The poverty industry

September 12th, 2005 at 10:04 am by David Farrar

The poverty industry have invented a measure of poverty which means that they can claim poverty is always a problem, unless one has a communist economy where all incomes are equalised.

That is because poverty is measured as relative to median income, not against purchasing power (which would be more useful).

Marginal Revolution’s Tyler Cowen notes that the official poverty rate in the US (12.7%) is higher than in 1974 (11.2%).

However in those 30 years, the following has happened:

* Real per capita income is over 60% higher today than in 1974.
* unemployment rate is lower
* percentage of adults with paying jobs is distinctly higher.
* Proportion of adults without a high school diploma has halved from 39% to 16%
* In 1972-73 only 42% of the bottom fifth of American households owned a car, now it is 75%
* In 1970 26% of “poverty households” lived in “crowded” homes, now 6%
* infant mortality fell by almost three-fifths over those same years, to 6.7 per 1,000 births from 16.7 per 1,000.

So what does this mean? It doesn’t mean all is wonderful in the US, but it does indicate that life is a lot better off today for most “poor” households than it was 30 years ago, despite there being an increase in the official number of people in poverty.

The conclusion is that poverty rates, as currently measured, are almost useless as an indicator of well-being.

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