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America’s real poverty rate

Everyone knows that the current recession has pushed many people into poverty.  That’s sad, but it makes sense.  When there are no jobs, people suffer, and poor people suffer the most.  Since the beginning of the recession the percentage of Americans who live in poverty has risen from 12.3% in 2006 to 14.3% in 2009.  The data haven’t been released yet, but it was probably even higher in 2010.  More than 43 million Americans live in poverty, and that’s not living very well: it means living on less than $11,000 for a single person, or $22,000 for a family of four.

In 1964 President Johnson declared a war on poverty that was far more successful than his war in Vietnam.  Over the course of the 1960s the proportion of Americans living in what the Johnson administration considered poverty conditions declined by ten percentage points, from 22% to 12%.  At that rate, poverty in America should be gone by now.  Unfortunately, with the end of the Johnson administration came the end of the war on poverty, and poverty rates today are actually higher than they were in 1969 when the current poverty line was set.

Over the past forty years the total income generated by US economy has doubled (per person, adjusting for inflation) but the poverty rate has remained stuck in the 12% – 15% range.  That’s an abysmal record, but the true situation is even worse.  The poverty line we use today was set in 1969 based on 1969 standards of living.  It’s now 2011, and we’ve never updated the poverty line.  It’s as if cell phones, personal computers, and FM radio just didn’t exist.  In 1969, most people didn’t even have color TV or air conditioning.

The poverty line should be updated in line with progress in the economy as a whole, not just adjusted for inflation.  Today’s poverty line represents living standards from 42 years ago.  In 2050, it’ll represent living standard from 81 years ago.  By the end of the century, it’ll represent living standards from 131 years ago.  Imagine if we were still using a poverty line from 1880 — that would be ridiculous.  Things change.  Progress marches on.  Our standard for what represents a dignified life (that is, not living in poverty) must march on as well.

Updating the poverty line for economic growth since 1969 would yield a 2010 poverty line of $45,736 for a family of four.  A family of four living on less than $45,736 today is just as poor — relative to the country as a whole — as a family in poverty was in 1969 when the current line was set.  By that standard, about 28% of American families of four are now living in poverty, twice the official poverty rate.  If that sounds high, it’s only because we are much more miserly today than our grandparents were in 1969.  We could learn a thing or two from them.

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Sydney-based globalization expert Salvatore Babones is available to speak on the Chinese economy (demographics, growth, technology), the Belt & Road Initiative, global trade networks, and Australia-China relations. Contact: