buy happiness past a certain threshold. Therefore the most equalizing act is to get people to the basic threshold.

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    • brazzy says:

      I think you got things backwards. Historically, rigid class systems did NOT correspond directly to wealth. Social status was linked to class, which is what you were born into. And while the upper class generally had better opportunities to acquire wealth, they could (and often did) lose their wealth while retaining their social status, whereas many lower-class people managed to become very wealthy while still being limited in social status. Hence the cliché of the “impoverished nobleman” looking down on the “nouveau riche” merchant.

      That’s actually how the abolishment of rigid class systems generally starts: lower-class people acquire wealth and thereby power, and use it to erode conventions that deny them the social status they seek.

      And if social classes in America are based on wealth rather than birth, then doesn’t that mean that the downside of being on the lower rungs is that you not only lack stuff, but automatically also social status? That’s certainly what my observations indicate: Americans tend to assume much more than Europeans that people are poor because they are lazy or morally deficient. This is often ascribed to the protestant mindset that considers wordly success an idication of divine favor, though I suspect that it’s often more a convenient method to justify the status quo.

      As for happiness levelling off once basic needs have been met: look up “Maslow hierarchy of needs”.

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  2. Kevin says:

    Canada, or at least the most vocal anti-poverty groups, also measure poverty in relative terms, which strikes me as somewhat ridiculous.

    If poverty is a relative term based on average income, then by definition it becomes impossible to eliminate.
    What’s worse is the measures these groups commonly advocate — raising the minimum wage — will by definition have an inflationary effect.

    They use the median income percentage to get a dollar figure, then demand a wage hike to reach that dollar figure, then recalculate to find SURPRISE the number of sub-poverty people hasn’t changed.

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    • brazzy says:

      “If poverty is a relative term based on average income, then by definition it becomes impossible to eliminate.”

      WRONG. In a population where half the people earn $30k/year and half earn $70k/year, nobody earns less that 60% of the average (or median), and by most relative definitions of poverty, nobody is poor.

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  3. John B says:

    The discussion of a definition of poverty begs the question as to why there is a need for such a definition–other than political needs.

    Congress fights over definitions because the formula ensures more money for various constituencies. Some cities with horrible schools get rewarded more money to keep the schools horrible by emphasizing their “poverty” levels.

    Many people under the “poverty” line own cars, 2 or 3 TV’s, computers, cell phones with cameras and apps, etc.

    The formulas are geared to increase the number of those classified as in poverty–because that is where the money is.

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  4. James says:

    Re #8: “Depending on what area you are from, $21000 per year may sound insanely low, but in vast swathes of this country, it’s not really all that hard to get by on that amount.”

    There’s also the question of lifestyle choices. I make far more than $21K/year, yet I lack (or rather, think my quality of life is much improved by not having) many of the material goods that I see many poor-by-definition people own.

    Then of course there’s the person making a larger income than mine, yet sharing a Manhattan studio with a couple of roommates. Which of us is the wealthier?

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  5. Joel Upchurch says:

    I suspect a person from a few hundred years ago would find it bizarre that one of the common problems of the poor is being overweight.

    I just finished reading “A farewell to alms : a brief economic history of the world” by Gregory Clark. One think he said that stuck with me, “What is different is that now paupers live like princes, and princes live like emperors.”

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  6. Steve says:

    Let me get this straight. If food were free, there would be no poverty?

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  7. PovertyProximateSubContinent says:

    I agree with the American definition. It is a different matter what could be considered as a bare minimum – which should change from time to time.

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  8. Patty says:

    Everybody I know who is under the poverty line has poor housing. Plenty of them have their gadgets, but they are driving 15 year old cars. I’m in a low cost rural area, also.

    I think the people most of you are commenting about, who are under the poverty line, are going in and out of poverty, and those folks are MUCH better off than the people I know who are in poverty, most of whom are all permanently disabled. They have never had good jobs, so anything nice that they have were hand me downs from their families. an Ipod or TV isn’t that expensive, compared to a decent home or car, which are the things they do without.

    Also, nobody is mentioning lack of health care as an issue. The poor people that I know do get health care, due to being permanently disabled, but the working poor do not have health insurance, and have to rely on emergency rooms for problems that spiraled out of control. They can afford a one time expense of $400 for a Tv, but can’t afford health insurance.

    I think maybe the people who comment here do not live in a low income area. My county is the poorest in the state of MN, and many, many people are below the poverty line.

    I will add that many poor people I know do not handle their money very well, but you have to remember, people are usually poor for a reason. It’s going to be disability, drug or alcohol addiction, low IQ, string of bad luck, etc. Some of those things are going to make people handle their money poorly. I really think financial counseling would help some people, but even so, sometimes you do just have to throw some money at problems, also.

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