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. Wes says:

    @ those who have wondered about the US being “only concerned with food” and not housing, healthcare, etc.: that’s why the poverty line is THREE TIMES the cost of a reasonable diet – so there’s money left over for the other necessities.

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  2. Joshua Northey says:

    “I’ve never understood the idea of measuring poverty in terms of relative income.”

    You measure it that way because that is how people psychologically measure it. The human mind/emotion is hugely adaptable to its circumstances and within reason happiness does not correlate to ones absolute material well being, but rather one’s relative material well being.

    Absolutely speaking (whatever that means) anyone living in any western country lives like kings right now. But people don’t think of it that way.

    This is the same reason no one in America thinks they are rich. In my state you have people making $125,000/year screaming because they say raising taxes on them isn’t raising taxes on the rich, and the rich are really those who make $250,000/yr. They of course also think they are not rich, because then they would have to explain to themselves why they are in such poor financial condition (over-consumption). Moreover many of their friends and acquaintances have similar incomes, so that seems normal to them. When self-reporting something like 70% of the population reports it is in the middle quintile of income. Finally, you have advertising always showing them that they could have more, never showing them how much they have.

    I have had people laugh at me when I describe myself as “upper-middle-class”. They think I am putting on airs. Actually it is just that I understand the demographics and they don’t (80,000+/yr is absolutely an upper-middle-class income).

    Anyway the impact that human psychology and its assessment of options has is interesting because it leads to odd scenarios. In certain parts of Africa increased wealth has brought decreased satisfaction because people now have just enough access to the global media world, and suddenly realize where they truly stand in the grand scheme of things.

    If you are the guy with the biggest hut in the village in 1800 you are living the high life. If you are the guy with the biggest hut in 2000, you just feel like a rural hick who cannot even afford a car.

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  3. Eric M. Jones says:

    In 2001 the richest 1% owned 32.7%
    In 2007 the richest 1% owned 33.8%
    Then we had a big dip in the economy and gave free taxpayer trillions to the richest people…Plus we give them a reduced tax rate.
    In 2010 the richest 1% own…? I’m taking bets on 42%.

    The bottom 50% has gotten poorer and poorer. So has the middle class. Can this inequality be reversed? I doubt it….short of an armed revolt. Don’t think what happened in the Mideast can’t happen here.

    I drew some revealing graphs which Dubner pocketed. It’s bloody awful.

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  4. James says:

    Re #16: “Plenty of them have their gadgets, but they are driving 15 year old cars.”

    There’s a problem with this? Again, I’m far from poor by any measure, but my two vehicles are 11 and 23 years old. I won’t be replacing them any time soon (barring accidents &c) because they’re still better than anything on today’s market.

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  5. J says:

    Poverty could be eliminated under the European model; it is mathematically possible for all households to make more than 50% of median income.

    “I would expect the minimum income level to also include decent housing, access to reasonable healthcare and schooling”

    It isn’t quite as simple as the 3X rule anymore, though that’s still basically true. Here’s a longer explanation of the standard, with (if you’re really bored) links to even longer ones: http://aspe.hhs.gov/poverty/papers/hptgssiv.htm

    “Also, nobody is mentioning lack of health care as an issue”

    Because it isn’t an issue; poor people in the US and (AFAIK) most if not all European countries get medical care paid for by the government (http://www.caring.com/articles/how-does-medicaid-work). If you’re referring to poor people not taking advantage of taxpayer provided healthcare, state it that way. Health insurance, at least in the US, is a problem for the lower middle class, not the poor.

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  6. Eric M. Jones says:

    For anybody who thinks there is not a problem, how’s this?:

    The 2007 US mean net worth was $556,300 and the median was $120,300.

    Ref: “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances”. And apparently everyone is shy about publishing more recent data….

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  7. Shane says:

    Daniel, a quick question: do you mean that these are OFFICIAL terms for the poverty line, defined by the United States government and by the European Union?

    (Or do you just mean that casually, most of the Europeans at that seminar used the relative poverty definition, most of the Americans used the absolute poverty definition?)

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  8. Patty says:

    re #20, perhaps I should have said, 15 year old rustbuckets that are unreliable and the paint is peeling off. These are junker cars I am talking about. I don’t know ANY middle class families that drive cars like these. I don’t think the spirit of what I said was understood. Many don’t have any car at all because thay cannot afford it, and this is a rural area with extremely limited transportation.

    Poor single adults are not always eligible for medicaid. Some states choose to offer more generous benefits.

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