Well Done Indy!

Lead story today is all about poverty in the US. They manage to get through it all without noting one very important fact:

The minimum wage had stood unchanged for a decade – its longest freeze ever – until it was increased to $5.85 an hour from the $5.15 set in 1997. The national poverty rate stands officially at around 13 per cent, a level little changed from the 1970s. Poverty is currently defined as an income of $21,500 (£10,750) for a family of four.

Indeed, however, there\’s a little wrinkle in the way in which poverty is measured in the US. It is market incomes, before tax, and with the addition only of direct cash transfers.

So, what it actually measures, that 13%, is the number of people who would be below the poverty line if they were to get no help or aid from the various organs of state.

But there are various forms of aid. There are food stamps (which the article mentions, but does not make this point clear) which, being aid in kind, are not counted. Housing vouchers are not counted, Medicaid is not counted.

Perhaps more importantly, the EITC (very like our tax credits) works through the tax system and is thus not counted. So America\’s largest program to aid the working poor is not actually counted in the poverty figures.

Now it may well be that the poor are treated differently in the US than they are here: but that doesn\’t actually mean worse, or at least not necessarily.

I once went through a rough exercise of taking that family of four though the system to see how much aid they would in fact get.  The EITC would be worth some $4.5-$5 k (that\’s including only the Federals: many States top this up), Medicaid a similar sort of sum, housing vouchers, food stamps perhaps on top.

As it happens, median household income in the US is about $42 k or so. So the poverty line (I\’m ignoring the difference in household sizes, sorry, this is from memory) is about 50% of median incomes: but add in the help that someone gets and for those on said poverty line actual income is more like 75%.

Now I\’m cherry picking, of course: but the important point still stands. Because of the way that poverty is measured in the US (pre tax, pre benefits) using these uncorrected figures always makes it look much worse in comparison with European figures than it actually is.

2 thoughts on “Well Done Indy!”

  1. The slightest acqaintance with food stamps would suggest that, for those who receive them, they’re almost exactly like cash; it wouldn’t surprise me if there were entrepreneurs always on the lookout to buy ’em at some discount.

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