Washington Wednesday: National poverty statistics

MARY REICHARD, HOST: It’s Wednesday the 18th of September, 2019. Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. First up today, Washington Wednesday. 

Last week the U.S. Census Bureau released new poverty statistics. They show the poverty rate fell slightly in 2018—it dropped from just over 12 percent to just under 12 percent. 

Not huge, but it was in fact improvement for the fourth year in a row. And it was important symbolically, because the poverty rate finally dropped back below where it was in 2007, before the Great Recession. So by this metric, it has been an 11-year recovery.

REICHARD: The bureau also found other good news: 2-point-3 million more Americans had full-time, year-round employment in 2018 compared to the year before. And median earnings for those workers rose 3 percent. 

On the down side, almost 2 million fewer Americans had health insurance. And median household income remained stagnant.

EICHER: There is a lot here, so we’ll post a link to these statistics at worldandeverything-dot-org. 

Meantime, we turn to Angela Rachidi for some perspective on these numbers. She’s the former deputy commissioner of New York City’s Department of Human Resources. And she’s now a research fellow studying poverty for the American Enterprise Institute. 

Angela, welcome.

RACHIDI: Good morning. Nice to be with you. 

EICHER: OK, there’s a lot here, and in a data set this big you’re bound to have good news and bad news. So I’ll start by asking you this: Do you find yourself more encouraged or discouraged by the trends in this report?

RACHIDI: That’s a great question, and I—actually overwhelmingly—I was encouraged by the data that came out, especially related to poverty. 

As you mentioned, there’s a lot of sometimes competing statistics. It’s kind of hard to interpret some of it, but when it comes to the poverty rates that were released—at least in terms of the official poverty rate that the U.S. Census Bureau puts out—it was really overwhelmingly positive. 

I mean, at the individual level, which is all individuals in this country, it’s the lowest official poverty rate that we’ve seen since the very strong economy of the late 1990s. In terms of child poverty, also the lowest. 

When you look at poverty rates by race, we have the lowest poverty rates on record for African American children, Hispanic children. You just go up and down the line, and I think it was just overwhelmingly positive news when it comes to poverty. 

EICHER: Let’s talk about how we draw the poverty line. The Census Bureau classified 38 million Americans as “poor” in 20-18. Can you talk about how they arrive at that number and what all is included in it? 

RACHIDI: Sure. There are a lot of flaws with the poverty rates that are put out by the U.S. Census Bureau that they just put out. One of those is just how they draw the line and then how they calculate who is poor according to that line. 

The biggest flaw of the official poverty rate, which I had just mentioned, is that most government benefits are provided as what we call “non-cash.” It’s things like food benefits, health insurance, tax credits. Those types of resources are not actually captured in the official poverty rate, which is the rate that I just talked about. So it very much overestimates who’s in poverty. 

So I actually, as a researcher studying poverty rates for a number of years, I do not pay attention to the raw numbers at all—so that 38 million you talked about—because it’s really an inaccurate picture in terms of the number of people who are in poverty. 

What I pay attention to is the trends over time. And I think the trends over time give us a much better sense of who is, who has economic well-being rather than paying attention to a specific number or rate. 

But in general how we calculate poverty is we look at how many resources are in a household. Typically that’s income but it can be other things like near-cash benefits like I talked about. And we compare that to a line—we call that a poverty threshold—and that line is usually determined by what a household needs. 

So we call it a standard of need or kind of what a household would need to meet their basic necessities. Then we compare the income or the resources in a household to that line. And if you fall above that line, you’re not in poverty and if you fall below that line, you are in poverty. 

But as I mentioned, there’s a lot of debate about how do you define the resources, how do you define income, and how do you define that line. And that’s where some of the debate comes in…  

EICHER: Let’s talk policy for a moment: When Congress passed the tax overhaul in late 20-17, we heard a lot about these “Opportunity Zones.” It was an effort to incentivize investment in poor communities. Is it too early to know whether they’re working?

RACHIDI: It’s definitely too early to know if those are working, but I’m glad you’ve raised them, because even though I mentioned all the positive news about poverty, there’s definitely still pockets in this country that experience high poverty and have not necessarily gained from all the benefits of the strong economy that we’ve had. 

And those opportunity zones are really designed to reflect that and try to build opportunity in those neighborhoods. And they’re really looking at trying to do that through investment in private business in the private sector, combining that with government policies that improve the economy. And it will take a little bit of time for us to see if they’re having any effect, but I like the approach. I think it’s the right approach to try to target resources to some of these high poverty neighborhoods. And I’m hopeful that over time we will start to see poverty in those concentrated areas to come down. 

EICHER: Let me broaden this out a bit because I’m curious what you see sort of bubbling up in Congress or ideas in the administration or even ideas in the presidential debates that could continue to move the needle in a positive way. Or, to be frank, move it in a negative way?

RACHIDI: Yeah, definitely. And, actually, there’s certainly discussions out there that could potentially do both of those. One, make things even better or, as you mentioned, make things even worse. 

I think the real tension we have in terms of thinking about policies both at the federal and the state level to try to reduce poverty. The tension is how do you develop policies and programs that can transfer income to low-income families without hurting their employment. 

So, for example, if the government transfers income to households, it theoretically would decrease their necessity or their incentive to work. And that’s a tension that is constantly there in designing public programs. 

And so when you hear current debates about let’s have larger government programs, let’s have child allowances that goes to every family or the universal basic income. Let’s provide more cash transfers, more cash transfers to households. What we don’t hear about is how that might affect employment, and that likely would decrease employment, which is counter-intuitive to what you’re trying to do because in the long run, that means you just have to make more and more government investments, and that decreases the self-sufficiency or self-reliance that people have. 

And so I think some of the policies that we hear out there like the child allowances, like the universal childcare, all of those, to the extent that they might reduce employment, I think that that could hurt us in the long run. 

But proposals that are out there that could increase employment, like potentially an expanded earned income tax credit on maybe some well-targeted childcare assistance to low-income families. And then things that really support work, like work programs that link benefit receipt to participation in those work programs. Those are all the things that would support employment and hopefully continue us on this path of reducing poverty.

EICHER: Angela Rachidi is a research fellow for the American Enterprise Institute. Angela, thank you for your research and thanks for talking to me today.

RACHIDI: Thanks so much for having me.

(Photo/Census Bureau)

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