Tuesday, November 15, 2011

What Percentage Lives in Poverty?

Do poor people represent the bottom 16 percent of the population or the bottom 15 percent? The answer matters more than you might think.

The difficulty of measuring economic well-being helps explain why it’s hard for people to figure out what economic percentile they belong to or which public policies would best serve their interests.

A difference of one percentage point in the overall poverty rate is no big deal. But the new Supplemental Poverty Measure, or S.P.M., developed by the Census Bureau, which yields the slightly higher overall estimate, shows lower rates of poverty among children and higher rates among the elderly than the traditional measure. An estimate based on a measure similar to the S.P.M. suggests that poverty has increased less over time.

The S.P.M. goes beyond consideration of money income to estimate the value of such in-kind transfers as food stamps, net taxes paid to government (taxes paid less the value of tax credits received), and medical and work-related expenses (such as child care and commuting costs). It also employs a new standard of need, linked to what low-income families actually spend.

Children are the beneficiaries of more of the in-kind transfers measured by the S.P.M. than people over age 65 and have fewer out-of-pocket medical expenses. As a result, they look less susceptible to poverty under the new measure than the traditional one, especially compared with older adults. Safety net programs such as food stamps expanded during the Great Recession. Read more....

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