U.S. Poverty Far Worse Than the Numbers Show

Posted by James Parks to AFL-CIO NOW

With the cost of almost every basic necessity going up, more and more Americans are facing the possibility of slipping into poverty. While the United States is the richest nation in the world, nearly 40 million Americans, roughly the population of California, officially live below the poverty line and millions more struggle to get by every month. Over the past seven years, the number of poor Americans has increased and inequality has increased.

But when the U.S. Census Bureau issues its report on the 2007 poverty rate in America in a few weeks, the report will not tell us the whole truth, according to the Economic Policy Institute (EPI). A new Economic Snapshot by EPI shows the official measure of poverty significantly undercounts the poor. Jared Bernstein, director of EPI’s Living Standards Program and author of the report, says a more accurate measure would reveal that millions more are in poverty than the census numbers reflect.

The way in which poverty is measured is significant, Bernstein says, because “our policymakers and citizens need to know how many people face serious economic deprivation in an otherwise affluent economy.”  

If we don’t measure poverty accurately, we can’t gauge how much our economic policy is reaching the edges of society. 

As a practical matter, Bernstein says, the scope of many government programs—such as food stamps and heating assistance—depend on whether the recipient is in poverty. But if we don’t have an accurate count of who needs help, the nation’s anti-poverty programs won’t work. 

There already is a more accurate way to measure poverty, the report says. After an extensive study, the National Academy of Sciences recommended an alternative way of measuring the poor that counts many more income sources, including tax credits and the market value of food stamps. It also updates the poverty thresholds—the income levels used to determine poverty status—using up-to-date information on consumer spending, including housing and out-of-pocket medical costs.

No matter which measure is used, the trend is clear: Even though workers’ productivity is rising, income inequality also is growing, trapping more and more people in poverty.  In 2006, 12.3 percent of the population—36.5 million people—were officially poor. But under the more comprehensive, alternative measure, 17.7 percent—more than 52 million—were poor. In 2000, the official poverty rate was 11.3 percent and the alternative rate was 15.3 percent.

Bernstein says these figures show an “economy out of whack.”

It’s extremely telling that after six years of touted economic growth, the poverty rate is actually higher in 2006 than it was in 2000. I can think of no better example of the impact of narrowly shared growth than that more people are poor than during the last growth cycle.

Getting an accurate idea of the extent of poverty could play a role in this year’s elections. A major study last year by the Poverty Task Force of the Center for American Progress (CAP) took a look at the extent of poverty and outlined a pragmatic plan of government action to reduce it by half over the next 10 years. The plan, which includes passage of the Employee Free Choice Act, will require a renewal of our political will to end poverty, congressional leaders say. Click here to read the study. 

Building on the recommendations in the study, four organizations—the Leadership Conference on Civil Rights, which includes the AFL-CIO; Association of Community Organizations for Reform Now (ACORN); Center for American Progress Action Fund; and the Coalition on Human Needs—joined in a major new anti-poverty initiative called Half in Ten: From Poverty to Prosperity. Former presidential candidate John Edwards is leading the initiative.

Click here to learn more about the effort to reduce poverty.