RELATIVELY DEPRIVED: How poor is poor?

JOHN CASSIDY – The New Yorker

Copyright The New Yorker
Issue of 2006-04-03
In the summer of 1963, Mollie Orshansky, forty-eight-year-old statistician at the Socia Security Administration, in Washington, D.C. published an article in the Social Security Bulletin entitled ìChildren of the Poor.î ìThe wonders of science and technology applied to a generous endowment of natural resources have wrought a way of life our grandfathers never knew,î she wrote. ìCreature comforts once the hallmark of luxury have descended to the realm of the commonplace, and the marvels of modern industry find their way into the home of the American worker as well as that of his boss. Yet there is an underlying disquietude reflected in our current social literature, an uncomfortable realization that an expanding economy has not brought gains to all in equal measure. It is reflected in the preoccupation with counting the pooródo they number 30 million, 40 million, or 50 million?î
Orshanskyís timing was propitious. In December of 1962, President John F. Kennedy had asked Walter Heller, the chairman of the Council of Economic Advisers, to gather statistics on poverty. In early 1963, Heller gave the President a copy of a review by Dwight Macdonald, in The New Yorker, of Michael Harringtonís ìThe Other America: Poverty in the United States,î in which Harrington claimed that as many as fifty million Americans were living in penury.
The federal government had never attempted to count the poor, and Orshanskyís paper proposed an ingenious and straightforward way of doing so. Orshansky had experienced poverty firsthand. Born in the South Bronx in 1915, she was one of six daughters of Ukrainian Jewish immigrants who barely spoke English. Her father, a plumber and ironworker, was often unemployed, and Orshansky and her sisters wore hand-me-downs and slept two to a bed. Sometimes the family stood in relief lines to collect food. Nevertheless, Orshansky attended Hunter College High School, which was then a school for gifted girls, and went on to Hunter College, where she majored in mathematics and statistics. In 1939, she joined the U.S. Childrenís Bureau, now part of the Department of Health and Human Services, and studied childrenís health and nutrition.
Orshansky never married or had children, but she was passionate about childrenís welfare. From 1945 to 1958, she worked in the Department of Agricultureís Bureau of Human Nutrition and Home Economics, where she worked on a series of diets designed to provide poor American families with adequate nutrition at minimal cost. In painstaking detail, the food plans laid out the amount of meat, bread, potatoes, and other staples that families needed in order to eat healthily. These were ìby no means subsistence diets,î Orshansky later wrote. ìBut they do assume that the housewife will be a careful shopper, a skillful cook, and a good manager who will prepare all the familyís meals at home.î
In 1958, Orshansky joined the research department of the Social Security Administration, and decided to try to estimate the incidence of child poverty. ìPoor people are everywhere; yet they are invisible,î she told a reporter for the Dallas Morning News in 1999. ìI wanted them to be seen clearly by those who make decisions about their lives.î Building on pioneering research on diet and poverty conducted in York at the turn of the twentieth century by Seebohm Rowntree, a British social reformer, Orshansky used her food plans to calculate a subsistence budget for families of various sizes. For a mother and father with two children, she estimated the expense of a ìlow costî plan at $3.60 a day, and of an even more frugal ìeconomy planî at $2.80 a day. Rather than trying to calculate the price of other items in the family budget, such as rent, heat, and clothing, Orshansky relied on a survey by the Agriculture Department, which showed that the typical American family spent about a third of its income on food. Thus, to determine the minimum income a family needed in order to survive, she simply multiplied the annual cost of the food plans by three. Families on the low-cost plan needed to earn at least $3,955 a year; families on the economy plan needed to earn $3,165.
Orshansky compared these figures with the Census Bureauís records on pre-tax family incomes and concluded that twenty-six per cent of families with children earned less than the upper poverty threshold and eighteen per cent earned less than the lower poverty threshold. In total, she estimated that between fifteen million and twenty-two million children were living in poverty, a disproportionate number of them in single-parent households and minority neighborhoods. ìIt would be one thing if poverty hit at random, and no one group were singled out,î she wrote. ìIt is another thing to realize that some seem destined to poverty almost from birthóby their color or by the economic status or occupation of their parents.î
Heller and his colleagues on the Council of Economic Advisers cited Orshanskyís paper in an ìEconomic Report to the Presidentî that appeared in January, 1964, shortly after Kennedyís successor, Lyndon B. Johnson, declared a ìwar on povertyî in his State of the Union address. In August of that year, Congress created the Office of Equal Opportunity, which used Orshanskyís method to determine eligibility for new anti-poverty programs, such as Head Start. Other federal agencies followed suit, and in 1969 the White House adopted a slightly modified version of Orshanskyís lower thresholdóthe one based on the economy food planóas the official poverty line.
