full image - Repost: Who's Poor? The Case for the Relative Poverty Rate (from Reddit.com, Who's Poor? The Case for the Relative Poverty Rate)
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Hey y'all been a bit busy so I haven't been around the sub much lately but I wanted to take a bit of time to talk about how we measure poverty in the United States, why it sucks ass, and what we can do about it. So here goes...How We Measure Poverty Now:If you've ever found yourself needing welfare of almost any kind in this country you've probably noticed that they use the Federal Poverty Line (which I'll refer to simply as the FPL from here on out) to determine eligibility. While some welfare programs, such as the ever-based EITC, do not use the FPL or some multiple of it as a determinant of eligibility, most do. In fact according to this list from the Department of Health & Human Services, all of the following programs do use the FPL as an explicit method of gatekeeping who has access to welfare:Department of Health and Human ServicesMedicaidMedicare Part D Low Income SubsidiesChildren's Health Insurance ProgramConsolidated Health Centers (CHCs), including Federally Qualified Health Centers (FQHCs)Maternal and child health servicesTitle X Family Planning ProgramOlder Americans Act Nutrition ProgramHead StartHealth professions student loans and scholarshipsCommunity Services Block GrantSocial Services Block Grant (Including Transfers from TANF)Low-income Home Energy AssistanceDepartment of AgricultureSupplemental Nutrition Assistance Program (SNAP)National School Lunch ProgramSpecial Supplemental Nutrition Program for Women, Infants, and Children (WIC)Child and Adult Care Food ProgramSchool Breakfast ProgramSummer Food Service ProgramCommodity Supplemental Food ProgramFood Distribution Program on Indian Reservations (FDPIR)Senior Farmers' Market Nutrition Program (SFMNP)Special Milk Program for ChildrenDepartment of EducationTRIO ProgramsEducational stipends for the Native Hawaiian Career and Technical Education Program (NHCTEP)Educational stipends for the Native American Career and Technical Education Program (NHCTEP)D.C. School Choice IncentivesFederal Student Aid - Income-Driven PlansDepartment of EnergyWeatherization Assistance ProgramDepartment of Homeland SecurityU.S. Citizenship and Immigration Services, Immigration Form Fee Waiver (Form I-912)U.S. Citizenship and Immigration Services, Inadmissibility on Public Charge GroundsDepartment of LaborJob CorpsWorkforce Innovation and Opportunity Act (WIOA)Senior Community Service Employment Program (SCSEP)Department of TreasuryHealth Insurance Premium Tax CreditsLow-Income Taxpayer Clinics (LITC)Fee waiver for Offer in CompromiseReduced user fee for Installment AgreementsCorporation for National and Community ServiceFoster Grandparent ProgramSenior Companion ProgramFederal Communications CommissionLifeLineLegal Services CorporationLegal ServicesIn short in the US, whether or not you're poor enough, is a pretty big fucking deal. Now if poverty is measured accurately, ostensibly using the current FPL, then this should be no problem since aid would be more or less perfectly targeted to those who truly need it. However, as we will see this may not be the case in reality.The current FPL was devised in 1964 by Mollie Orshansky, an economist working for the SSA and its method of calculation has remained more or less unchanged since. The way that the FPL is calculated is by taking the cost of a minimum (read: emergency) food diet multiplied by three to account for other family expenses. This minimum basket of food products used to calculate the FPL is itself based on an even older report: "Family Food Plans & Food Costs" written by USDA researchers 1962. Using this method, the current FPL (2022) for Americans ranges from a measly $13,590 for a single individual to $46,630 for a household of 8.Why the Current FPL Sucks:While the dollar value of the FPL does change on a yearly basis since the costs of this minimum basket of foods changes too, the FPL is considered to be an absolute measure of poverty. An absolute measure is calculated based on a timeless or uniform set of needs. In the case of the United States, the uniform need is the emergency diet though in other countries goods like shelter or other basic survival necessities may be used. The fact that the US signed the United Nations Universal Declaration of Human Rights, which recognizes shelter as basic necessity, all the way back in 1948 yet doesn't include expenses on shelter as part of the basket of goods used to calculate the FPL tells you a lot.Economists and organizations around the world, from the based Amartya Sen, the EU's European Anti-Poverty Network, to the renowned Luxembourg Income Study all generally agree that relying purely on measures of absolute poverty (at the global level think of the $1.25/day often touted) are pretty garbage compared to relative measures of poverty. We'll get into relative poverty measures more in the next section. In the context of the United States specifically, most economists agree that the official FPL is far too low. Considering its use in determining eligibility for the myriad of welfare programs listed above, this inaccurate measure can arbitrarily bar millions of poor Americans from accessing potentially life-changing assistance.A major problem with using absolute measures of poverty, like we do in the US, is that at the fundamental level, poverty is a lack of resources relative to needs. In order to escape poverty, a person or household must have enough resources (aka income) to meet a basic standard of needs. For example, even if a household can afford their basic food needs but lacks enough money to pay rent, are they poor? Under the current system, a household may meet or even exceed the FPL and yet still be unable to meet society's basic standard of needs.What We Can Do Better (aka Relative Poverty Rates):Typically, a relative measure is calculated compared to the current distribution of income, which serves as a useful proxy for any possible bundle of wants/needs/resources. The most common relative measure of poverty is calculated relative to the median income of some unit. The most popular and conventional relative measure is to say a person is poor if their income is below 50% of the median. Though it is important to recognize that 50% is not some set number and various proposals have ranged from as low as 30% of median income to as high as 80%.Another bonus of replacing the current absolute FPL with a relative FPL is that it can be easily scaled from the national level down to the state, county, or even municipal level. 50% of the median income in New York County, NY (aka Manhattan) is going to be considerably higher than 50% of the median income in McKinley County, New Mexico. The federal government could of course use national median income as relative measure but it could make adjustments to areas with different costs of living. This same argument has been made by economist Arindrajit Dube for having regional relative minimum wages set at some percentage of median hourly income but that's a story for another effortpost.So how would it look like if we used a federal relative poverty line (FRPL) instead? According to OECD data, which uses relative poverty rates, the United States' calculated poverty rate in 2016 was actually 18%! This is substantially higher than the official absolute poverty rate of 12.7% that was measured that same year, suggesting that tens of millions poor Americans slipped under the radar and they may have be denied access to welfare programs as a result.Using 2021 data, the official FPL for an individual was just $12,880 while using 50% of the national median individual income as a relative poverty measure would increase this to $18,776 (using 2021 St. Louis FRED data). This new FPL is still not a lot of money but it would expand access to a variety of welfare programs. For example, in my home state of New Mexico an individual is only eligible for Medicaid if they make less than 138% of the FPL, which using the current absolute FPL amount for 2021 would mean they couldn't make more than $17,774 that year. Under the proposed relative measure for that same year, an individual could have made up to $25,910 before losing eligibility. Keep in mind that $26k is still not a lot of income but the impact of being able to retain lower-cost health insurance is potentially very large. Considering an individual who currently gets kicked of Medicaid due to income limits still likely doesn't make enough to purchase coverage on the unsubsidized market, they may end up foregoing health insurance coverage altogether all because of weird federal rules.This is by no means a comprehensive list of arguments for using relative poverty rates but I hope I've given y'all some stuff to think about. If we are ever to truly win the war on poverty, we must first be able to properly quantify it. Cheers!OECD Relative Poverty Rates (2016)
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