U.S. Poverty: We’re #2!

February 19th, 2008

Lane Kenworthy rightly chastises Paul Krugman, correcting the belief that the U.S. has the highest poverty rate among affluent countries.

We actually have the second-highest rate.

Mr. Kenworthy is right that “relative” poverty measures are (my word, not his) garbage. They’re based on a percent of median income in each country, so a wildly rich country could have “poor” people who are incredibly affluent by anyone’s standards. It makes cross-country comparisons meaningless.

You can correct for this by choosing one standard (say, a percentage of U.S. median household income), and using that as a yardstick for all countries. (You convert currencies to dollars using purchasing power parity—PPP, based on how much a “basket” of goods costs there in U.S. dollars, basically letting you compare, almost literally if somewhat approximately, apples and apples.)

The result is an only-somewhat-hopefully titled “absolute” poverty rate. Here are the results from one such study. (Smeeding, 2006. PDF here.)


Hard to read, I know. Two columns for each—poverty overall, among children, and among the elderly.

The first column defines poverty as being below 32% of U.S. median household income. ($48,201 in 2006, so 32% is $15,424, or $296 a week, $1,285 a month.)

The second defines it as below about 40%—$19,280.

Using the first definition, the U.S. ranks #2 for overall, child, and elderly poverty. Only the U.K. is worse.

Is it significant that the former and current world empires are at the top (or is that the bottom?) of the list?

None of this, of course, addresses the consumption-inequality argument that Alm and Cox presented so persuasively recently in the NYT. (Nor does it address the far more disparate wealth inequality.) That piece seemed to be arguing that nobody’s really suffering much, so we should just stop worrying about it.

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