In the nineteen-sixties, many economist believed that economic growth and governmen intervention would eliminate poverty. Betwee 1964 and 1973, as Johnsonís Great Societ programs went into effect, the poverty rate fel from nineteen per cent of the population to 11. per cent. But, while the nationís inflation-adjusted gross domestic product has virtuall tripled since 1973, the poverty rate has hardl budged. In 2004, the most recent year fo which figures are available, it stood at 12.7 pe cent, a slight increase over the previous year and in some regions the figure is much higher The horror of Hurricane Katrina was not jus the physical destruction it wrought but th economic hardship it exposed. In New Orleans the poverty rate in 2004 was twenty-three pe cent, a fact that George W. Bush noted in hi address from New Orleansí French Quarter o September 15th, when he said, ìWe have duty to confront this poverty with bold action. (Six months later, the Bush Administration ha yet to present an anti-poverty plan.) Accordin to the Census Bureau, many cities are eve poorer than New Orleans. In Detroit in 2004 the poverty rate was 33.6 per cent; in Miami, i was 28.3 per cent; and in Philadelphia it wa 24.9 per cent. (In New York, it was 20.3 pe cent.
The persistence of endemic poverty raises questions about how poverty is measured. In the past ten years or so, significant changes have been made in the way that inflation, gross domestic product, and other economic statistics are derived, but the poverty rate is still calculated using the technique that Orshansky invented. (Every twelve months, the Census Bureau raises the income cutoffs slightly to take inflation into account.)
This approach has some obvious shortcomings. To begin with, the poverty thresholds are based on pre-tax income, which means that they donít take into account tax payments and income from anti-poverty programs, such as food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, which cost taxpayers hundreds of billions of dollars a year. In addition, familiesí financial burdens have changed considerably since Orshansky conducted her research. In the late fifties, most mothers didnít have jobs outside the home, and they cooked their familiesí meals. Now that most mothers work full time and pay people to help them take care of their kids, child care and commuting consume more of a typical family budget.
Another problem is that the poverty thresholds are set at the same level all across the country. Last year, the pre-tax-income cutoff for a couple with two children was $19,806. This might be enough to support a family of four in rural Arkansas or Tennessee, but not in San Francisco, Boston, or New York, where the real-estate boom has created a shortage of affordable housing. According to Jared Bernstein and Lawrence Mishel, economists at the liberal Economic Policy Institute, in Washington, D.C., the average rent in working-class neighborhoods of Boston is about a thousand dollars a month, which for a family of four with a poverty-level income leaves just six hundred and fifty dollars a month for food, clothing, heat, and everything else. Bernstein and Mishel argue that in some cities the poverty thresholds should be twice their current level.
Such considerations suggest that the official measures understate the extent of poverty, but the opposite argument can also be made. The poverty figures fail to distinguish between temporary spells of hardship, like those caused by a job loss or a divorce, and long-term deprivation. Surveys show that as many as forty per cent of people who qualify as poor in any given year no longer do so the following year. Middle-class families that suffer a temporary loss of income can spend their savings, or take out a loan, to maintain their living standard, and they donít belong in the same category as the chronically impoverished. One way to remedy this problem is to consider how much households spend, rather than how much they earn. If in the course of a year a household spends less than some designated amount, it is classified as poor. Daniel T. Slesnick, an economist at the University of Texas, has tested this approach using figures that he obtained from the Department of Laborís Consumer Expenditure Survey, which tracks the buying habits of thousands of American families. Slesnick calculated that the ìconsumption poverty rateî for 1995óthat is, the percentage of families whose spending was less than the povertyincome thresholdówas 9.5 per cent, which is 4.3 per cent less than the official poverty rate. Subsequent studies have confirmed Slesnickís findings.
In 1995, a panel of experts assembled by the National Academy of Science concluded that the Census Bureau measure ìno longer provides an accurate picture of the differences in the extent of economic poverty among population groups or geographic areas of the country, nor an accurate picture of trends over time.î The panel recommended that the poverty line be revised to reflect taxes, benefits, child care, medical costs, and regional differences in prices. Statisticians at the Census Bureau have experimented with measures that incorporate some of these variables, but none of the changes have been officially adopted.
