U.S. poverty numbers continue to decline, according to consumption poverty report

Author: Leigh Lynes

A more accurate measure of the poverty rate, based on how much people consume, highlights the dramatic decline in poverty over the past four decades, a fact that is missed by the official government poverty numbers. This can be visualized in a poverty dashboard developed by professors James Sullivan of the University of Notre Dame and Bruce Meyer of the Harris School of Public Policy at the University of Chicago. The online tool compares data over the past 50 years from their pioneering poverty measure as well as poverty figures from the U.S. Census Bureau.

Sullivan and Meyer have released their 2018 Annual Report on U.S. Consumption Poverty, which shows that between 1980 and 2018, the share of people consuming less than the standard of living of the 1980 official government poverty level fell from 13.0 percent to 2.8 percent, while the official poverty rate fell to only 11.8 percent over that period. 2018’s figures show that consumption poverty ticked up between 2017 and 2018. 

Because the official poverty thresholds are indexed for inflation using a price index that overstates the true rise in prices, the official cutoffs yield an ever-increasing standard of living each year. Thus, the level of the poverty rate depends on an arbitrary choice of which year’s standard is selected. While the level of poverty depends on this choice of standard, absolute consumption poverty has fallen sharply over time whatever fixed year is chosen for the standard.

According to Sullivan and Meyer’s 2018 report, the share of those consuming less than the 2015 official poverty standard fell from 32.9 percent in 1980 to 10.8 percent in 2018. Consumption poverty based on the 2015 standard fell from 12.1 percent in 2017 to 10.8 in 2018, while the official government rate fell from 12.3 to 11.8 over the same year.  

Data from the U.S. Census Bureau’s annual income-based poverty measure inform a range of policies and issues affecting Americans — from taxes to immigration to trade policy — and the consumption poverty dashboard offers a more comprehensive picture of poverty in America for researchers and policymakers. Consumption-based poverty is more highly associated with other measures of family deprivation.

Much of this difference between Sullivan and Meyer’s consumption-based poverty measure and the Census Bureau’s official poverty measure can be explained by bias in the price index used to calculate official poverty, the consumer price index (CPI). 

Their poverty measure relies on household consumption data, which does a better job of capturing anti-poverty programs such as the Supplemental Nutrition Assistance Program (food stamps) and the earned income tax credit. The American Housing Survey (conducted by the Census Bureau) corroborates this, reporting that the poorest Americans’ standard of living is approaching that of the middle class in the 1980s.

Originally published by Leigh Lynes at leo.nd.edu on October 17, 2019.