Should The Official Poverty Guidelines Be Revised?
On the Adam Smith Institute blog, Tim Worstall writes:
There's a technical point that needs to be made about U.S. poverty figures. To remind you, the U.S. measures poverty entirely differently from every other nation: they took the necessary food budget in the early 1960s, tripled it and said that this was the poverty level (everyone else is using 60% of median household income) and they've simply updated it for inflation ever since.
What they haven't done is update it for the changes in portions of spending on different goods and services. We can thus say that the position of the U.S. poor, those on or below this poverty level (which, just to remind everyone again, is before the impact of poverty alleviation measures, everyone else counts after whatever we do to reduce poverty), is rather better than the simple stated figures suggest. For food has declined massively in price and thus that inflation adjusted standard goes further than it used to.
MP: The top chart above shows graphically that when the official U.S. poverty guidelines were established in 1963, total spending on food (at home and away from home) as a share of disposable income was 16%, almost double the 9.6% level in 2008 (data here). And for food consumed at home, the share of income spent on food in 1963 (12.5%) was more than double the share of income for food at home in 2008 (5.6%).
In that case, both the number of Americans officially below the poverty level and the percent of Americans living in poverty (see graph below) are overstated, since the official poverty thresholds apparently do not take into account the significant increases over time in food affordability.
Perhaps we have won the "War on Poverty," but not through massive government spending on welfare programs, but through technological improvements and increases in farm productivity leading to lower food prices?