The obstacles are mainly political. ìPoverty rates calculated using the experimental measures are all slightly higher than the official measure,î Kathleen Short, John Iceland, and Joseph Dalaker, statisticians at the Census Bureau, reported in a 2002 paper reviewing the academyís recommendations. In addition to increasing the number of people officially classified as impoverished, revising the Census Bureau measure in the ways that the poverty experts suggested would mean that more elderly people and working families would be counted as poor.
Conservatives would prefer a measure that reduces the number of poor people. ìThe poverty rate misleads the public and our representatives, and it thereby degrades the quality of our social policies,î Nicholas Eberstadt, of the American Enterprise Institute, wrote in a 2002 article. ìIt should be discarded for the broken tool that it is.î In February, the conservatives appeared to make some headway when the Census Bureau released a report on some new ways of measuring poverty that could cut the official rate by up to a third.
Rather than trying to come up with subsistence-based poverty measure about whic everybody can agree, we should accept tha there is no definitive way to decide who i impoverished and who isnít. Every three years researchers from the federal governmen conduct surveys about the number o appliances in the homes of American families In 2001, ninety-one per cent of poor familie owned color televisions; seventy-four per cen owned microwave ovens; fifty-five per cen owned VCRs; and forty-seven per cent owne dishwashers. Are these families poverty-stricken
Not according to W. Michael Cox, an economist at the Federal Reserve Bank of Dallas, and Richard Alm, a reporter at the Dallas Morning News. In their book ìMyths of Rich and Poor: Why Weíre Better Off Than We Thinkî (1999), Cox and Alm argued that the poverty statistics overlook the extent to which falling prices have enabled poor families to buy consumer goods that a generation ago were considered luxury items. ìBy the standards of 1971, many of todayís poor families might be considered members of the middle class,î they wrote.
Consider a hypothetical single mother with two teen-age sons living in New Orleansí Ninth Ward, a neighborhood with poor schools, high rates of crime and unemployment, and few opportunities for social advancement. The mother works four days a week in a local supermarket, where she makes eight dollars an hour. Her sons do odd jobs, earning a few hundred dollars a month, which they have used to buy stereo equipment, a DVD player, and a Nintendo. The family lives in public housing, and it qualifies for food stamps and Medicaid. Under the Earned Income Tax Credit program, the mother would receive roughly four thousand dollars from the federal government each year. Compared with the destitute in Africa and Asia, this family is unimaginably rich. Compared with a poor American family of thirty years ago, it may be slightly better off. Compared with a typical two-income family in the suburbs, it is poor.
The concept of relative deprivation was first described by Adam Smith in ìThe Wealth of Nations,î in a passage on the ìnecessariesî of daily life:
By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but what ever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-laborer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England.
For decades, economists overlooked Smithís analysis, and it was left to sociologists and anthropologists to study the impact of relative deprivation. During the Second World War, Samuel A. Stouffer, a sociologist at the University of Chicago, and a team of researchers compared the levels of job satisfaction reported by members of the military police, a profession in which few people were promoted, and members of the Army Air Force, where there were frequent opportunities for advancement. To the researchersí surprise, the policemen reported greater happiness in their jobs than the airmen. One possible explanation, the researchers speculated, is that the policemen tended to compare themselves with colleagues who hadnít been promoted, whereas the ìreference groupî for the airmen was colleagues who had been promoted. ìThe more people a man sees promoted when he is not promoted himself,î the Cambridge University sociologist W. G. Runciman wrote in 1966, in his book ìRelative Deprivation and Social Justice,î ìthe more people he may compare himself to in a situation where the comparison will make him feel relatively deprived.î
More recently, three economists at the University of Warwick published the results of a survey of sixteen thousand workers in a range of industries, in which they found that the workersí reported levels of job satisfaction had less to do with their salaries than with how their salaries compared with those of co-workers. Human beings are also competitive with their neighbors. Erzo Luttmer, an economist at the John F. Kennedy School of Government, recently found that people with rich neighbors tend to be less happy than people whose neighbors earn about as much money as they do. It appears that, while money matters to people, their relative ranking matters more.
Relative deprivation is also bad for you health. In a famous study conducted betwee 1967 and 1977, a team of epidemiologists le by Sir Michael Marmot, of University Colleg London, monitored the health of more tha seventeen thousand members of Britainís Civi Service, a highly stratified bureaucracy Marmot and his colleagues found that peopl who had been promoted to the top ranksóthose who worked directly for cabinet ministersólived longer than their colleagues in lower-ranking jobs. Mid-level civil servants wer more likely than their bosses to develop a rang of potentially deadly conditions, including hear disease, high blood pressure, lung cancer, an gastrointestinal ailments

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