By any definition, poverty is a problem

Blog post
January 29, 2018By Juan Carlos Ordóñez

Recently, more Oregonians became officially “poor,” following publication of new federal poverty guidelines. These guidelines offer an important — albeit inadequate — answer to the question, “What is poverty?”

Usually published early each year, the guidelines help determine eligibility for many safety net services such as the Oregon Health Plan and the Supplemental Nutrition Assistance Program (formerly known as food stamps).

The guidelines, often referred to as the “federal poverty level,” vary by family size. For a three-person family, such as a single parent supporting two kids, the federal poverty level in 2018 is $20,780. That translates into $400 per week.

It’s difficult to imagine a family of three earning a bit more, say $450 per week, not struggling to make ends meet. Yet this family is not officially poor in 2018.

Indeed, it’s widely recognized that the official definition of poverty, developed in the early 1960s, is outdated and flawed. Under that definition, families are poor when their income is less than three times the cost of a modest basket of food. Though over time the income level has been adjusted for inflation, the definition has not changed to reflect that, compared to decades ago, a bigger share of a family’s paycheck now goes to non-food items such as housing, child care, transportation, and health care.

The U.S. Census Bureau estimates that 13.3 percent of Oregonians — including nearly one in six children — met the official definition of poverty in 2016. That means more than 536,000 Oregonians lived in poverty that year, including nearly 137,000 children.

Recognizing some of the flaws in the official definition of poverty, a few years back the federal government began publishing a Supplemental Poverty Measure. This new measure — being used by policymakers just for informational purposes at this point — acknowledges some of the costs that families today confront. It also considers as income such things as tax credits and non-cash benefits that help families meet basic needs.

Under the Supplemental Poverty Measure, the Census Bureau estimated that there were 44.8 million Americans living in poverty in 2016 — 4 million more than under the official measure.

Yet even that definition is inadequate, ignoring the relative nature of poverty. Both the official and supplemental poverty measures focus on whether a person lacks basic material necessities such as food and shelter. But people can meet their basic needs and still have income so low compared to others that it sets them apart, excluding them from the opportunities that help others get ahead.

Relative poverty is what Adam Smith, the father of modern economics, highlighted in a famous passage in The Wealth of Nations. He pointed out that while the ancient Greeks and Romans lived fine without linen shirts, in 18th-century Europe any worker would be “ashamed” to appear in public without one, indicating a “disgraceful degree of poverty.”

By any definition, poverty is a problem. Children growing up in poverty are less likely to do well in school, more likely to suffer poor health and, ultimately, less likely to achieve their potential.

Even though a perfect definition of poverty may be elusive, the necessity to confront it is clear and urgent. And the increase in the number of poor under the new official guidelines only adds to that urgency.

Posted in Poverty & inequality.

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