Raising the Issue: What Poverty Is and How to Reduce It

Towards the end of August, the U.S. Census Bureau released new data on poverty and other economic indicators for the 2001-03 period. While I have serious concerns about how some of these statistics are generated, there could be at least one salutary effect of the Census release: it may serve to direct the attention of North Carolina candidates, policymakers, journalists, and voters to what should be a major agenda item for the coming years.

The issue is poverty ? or, perhaps more broadly, the need to expand economic opportunities for all citizens.

There are two propositions to which I?ll stipulate up front. First, there are North Carolinians whose circumstances are dire. They suffer basic deprivations, they struggle just to get by, and they face an uncertain future. Second, policymakers can and should make it a goal to promote economic opportunity so that fewer North Carolinians live in poverty.

Unfortunately, this may exhaust the areas of agreement between Rob and me. Other propositions I will advance include: 1) the extent of poverty is exaggerated by the Census Bureau and other agencies and institutions, 2) its causes lie primarily in personal choices rather than economic recession or exploitation, and 3) the appropriate role for government in combating poverty does not include ongoing efforts to redistribute income from those who earn it to those who don?t (which I?ll bring up later in the debate).

First, ?poverty? should not be a relative concept. It should refer to a state in which households are subject to real or threatened deprivations. In the interest of not ruining our language further, poverty should not refer to the lack of luxuries ? nor should it, I admit, simply refer to the ability to acquire only the bare necessities of food, clothing, and shelter. Most dictionaries suggest that we use the term ?destitution? to describe a state of starvation or homelessness, ?poverty? to denote a lack of resources for reasonably comfortable living, and ?indigent? or ?low-income? to describe someone who may not be poor but who cannot, for example, afford lots of entertainment, recreation, or long-term investments such as stock portfolios or college educations.

I don?t say all this to play word games. I do so because the concept of poverty has been so warped over the years that many people who own their own homes and cars, who have cable television and Internet connections, and who eat out or attend concerts regularly are called ?poor.? This adulterates the term and clouds the debate over real poverty.

I have already written a fair amount lately about why the Census Bureau?s estimates of poverty are so misleadingly high. In sum, the bureau wrongly uses income reported to the government rather than reported spending as the basis for determining poverty. This results in an overcount because many low-income households earn off-the-books income, because government benefits other than cash ? such as free health care, free child care, and subsidized housing ? do not show up in reported income, because retirees can have lower incomes and higher standards of living due to accumulated assets, because many young people (think college students) are supported by their parents but treated as separate households, and because some households endure brief spells of unemployment by tapping savings or accumulating debt and thus don?t truly live in poverty during such periods.

I?ll be happy to discuss the technical problems with the poverty rate later, but suffice to say that since poor families on average spend something like 40 percent more than their apparent incomes, this one factor, if accounted for in poverty measures, would cut the rate significantly.

On the cause of poverty, there is no apparent relationship between government policies such as minimum-wage hikes and reductions in poverty. Strong economic growth and job creation do, indeed, often correlate with declines in poverty, but Rob and I would likely disagree about how to accomplish those things. But even more clear is the existence of strong linkages between poverty and the decisions people make ? such as dropping out of school, failing to build job skills and experience, and having children out of wedlock. Looking at a recent Census survey, I concluded that while 14 percent of all families were considered poor in 2002, the rate dropped to 11.5 percent for single parents working full-time, 11 percent for high-school graduates, 4 percent for married families with children in which one parent worked full-time, 3 percent for married families with one full-time and one part-time worker, and an even lower rate if those married parents are high-school graduates.

Let me hasten to say that I?m not saying this to ?blame the victim.? Many such decisions are made when people are quite young, when their time horizons are short and their ability to think carefully about what they are doing is not yet developed. Moreover, the children whose parents make these unfortunate decisions deserve our concern, not our blame. But unless we talk frankly about the sources of poverty, we cannot hope to fashion effective responses that help poor families build a brighter future and the next generation not to make the same painful mistakes.