|
The American Economic Association awarded a
36-year-old professor from Harvard University its highest honor, the John
Bates Clark medal. This prestigious award, handed out every two years has
boasted some notable honorees including Stephen Levitt, Paul R Krugman, Lawrence H. Summers, Milton Freidman and Paul A.
Samuelson.
The most recent recipient of this award was Susan
Athey. Noted for her analysis of how people react to uncertainty when faced
with increasing levels of change, often while engaged in auctions Professor
Athey was the first woman to receive the award. But she was certainly not the
first to deserve it.
Mollie Orshanksy, had she not been pigeonholed at
the Social Security Administration as a statistician may well have been
qualified for such prestige. Her research into poverty thresholds for the SSA
opened the eyes of policymakers to the possibility that poverty can be
measured and not simply debated in some sort of abstract form.
The index she developed was based on nutritionally
adequate food plans from statistics gathered by the Department of
Agriculture. Enough information had been gathered to suggest that, after-tax
spending on food consumed about a third of the average family’s income.
Mollie took this information and developed 120 different thresholds in the
hope of encompassing every possible combination of poverty.
Pinpointing a solution to poverty has been elusive. In
her 2001 book titled “Poverty Knowledge” Alice O’Connor
wrote that to understand what poverty was required “a commitment to
using rational empirical investigation for the purposes of statecraft and
social reform; a belief that the state, in varying degrees of cooperation
with organized civil society, is a necessary protection against the hazards
of industrial capitalism and extreme concentrations of poverty and
wealth”. It was her
hope that a capitalist economy could be maintained but that it needed to be
applied “for the common good.”
The attempt
to define poverty, as Ms. O’Connor wrote has “been subject to
varying interpretations, to internal conflict, and to revision over
time” that has, as far as the public debate is concerned,
“defined poverty knowledge as a liberal as well as a scientific
enterprise, starting with the efforts by Progressive-era social investigators
to depauperize thinking about poverty--to make it a matter of social rather
than individual morality--by turning attention from the "dependent"
to the wage-earning poor.”
Trying to
determine who is poor has created a political divide. The Orshansky index did
not calculate the added costs of such economic burdens as housing, the costs
of employment, which included transportation and childcare and the
affordability of healthcare. Mollie’s simple equation served a purpose
in helping solve one of the more perplexing challenges of her day: how to
assure proper nutrition.
Her belief in
this method was based on her own personal experience with poverty and the
hope that, given the proper guidelines, a household could adequately feed its
members. Her experience with Home Economics led her to focus on proper
feeding as a way to change what was, up until that time, a difficult problem
to measure and a doubly troublesome phenomenon to solve.
Although
Mollie succeeded in drawing attention to the problem and her solutions
actually halved the poverty rate of the time, it did not eliminate the poor.
Since then, the number of poor in America tallied, as a percentage against
the total population has remained steady. In other words, as the population
has grown, so has the number of impoverished.
How is that
possible? When you consider the useless debate over which economic expansion
has proved more beneficial to the impoverished: the Clinton years (low
inflation accompanied by the post-Cold War peace dividend) or the Bush years
(tax cuts and deficit spending), neither succeeded in changing anything.
Mollie had hoped that her index would ultimately influence policy.
Even as
measurements of inflation and gross domestic product (GDP) have improved, the
Census Bureau still relies on Mollie’s formulation. Liberals use to
demonstrate the need for social reform; conservatives suggest that all
economic boats will rise. Neither is right and to further complicate matters,
neither group is necessarily wrong.
Poverty
depends on where you live (urban living, which tends to be closer to jobs and
services vital to survival and support is more expensive that rural locales),
what you earn (or as some would have it, what you spend which suggests that
poverty for some households is transitory) and how current policies are
calculated (recommendations to the Census Bureau have included changes that
reflect taxes, benefits, child care, medical costs, and regional differences
in prices).
Excluding
comparisons to other industrialized and developing economies is important in
the formation of good policy. At what point do 34 million people of whom 13
million are children make for an acceptable poverty limit? Is the poverty
that these people experience chronic or temporary, environmental or
congenital?
Longitudinal
surveys of income conducted over a period of three years often suggest that
poverty is not static phenomenon. Information such as this is absent from
traditional census based surveys, which usually focus on a much broader
picture. Poverty observed in these types surveys can often spot changes in a
month-to-month format.
While the
Office of Budget and Management should offer methodologies for measuring who
is poor, one need look no further than Adam Smith. In his “Wealth of
Nations” he pointed to the ever-shifting landscape of necessaries, a
measure of what is needed now to subsist as compared to what may have been
considered a luxury a mere generation before.
Determining
who is poor is almost as important as why and could affect policies on health
insurance, immigration law, job quality and ultimately, education.
While
Mollie’s index did bring the poor in clearer focus, it failed to offer
a meaningful way of solving the problem. Perhaps using some percentage of the
median income might be more useful in highlighting their plight as John
Cassidy of the New Yorker suggested.
Circular debates about income gap and the quest for
universal health insurance all skirt the larger issue of why we tolerate the
existence of poverty. The late Ms. Orshansky had simply found a way to
identify the poor. It is up to us to fix the problem not find a better
measure.
Paul Petillo
www.BlueCollarDollar.com
| 
