StickWithANose

The thing about statistical measures is that they have a way of taking on a life of their own. The often quoted measures that we use to understand economic health and social well-being, such as unemployment and poverty rates, are by no means exhaustive nor do they necessarily represent the best measures available. For example, the unemployment rate commonly quoted in popular discourse is the U3 rate which measures the total unemployed as a percentage of the total labor force, currently 9.8%. However, the government uses many different statistical measures that include important variables not included in the U3 rate, such as discouraged workers who have dropped out of the formal economy. The U6 rate, which includes the total unemployed plus all marginally attached workers plus total employed part-time because of economic reasons as a percentage of the total worker force, offers the broadest and most comprehensive view on employment and is currently at 17%. In short, we have at our disposal many different ways to measure unemployment. However, we really only use one of those in public debates, and we do so out of convention not because of its exhaustiveness.

Today’s news that the evil socialist usurpers at the National Academy of Science have released a revised poverty measure that includes variables related to geographic differences and medical costs offers us another example of the same phenomena in action. The Census Bureau includes neither variable and is currently sitting at 13.2% or 39 million people. However, if you look at the poverty guidelines, it doesn’t take a lot of imagination to see that making $10,830 in Arkansas is very different than making that much in S. California or NYC. So, if you add in those variables what do you get?

The NAS formula shows the poverty rate to be at 15.8 percent, or nearly 1 in 6 Americans, according to calculations released this week…

_About 18.7 percent of Americans 65 and older, or nearly 7.1 million, are in poverty compared to 9.7 percent, or 3.7 million, under the traditional measure. That’s due to out-of-pocket expenses from rising Medicare premiums, deductibles and a coverage gap in the prescription drug benefit.

_About 14.3 percent of people 18 to 64, or 27 million, are in poverty, compared to 11.7 percent under the traditional measure. Many of the additional poor are low-income, working people with transportation and child-care costs.

_Child poverty is lower, at about 17.9 percent, or roughly 13.3 million, compared to 19 percent under the traditional measure. That’s because single mothers and their children disproportionately receive non-cash aid such as food stamps.

_Poverty rates were higher for non-Hispanic whites (11 percent), Asians (17 percent) and Hispanics (29 percent) when compared to the traditional measure. For blacks, poverty remained flat at 24.7 percent, due to the cushioning effect of non-cash aid.

_The Northeast and West saw bigger jumps in poverty, due largely to cities with higher costs of living such as New York, Boston, Los Angeles and San Francisco.

This measure offers a far more nuanced view of poverty in the USA, but I wouldn’t bet on it making anything more than a blip on the radar screen.