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  • Monday, March 06, 2006


    Lies About Poverty in the US

    I am not an expert or a teacher of economics like my fellow blogger the Dark Wraith. I don't even like math or numbers much but I admit to an interest in the "big picture" of how the US and interlocking world economies work. So I sometimes grit my teeth and try to understand what statistics mean and the interpretations of these numbers.

    An article in the current issue of In These Times caught my eye. Lies, Damn Lies and Poverty Statistics by Christopher Moraff examines the roots of how "poverty" is defined by the US government for budgeting and other purposes. The income figures designated for the families to be considered "in poverty" have always seemed absurdly low to me. The reason why is explained in the article.
    The current method for measuring poverty in the United States was developed in 1963 by a young statistician for the Social Security Administration named Mollie Orshansky. Using data from a 1955 Department of Agriculture survey, Orshansky developed a set of thresholds that set a poverty line at three times the annual cost of feeding a family of three or more under Agriculture'’s "“low-cost budget."” She developed the thresholds purely for her own research and said at the time that her data'’s limitations would yield a "“conservative underestimate"” of poverty.
    Working Families with Incomes Less Than Family Budget and Poverty Thresholds, by RegionThis figure was then used and adopted by President Lyndon Johnson's administration in 1964 for its "War on Poverty." But wait: the Office of Economic Opportunity then took an already low and conservative number and lowered it by another 25%. "Low and conservative" meaning that they were underestimating the level of poverty in the US. Thus, by using these unrealistically low figures, they were able to "win" that war. These figures, adjusted for inflation, are still used today to measure poverty in the US.

    The figure at the left is from the article cited above labeled "Working Families with Incomes Less Than Family Budget and Poverty Thresholds, by Region." The blue bar represents a different standard of poverty. Government figures, using the low standards, place the poverty level at about 12.7 percent or 37 million Americans. Less conservative figures have put the level of people in poverty at 25 percent or 70 million Americans. Let me remind you of the standards used by the government. They bear repeating.
    What this means in real numbers is that the average poverty threshold for a family of four in 2004 was an annual income of $19,307. It was $15,067 for a family of three; $12,334 for a family of two; and $9,645 for individuals.
    It also bears repeating that an individual working fulltime at the federal minimum wage in this country ($5.15/hour) might earn less than the current federal poverty level for an individual. 35 hours a week x 52 weeks = $9,373 and 40 hours a week x 52 weeks = $10,712. Note those figures are without vacation or break. I doubt minimum wage earners would be unionized so there is no telling if there would be any sick days or even lunch breaks included. Certainly it is unlikely they would have medical insurance. Also remember this does not include taxes of any kind.

    I glaze over sometimes looking at figures like these but I think it's important to try to understand them. Welcome to the working week.

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