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)


Ralph

Both are interesting but neither seems sufficient to me.

In fact the negative effects of income differences are there and it makes sense to control it. At the same time, it is pessimistic to focus exclusively on it and more than anything, does not provide a manageable fixed target (which is what a real standard should provide)

The US definition seems weak, since I would expect the minimum income level to also include decent housing, access to reasonable healthcare and schooling (as these factors seem essential to reducing powerty).

I'd take the US as a lowest limit and policy driver and the EU defintion as a vision or indicator of overall development.

Ralph, Montreal, QC, CA

Dan Inesanto

Ha! And as a (vaguely) typical American, I tend to agree with the American definition of poverty.

Taken to extremes, the European model could have people driving BMWs, wearing nice clothes, living in nice homes, and eating great food, STILL be considered to be in poverty.

However, I do realize that is merely the extreme. Especially considering the effects perceptions of relative wealth have on people and society as a whole, I can see a valid rationale for the European definition.

I still prefer the American approach to defining poverty.

Eric H.

I've never understood the idea of measuring poverty in terms of relative income. Suppose you had a choice: 1) live in a society where 10% of the population makes $100 and 90% makes $30, or 2) live in a society where everyone makes $10. If you favor equality, you should choose 2.

Or to put it another way, Ethiopia and Pakistan have less income inequality (based on the Gini index) than Canada, Japan, the EU or the US. But which direction do you think the migration is flowing?

Simon

@Eric H. Surely to be a fair comparison it should be
1) live in a society where 10% of the population makes $100 and 90% makes $30, or 2) live in a society where everyone makes $37. The total income in both societies is now the same, and (2) might look more tempting.
(I appreciate that the policies required to bring about society model 2 might result in the total income being restricted, and maybe that's what you were hinting at.)

Kate G

I see the problem with the European definition. But really, people don't need clothing and shelter? The U.S. definition seems grossly inadequate, since most Americans only spend about 10% of their income on food. It's ridiculous that a family of 4 making $21,000 isn't considered to be living in poverty.

wlajfa

A common argument proponents of the American definition make is that while they acknowledge there's more economic inequality here, there's also more potential for economic advancement here as well. It would be a great argument--if it were true. People in western European nations have more economic mobility than we do, and the most accurate predictor in the USA of how much money you'll make is how much money your father makes (or made).

The words "optimistic" and "pessimistic" in said article should be replaced with "delusional" and "realistic". It would be more accurate.

GQ

regardless of definition, the number is too high in the US...and worst of all, it would go up with the euro definition.

interested to know what euro's poverty rate would look like with our definition though

Dan Inesanto

Kate G, the poverty threshold for a family of four is ~$22K. A family of 4 making $21K per year WOULD be below the poverty threshold. You seem to have some bad facts - always a bad basis for forming opinions.

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. You can't do it in NYC, L.A., or other high-income/cost-of-living areas, but it's certainly doable in plenty of other places.

My family (of six) managed pretty well on $26K per year (just barely above poverty line back then). We were in small town OH, though, not Prince William County, Virginia. We had two cars, rented a 3 bd house, had plenty to eat, and nice clothing.

Your conception of what is needed to provide clothing and shelter is seriously warped.

Mike B

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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Kevin

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.

John B

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.

James

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?

Joel Upchurch

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."

Steve

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

PovertyProximateSubContinent

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.

Patty

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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Wes

@ 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.

Joshua Northey

"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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Eric M. Jones

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.

James

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.