Out of Control Policy Blog

Measuring poverty is tricky business

    Every three years, researchers from the federal government conduct surveys about the number of appliances in the homes of American families. In 2001, ninety-one per cent of poor families owned color televisions; seventy-four per cent owned microwave ovens; fifty-five per cent owned VCRs; and forty-seven per cent owned dishwashers. Are these families poverty-stricken?

    Not according to W. Michael Cox, an economist at the Federal Reserve Bank of Dallas, and Richard Alm, a reporter at the Dallas Morning News. In their book "Myths of Rich and Poor: Why We're Better Off Than We Think" (1999), Cox and Alm argued that the poverty statistics overlook the extent to which falling prices have enabled poor families to buy consumer goods that a generation ago were considered luxury items. "By the standards of 1971, many of today's poor families might be considered members of the middle class," they wrote.

    Consider a hypothetical single mother with two teen-age sons living in New Orleans' Ninth Ward, a neighborhood with poor schools, high rates of crime and unemployment, and few opportunities for social advancement. The mother works four days a week in a local supermarket, where she makes eight dollars an hour. Her sons do odd jobs, earning a few hundred dollars a month, which they have used to buy stereo equipment, a DVD player, and a Nintendo. The family lives in public housing, and it qualifies for food stamps and Medicaid. Under the Earned Income Tax Credit program, the mother would receive roughly four thousand dollars from the federal government each year. Compared with the destitute in Africa and Asia, this family is unimaginably rich. Compared with a poor American family of thirty years ago, it may be slightly better off. Compared with a typical two-income family in the suburbs, it is poor.

Read Relatively Deprived here.

Ted Balaker is Producer


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