Poverty of Poverty Statistics

Which country has the higher poverty rate Greece (GDP per head $29,059) or the US ($47,132)? In a recession, does poverty go up or down? How did the poorest man who ever lived die?

If you correctly guessed the US, down, and he fell off his yacht, or to be strictly accurate, one of his yachts, then you are either a poverty statistics geek, or you are familiar with this column’s cynicism about government statistics.

The biggest problem with poverty statistics is that they define poverty by income. They compound this by talking about ‘relative poverty’. Defining poverty might seem obvious. People with low incomes are poor, right? Not necessarily. Income is measured year by year. How much did someone with a low income this year earn last year? Glenn Kessler of the Washington Post wrote a, frankly, idiotic column accusing Governor Haley Barbour of lying because he referred to people picking up Medicaid checks in BMWs. Kessler argued that to be eligible for Medicaid in Mississippi someone would have to be earning less than $8,150 a year, and since a BMW costs over $30,000, Barbour must be lying. Kessler produced absolutely no evidence for his disgraceful assertion. The huge hole in his argument was pointed out on the Washington Post website the day it was published, but there has been no apology yet. Someone who lost a job paying $200,000 a year could have purchased a BMW last year and be eligible for Medicaid this year. Simple. Yet it never even occurred to a journalist whose job it is to ‘fact check’ comments by politicians.

This is, of course, how the poorest man who ever lived had a couple of yachts and helicopter. In the last year of his life, Robert Maxwell had a negative income to the tune of around $3 billion. Take a million people on the poverty wage of $3,000 (in 1991). Add to the group Robert Maxwell. The average income of the group and the total income of the group would fall to 0. But with Maxwell’s yachts and his helicopter, we can reasonably assume that the average standard of living would have gone up.

But things get even worse. Poverty is defined as less than 60% of average income. What if average income goes down? Then the number of people in poverty goes down. This is why poverty falls in a recession. Highly paid people on Wall Street get smaller bonuses. This has a disproportionate effect on the average. Someone just below the poverty line suddenly moves above it. Policy win – except for the fact that everyone is poorer than before.

When the economy is doing well – think of the Reagan years – people take more risks. People launch businesses. More people move onto highly variable incomes. People can earn huge incomes one year and nothing the next – just like Robert Maxwell. During the 1980s the proportion of people in the ‘poorest’ 10% who were either company directors or self-employed massively increased. And though Robert Maxwell was an extreme example, he was not unrepresentative. In Britain research showed that more than half of the “poorest” 10% had above average expenditure.

Perhaps expenditure is a better guide than income. But how about looking at what people have? Hint: anyone with a BMW, yacht or helicopter is not poor.

Article provided by Quentin Langley
Lecturer in PR and Political Communications,
School of Journalism, Cardiff University

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