NCPA - National Center for Policy Analysis

Redefining Poverty

October 25, 1999

Last week, the New York Times reported that the Clinton Administration is planning to revise the definition of poverty used since the early 1960s. (The Census Bureau has denied the report.) The poverty level for a family of four would rise from $16,600 to $19,500, the Times says, which would raise the poverty rate from 12.7 percent to 17 percent. Under the new definition, 46 million Americans will be living in poverty.

The basis for the move is a 1995 report from the National Academy of Sciences that concluded the definition of poverty should change over time and reflect the fact that luxuries of the past have become the necessities of today.

The problem is that this new definition is entirely subjective and less a measure of true poverty than a liberal ploy to justify more government programs. Any objective measure would show poverty is declining, not rising.

The Census Bureau's own data, for example, show that for most people in poverty their stay is brief:

  • In 1993-94, 47.3 percent of those in poverty stayed there less than 4 months.
  • Only 12.9 percent of those in poverty remained there for more than 2 years.
  • If the definition of poverty was limited to the chronically poor, the poverty rate would fall to 5.3 percent.

Consumption data also show declining poverty. In part, that is because spending, and hence the actual standard of living, greatly exceeds income for many poor households. According to the Bureau of Labor Statistics, in 1997 average spending by the lowest 20 percent of households ($16,008) was more than twice their income ($7,086). Fully incorporating consumption data reduced the 1989 poverty rate from 12.8 percent to just 2.2 percent in one study.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 25, 1999.

 

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