Be very careful of US poverty numbers


We should always be very, very, careful with the poverty numbers that come out from the US. For they calculate their poverty level in an entirely different manner to everyone else. We and the rest of the industrial world look at what people have after all the things we do to alleviate poverty. After tax credits, housing benefit and all the rest. This is sensible, because what we want to know is not how much poverty is there before we start to help but how much is there after the help we already do give: how much remains to be done in essence?

Have a look at this calculation here. They've got it a little bit wrong in that the minimum wage worker doesn't have more disposable income than the $60,000 a year household, rather they have a larger consumption bundle. And, of course, it's really consumption that defines poverty, not either income or disposable income.

But here's the important point. When the calculation is done of how many poor people there are in the US the only part of that assistance that is included is the TANF amount. That $2,040 going to the extremely poor family. For the only thing that is counted in determining poverty is cash income: the effects of the tax system (and thus tax credits) and benefits in kind (food stamps, Section 8 housing vouchers etc) are ignored. That some $32,500 in various assistances offered to the minimum wage household is simply not taken into account at all.

Which, when you think about it is really rather strange. For that minimum wage household is enjoying a consumption bundle considerably higher than median household income for the US as a whole (which is $49,000 or so, but that's a pre tax number, and as we can see, the min wage household has higher consumption than the $60,000 one).

And the implication of this is that, to the first level of approximation at least, is that there are no working poor in the US. The problem has already been solved. The US welfare state is sufficiently large, sufficiently redistributive, that working at minimum wage leads to a better than median lifestyle and consumption bundle.

What poverty?