New "poverty" numbers measure income inequality, not purchasing power

Economists on both the left and the right have long had concerns and criticisms about the accuracy of the poverty rate — so, at the instruction of the federal government, the Census Bureau developed a new measure to determine the number of poor in America. The Bureau today released the nation’s poverty numbers under the new gauge.

Called “The Supplemental Poverty Measure,” the new indicator suggests 49.1 million Americans face poor economic conditions, compared with just 46.6 million under the standard measure. That sounds “grim,” as an MSNBC headline put it — but, just as the standard measure is misleading in many ways, so, too, is this new indicator.

“The new measure places income thresholds for poverty on a built-in escalator that rises automatically in direct proportion to any improvement in the living standards of the average American,” Heritage Foundation expert Robert Rector said in a statement. “So even if the real income of every single American were to double, the new measure would show no drop in poverty because the income thresholds would also double. The result is that, over the long term, poverty can be reduced only if the incomes of the ‘poor’ are rising faster than the incomes of everyone else.”

In other words, the new tool measures income inequality not purchasing power. Or, as Rector put it, “The old measure told us how much one household can purchase; the new measure tells us how much one person can buy relative to others.”

That’s convenient for a government that wants to pursue a redistributive agenda. Call those who are less well off “poor” and people will be far more supportive of programs to aid them. In general, folks agree that poverty is a problem. But, the prevalence of Occupy Wall Street protesters aside, not everyone assumes income inequality is. If everyone in the U.S. was a millionaire or billionaire, income disparity would still exist — but poverty wouldn’t.

What is, perhaps, saddest about these figures is that it obscures the picture of true poverty — both in the U.S. and in the world. Like so much of this administration’s rhetoric, it encourages class envy and tends to inspire dissatisfaction with what actually amounts to a pretty decent standard of living among some who qualify as “poor” by the government’s measures.

News reports about the new poverty measure emphasize that it takes government aid and unavoidable expenses — like health care, child care and commuting costs — into account as it calculates the poverty rate. The standard measure, on the other hand, doesn’t incorporate these factors. Poverty numbers should take these factors into account — but their inclusion need not necessitate a new income threshold linked to the improvement in living standards of all Americans. Try again, please, Census Bureau.