Claims that millions of Americans are mired in extreme poverty, barely surviving on $2 or $4 a day, are false, according to a new working paper from the National Bureau of Economic Research.
The paper, released June 3, is by Bruce Meyer, Derek Wu, and Victoria Mooers of the Harris School of Public Policy at the University of Chicago and by Carla Medalia of the U.S. Census Bureau. Some households that income surveys erroneously categorized as extremely poor actually had "net worth in the millions" of dollars, the authors found.
The discrepancy between what people tell government survey-takers that they earn and how much money these same respondents actually make or have may seem like an arcane statistical argument. But the new research comes at a moment when poverty is an issue in the presidential campaign. The academic quarrel about the scope and severity of the poverty problem could find its way into the campaign and shape voters' views.
On Sunday, a Democratic presidential candidate, Bernie Sanders, published a New York Times opinion piece claiming that "millions of workers earn starvation wages" and that "today our rate of childhood poverty is among the highest of any developed country in the world."
As is often the case, the politicians are parroting the professors. The new NBER paper takes aim at a Nobel laureate in economics, Angus Deaton, who claimed that 5.3 million Americans in 2015 were living on less than $4 a day. It also criticizes work by a professor at Johns Hopkins, Kathryn Edin, and by a professor at the University of Michigan, H. Luke Shaefer. Edin and Shaefer are authors of a book, "$2.00 a Day: Living on Almost Nothing in America," that claimed about 3 million children lived in households with incomes of $2 a day or less.
"We find that 92% of the households categorized as extreme poor based on survey-reported cash income are misclassified," Meyer and his coauthors write. "Many of the households included in survey-reported extreme poverty appear to be better off than the average American household based on numerous indicators of material well-being."
Rather than millions of extremely poor American children, Meyer and his co-authors found the 285,000 households in "extreme poverty" were either single individuals or "households with multiple childless individuals."
They write, "this result likes in stark contrast to the focus in academic and policy circles on the plight of extreme poor households with children."
They write that "the errors in the income level exaggerate the level of extreme poverty."
The paper is titled "The Use and Misuse of Income Data and Extreme Poverty in the United States." To research it, the authors checked the income data reported by participants to survey-takers against administrative records from the Internal Revenue Service, the Social Security Administration, and state agencies.
It's difficult to be poor even at income levels above $4 a day. And if extreme poverty is rare for American children, it's the result in part of both government programs and voluntary, family- or community-based assistance. Whatever the imperfections in terms of unintended consequences, these programs do important work in helping ameliorate the circumstances of those, especially children, suffering from poverty.
To win public support for new programs to lift people out of poverty or to ease the plight of those who have fallen into it, though, exaggerating the problem may be counterproductive. It erodes credibility. If a politician or professor can't be trusted to describe the problem, why would they be trusted about a solution?
And, as the authors of this new study point out, more accurate data can help prevent miscast blame. It's unlikely, for example, that the time limits and work requirements of the 1996 welfare reform are responsible for any increase in extreme poverty, because the federal welfare program affected by that reform, Aid to Families With Dependent Children or Temporary Assistance for Needy Families, is aimed at families rather than at childless singles.
No one's claiming that poor people do not exist. But to help them out, it'd be useful to have an accurate picture of the situation rather than an exaggerated one.
Maybe Senator Sanders will ask The New York Times to run a correction to his op-ed piece.
Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.
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