Saturday, January 29, 2011

Perspectives on Poverty

Following up on yesterday's post on self storage units and the blessings of plenty we have in this country, I recalled an excellent column by Walter Williams that I read last year titled "Poverty in America is Anything But".  Dr. Williams is a Professor of Economics at George Mason University as well as a syndicated columnist.  He is also an African-American who grew up in Philadelphia's housing projects.  This is a man who knows something of living in poverty.

Dr Williams writes:

Imagine you are an unborn spirit whom God has condemned to a life of poverty but has permitted to choose the nation in which to live. I'm betting that most any such condemned unborn spirit would choose the United States. Why? What has historically been defined as poverty, nationally or internationally, no longer exists in the U.S. Let's look at it.
Forty-three percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage and a porch or patio.
-- Eighty percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
-- Only 6 percent of poor households are overcrowded; two-thirds have more than two rooms per person.
-- The typical poor American has more living space than the average individual living in Paris, London, Vienna, Athens and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
-- Nearly three-quarters of poor households own a car; 31 percent own two or more cars.
-- Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
-- Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
-- Eighty-nine percent own microwave ovens, more than half have a stereo, and a more than a third have an automatic dishwasher.

The complete report from 2007 is here which included this chart showing the ownership of property and consumer goods by those below the poverty line in America.

How is this possible?  The definition of "poverty" includes only "pre-tax" cash income.  It ignores food stamps, subsidized housing allowances, Medicaid, the earned income credit and welfare payments.  One study found that the poorest fifth of American households purchased nearly twice as much as their reported incomes.  In effect, government programs have been effective in taking care of many basic needs that allow for the poor in this country to accumulate consumer goods that would be the envy of almost anyone else in the world.

There was no definition of what constituted "poverty" in this country until the mid-1960's.  It was developed shortly before President Johnson declared his "War on Poverty" in 1964.  The poverty rate in 1964 was 19%.  In the 1950's it was in the mid-20's using this formula.  It is in the 14-15% range today.  We clearly have made progress on this issue despite the rhetoric we often hear.

In fact, the progress has actually been much greater than the poverty statistics reveal when it is considered that the poor are receiving a lot of support today (Medicaid, food stamps etc) that did not exist in the early 1960's.  However, the definition of "poverty" that considers only "cash income" has not changed. We are not even comparing apples to apples.

Dr. Williams suggests that the calculation of poverty should change to reflect reality.
Material poverty can be measured relatively or absolutely. An absolute measure would consist of some minimum quantity of goods and services deemed adequate for a baseline level of survival. Achieving that level means that poverty has been eliminated. However, if poverty is defined as, say, the lowest one-fifth of the income distribution, it is impossible to eliminate poverty. Everyone's income could double, triple and quadruple, but there will always be the lowest one-fifth.
That is not likely to happen.  There are a lot of vested political interests that will make sure of that.  However, keep the above perspective in mind when you hear comments about our country's horrible record in helping the poor.  We can always do better but the facts show that we have come a long way.

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