Monday, August 17, 2009

Whither the poor?

Item #1: Income per person over the last three millenia:

Item #2: U.S. per capita GDP growth (based on purchasing power parity) since 1980:

Since at least the advent of the Industrial Revolution the United States and many other societies have become progressively richer, with each generation better off than the previous one. I drove a car to high school while one of my grandfathers literally rode a horse. This is a trend that shows no sign of abating as technological advancements continue apace, thus expanding productivity levels and the possibilities of what each of us can earn and consume. It is quite possible, even probable, that future generations of Americans will have median incomes in the hundreds of thousands of (constant) dollars.

And it isn't just the U.S., or even the OECD that will experience this phenomenon, given the pace of growth taking place in traditionally less developed countries. As Bjorn Lomborg says in his book Cool It:
[In 2100] the average person in the developing world is expected to make about one hundred thousand dollars (in present value) each year. Even the very worst-case scenario envisions the average person making above $27,000. In this very unlikely case, the average person in the third world will be as rich as a present-day Portuguese or Greek or richer than most West Europeans in 1980.
It's hard to read this without thinking of the concepts of "poor" and "poverty" and how increasingly meaningless they will become. As wikipedia says of relative poverty measurements:
Relative poverty measurements can sometimes produce odd results. For example, if the median household in a wealthy neighborhood earns US$1 million each year, then a family that earns US$100,000 would be considered poor on the relative poverty scale, even though such a family could meet all of its basic needs.
This isn't simply theoretical. Because the U.S. measures poverty by a relative, rather than absolute, standard we arrive at some strange results of our own:
In 2001, the country's per capita income was far higher than in 1973 -- according to the Census Bureau, roughly 60 percent higher -- and unemployment rates were lower. In 2001, only one in six adults lacked a high-school diploma; in 1973, two-fifths had not finished high school. And government anti-poverty spending was more than twice as high in 2001 as in 1973.

So, in a richer, more fully employed and better educated nation with a bigger safety net, shouldn't the poverty rate be lower? Wrong. The way the official rate is calculated, the fraction of Americans living below the poverty line was higher in 2001 (11.7 percent) than in 1973 (11.1 percent). For some reason, our official statisticians insist that America's best year for combating poverty -- ever -- was 1973. Go figure.
Indeed, take a look at the living standard enjoyed by many of the poor in the U.S. today. Things that used to be luxuries are now considered unremarkable or standard:
In 1971, only about 32 percent of all Americans enjoyed air conditioning in their homes. By 2001, 76 percent of poor people had air conditioning. In 1971, only 43 percent of Americans owned a color television; in 2001, 97 percent of poor people owned at least one. In 1971, 1 percent of American homes had a microwave oven; in 2001, 73 percent of poor people had one. Forty-six percent of poor households own their homes. Only about 6 percent of poor households are overcrowded. The average poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other European cities.

Nearly three-quarters of poor households own a car; 30 percent own two or more cars. Seventy-eight percent of the poor have a VCR or DVD player; 62 percent have cable or satellite TV reception; and one-third have an automatic dishwasher.
Compare that with middle class -- or even wealthy -- Americans of generations past, or with the millions who live in the third world today. As recently as 1994 rappers were bragging about having a "50 inch screen" while today this is less remarkable as you can get a much better television in that size for just over $1,000.

A few thoughts:
  • If we continue to measure poverty on a relative scale then at some point we could quite conceivably have those in poverty taking overseas vacations and enjoying access to technology we can't even conceive of today. At what point does the term become meaningless as an indicator of deprivation?
  • If we continue to use relative measurements then poverty will always be with us, and efforts to fight it we will be something like the dog always trying to catch its tail. Is attempting to combat relative poverty a worthwhile public policy goal even in an age of opulence?
  • If poverty is measured on an absolute scale, commonly defined as a lack of "nutrition, clean water, clothing, shelter and health care because of the inability to afford them" then isn't the war on poverty largely won? Certainly for the first four criteria, while health care is more debatable given the high cost of treatments for ailments such as cancer and AIDS.

No comments: