Date posted: September 13, 2012
Poverty rates have risen about 4 percentage points in the last decade, with the 2010 measure standing at near 15 percent. But N.C. State University economist Mike Walden says that analysts don’t think this is an adequate measure of poverty.
“Virtually no one who studies poverty and tracks poverty is satisfied with the way the way the government measures the poverty rate. And it measures it in the very simple way that was developed about 50 years ago. It is based on the money that the government estimates a family needs to spend to have an adequate amount of nutrition from their food. And then it simply takes a multiple of that and says, well, when you include other things, maybe you need four times that amount of money.
“So clearly this is outdated for several reasons — one reason being the cost of food has actually gone down relative to other things. Of course people buy many more things than just food. Health-care costs have gone up much more rapidly.
“So that very simple formula probably is not adequate today. Therefore, critics argue …, the measure of poverty is understated because it doesn’t take into account these other costs. They also argue that it doesn’t take into account differences in costs of living between areas.
“But there are also some folks that say, really, the measure of poverty … overstates poverty because it doesn’t account for the assistance that many who live below the poverty line receive – assistance, for example, in things like food stamps, Medicaid, subsidized housing, et cetera.
“So, all told, no one thinks that the way we measure poverty is good. The challenge is to get an alternative official measure.”
Category: Economic Perspective