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Transatlantic Blog

Four caveats about the Official Poverty Measure

The U.S. Census Bureau released the official poverty measure (OPM) yesterday. Although the numbers were encouraging, there are at least four caveats that everyone who reads these statistics should keep in mind. Without making these adjustments, we may have an inaccurate picture of poverty in the U.S.

1. The OPM does not include the effects of government welfare programs. As the Census Bureau explains, “The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).” Matt Weidinger at AEI noted:

Crucially, the current official [poverty] measure ignores a growing share of spending devoted to reducing the plight of the poor, effectively overstating poverty in the US.

 

If not addressed, the disconnect between the real conditions facing low-income households and what is reported in the OPM will only continue to grow—possibly dramatically—given calls by Democratic presidential candidates for rapid increases in benefits that may not be counted under the OPM. Unless the OPM is adjusted, these new benefit proposals would not reduce “official” poverty—or they could even result in its apparent increase if the new, uncounted benefits discourage work among low-income households and thus reduce earned income counted under the OPM.

The Supplemental Poverty Measure (SPM), which began publication in 2011, tracks these data.

2. Americans likely underreport their income. Experts have long noted that the income reported on the surveysthe bureau uses to calculate U.S. poverty “appears to be substantially underreported, especially for categories of income important for those with few resources, and the extent of underreporting has worsened over time.”

3. These data are a snapshot of current poverty. They do not track the rate of persistent poverty, year-on-year. That rate would be significantly lower, due to America’s high level of economic and social mobility – but as it is, we don’t know how much lower.

4. These data do not figure in taxes. CBS News reported, “One caveat is that the income figures reflect pre-tax income, which means that any benefits from the Tax Cuts and Jobs Act, signed into law by President Donald Trump at the end of 2017, wouldn't be reflected in the data.” Just as people benefit from the added consumption allowed by social welfare programs, they are penalized by confiscatory tax rates.

For Christians to combat poverty, we must first measure it accurately. The best proposal would shift to a consumption-based measure. Barring that, this system is the best one available.

  1. (Photo credit: Public domain.)

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Rev. Ben Johnson is a senior editor at the Acton Institute. His work focuses on the principles necessary to create a free and virtuous society in the transatlantic sphere (the U.S., Canada, and Europe). He earned his Bachelor of Arts in History summa cum laude from Ohio University and was inducted into Phi Beta Kappa.