NCPA - National Center for Policy Analysis


September 12, 2005

The official poverty rate not only fails to calculate trends in impoverishment with any precision, it even gets the direction wrong, says Nicholas Eberstadt, writing in the New York Times.

According to the latest poverty rate estimates by the Census Bureau, the percentage of Americans living in poverty was higher in 2004 (12.7 percent) than in 1974 (11.2 percent). Eberstadt explains that even the most basic facts on poverty alleviation rebut the proposition that material circumstances in America are harsher for the vulnerable today than three decades ago. Consider:

  • Per capita income adjusted for inflation is over 60 percent higher today than in 1974, the unemployment rate is lower and the percentage of adults with high paying jobs is distinctly higher.
  • In 1972-73, 42 percent of the bottom fifth of American households owned a car compared to almost 75 percent in 2003.
  • By 2001, 6 percent of poverty households lived in crowded homes (more than one person per room) -- down from 26 percent in 1970; by 2003, 45 percent of poverty households had central air-conditioning compared to 29 percent of the non-poor in 1980.

Eberstadt calls the poverty rate a broken compass, out of step with these readings about deprivation in modern America because it was designed to measure the wrong thing. A better gauge of a household's material deprivation is not what it earns, but what it spends:

  • According to the Labor Department, the average reported income for the bottom fifth of households was $8,201, while reported outlays were $18,492.
  • In the early 1970s, the poorest fifth's reported spending exceeded income by 40 percent.

Source: Nicholas Eberstadt, "Broken Yardstick," New York Times, September 9, 2005.


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