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Chapter 14. What Does It Mean to Be Poor in a Rich Society?
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Chapter 14 What Does It Mean to Be Poor in a Rich Society? Robert Haveman I n 2007, Mollie Orshansky, whose contributions led to the nation’s official poverty measure, passed away. Given the data available in the early 1960s, the Orshansky poverty measure—based on family money income and an absolute poverty threshold—made perfect sense. President Lyndon Johnson had declared a War on Poverty in 1964, and the nation needed a statistical picture of the poor. Although she recognized the criticisms of her measure,1 the concept of absolute income poverty as well as the nation’s official measure of poverty can be directly traced to her contributions.2 Since that time, the U.S. official poverty measure has stood nearly unchanged (see Smeeding 2006; Citro and Michael 1995; Jencks, Mayer, and Swingle 2004; Blank 2008), in spite of extensive efforts designed to improve the measurement of both financial means (for example, extensions of the income concept to include the value of in-kind transfers and tax liabilities) and the poverty threshold (for example, alternative equivalence scales and revised needs standards).3 In this chapter, I attempt to broaden the discussion of poverty and poverty measurement. I first discuss the broad question of “what is poverty?” and describe various poverty concepts that have been proposed. Then, I describe the official U.S. poverty measure, highlight its main characteristics, and note some of the criticisms directed toward it. I compare this official, absolute income poverty measure to a relative measure, as well as to alternative concepts of economic poverty that rely on indicators of permanent income (such as consumption or the ability to secure income) and a family’s own assessment of its well-being; the pros and cons of these measures are also noted. Finally, I examine broader conceptions of poverty and deprivation and discuss proposals for a comprehensive measure of poverty that takes into consideration indicators of material deprivation and “social exclusion.” Most of the research on this approach has occurred in the European Union and the United Kingdom. The chapter ends with a modest proposal for the development of a broader measure of poverty and social exclusion for the United States. / 387 CONCEPTS OF POVERTY Improving the well-being of deprived people is a nearly universal goal among policymakers in all nations. However, there is no commonly accepted way of identifying who is deprived or who has an unacceptably low level of well-being. Economists tend to prefer a concept of hardship that reflects “economic position” or “economic well-being,” which is typically measured by an indicator of command over resources, typically annual income.4 These economic poverty measures seek to identify those families whose command over resources (income) falls below some minimally acceptable level. This economic approach requires precise definitions of both available economic resources and the minimum level of economic “needs,” both of which must be measured in the same units. Such economic poverty measures do not impose any norm on people’s preferences among goods and services (for example, necessities versus luxuries) or between work and leisure. They also allow for differentiation according to household size and composition. By focusing on command over resources, however, they ignore many non-economic considerations that may affect individual “utility ” or “well-being.” To the extent that such factors—for example, living in unsafe surroundings, being socially isolated, or experiencing adverse health or living arrangements not remediable by spending money—are neglected by these measures , policy efforts designed to reduce economic poverty may also overlook these other aspects of what it means to be poor. Because of such concerns, income-based poverty measures are increasingly challenged , particularly in other Western industrialized countries. Critics argue for a multidimensional poverty concept. For example, people deprived of social contacts (with friends, family, and neighbors) are described as “socially isolated” and hence poor in this dimension, people living in squalid housing are “housing poor,” and people with health deficits are “health poor.” However, those who prefer to take a broader approach to the measurement of poverty face a difficult task in changing the official U.S. measure. Dimensions of well-being beyond income need to be identified and agreed upon, indicators that accurately reflect these dimensions need to be defined, the data necessary to accurately measure these dimensions for individual living units need to be collected, and the several indicators need to be weighted to produce an index of the size of the poor population and its composition. While debates over...