There is no one-size-fits-all definition of poverty. The poorest people in an industrialized nation may well be richer than the average citizen of a less-developed country. According to the United Nations’ Human Development Report 1996, the average per capita income of the poorest one-fifth of Americans was $5,814 in 1993. That figure is ten times Tanzania’s average per capita income of $580 per year. By Tanzanian standards, Americans in that bottom 20 percent may seem quite well-off. However, by U.S. standards, they are not.
Politicians and social scientists have sought to define poverty for over three decades. In 1965, the government officially adopted the definition set by Mollie Orshansky of the Social Security Administration, who placed the poverty threshold at an income three times the cost of a minimally nutritious diet. The threshold for a family of four in 1996 was $16,036. Similarly, the poverty guidelines established by the U.S. Department of Health and Human Services (HHS) placed the poverty level for a family of four at $16,450 in 1998. (Since 1966, poverty guidelines have been set higher in Alaska and Hawaii.) The poverty rate in 1996, according to the HHS, was 13.7 percent, or 36.5 million Americans.
Although these figures may seem straightforward, experts disagree as to whether they are the most accurate measurements of poverty. Some believe poverty is overestimated, while others claim it is underestimated. Those who say poverty is overestimated argue that certain income sources—including unreported wages and government entitlements such as food stamps, Medicaid, and public housing—are not taken into account when a family’s annual income is measured. Critics also contend that the cost of living is overstated, further skewing the poverty rate. According to Lowell Gallaway, a professor of economics at Ohio University, the poverty rate is overstated by a factor of two.
Additionally, conservatives maintain, most poor Americans do not live substandard lives, further indicating that poverty is not as extensive as the official figures would indicate.They point out that most poor American families own more luxury items and consumer appliances than average Europeans do. According to Human Development Report, the average per capita income in the Netherlands is $17,330, approximately three times larger than the per capita income of the poorest one-fifth in the United States. However, in 1994, nearly 93 percent of poor American families had a color television, almost 72 percent had at least one car, and approximately 60 percent had a microwave and a VCR. In comparison, in 1991 only 50 percent of all households in the Netherlands had a VCR and just 22 percent owned a microwave. Hence, as Bruce Bartlett writes, “Insofar as consumption is a truer measure of living standards than income, . . . many low-income Americans are far better off than their reported income suggests.”
On the other hand, liberal analysts claim that the rate of poverty is underestimated. For example, they contend, the current method of measuring income based on pre-tax earnings is deceptive. When income is based on after-tax earnings, the poverty rate climbs to over 23 percent. These analysts also assert that the current definition of poverty does not take into account the true costs of living. According to political scientists John Schwarz and Thomas Volgy, the average family now spends only one-sixth of its income on food. The costs of housing, child care, transportation, and health care are not taken into consideration, these critics contend.The poverty guideline for a family of three—for example, a mother with two children—is $13,650 per year. However, women’s advocates argue that mothers on welfare in California would need to earn two to three times the minimum wage—or an annual salary between $25,000 and $35,000—in order to provide their family with housing and other key expenses.
The costs of housing are especially important when determining the true extent of poverty, some advocates for the poor contend. These advocates point out that housing—an essential— is the largest portion of many poor families’ budgets. Shirley Weathers, the author of a report published by the Utah Issues Information Program, argues that housing expenses, rather than food expenses, provide a more realistic measure of income inadequacy.Weathers notes that poor families are often left with inadequate funds to pay bills or purchase food and clothing after paying their housing costs. “On the average in the 1960s housing costs represented one-quarter of a family’s budget whereas shelter is now more likely to constitute one-half of the living costs of a low-income family,” she writes.
Some of these arguments, such as including noncash benefits and basing income on after-tax earnings, have been taken into consideration by the U.S. Census Bureau. In September 1997, Daniel H.Weinberg, the chief of Housing and Household for the Economic Statistics Division of the U.S. Census Bureau, reported that the bureau has computed seventeen experimental definitions of income to determine the effect of noncash benefits and taxes. If noncash benefits are included and taxes are subtracted, the estimated poverty rate would be 10.2 percent, or 27.1 million Americans, according to the bureau. The Census Bureau is examining recommendations to change the official definition of poverty. As of this writing, no decision has been made. If this decision were left to the American public, it is likely that the poverty rate would increase: Polls have indicated that most Americans believe the poverty threshold should be adjusted upward by 25 percent.
Whether the official definition of poverty will be adjusted remains to be seen. As it stands, the debate over defining poverty centers on whether poverty should be determined by consumption or expenditure—that is, do poor people have more spending power than their official income indicates, or are their essential expenses not fully taken into account? Poverty: Opposing Viewpoints considers these and other related questions in the following chapters: Is Poverty a Serious Problem? What Are the Causes of Poverty? Can People Work Their Way out of Poverty? How Can Poor People Be Helped? In these chapters, the authors debate the extent and causes of poverty in America and possible measures to help the poor.