Escaping Poverty

The poverty threshold presented by the EPI calculators presents several problems. First, it fails to take into account the fact that the cost of living is not the same everywhere. It only counts the number of people in the household and ignores the household production of a non-working adult or the cost of medical care for someone with a chronic health problem (Fisher, 2021). But the GDP per capita and all income measures and even tax rate suffer from the same problems, and it is better to know something than nothing. It measures income only not assets or quality of life. For instance, a community of retired people who have lived in a place for more than 30 years and everyone has a paid off their houses filled with furniture, can live on little. Also. Having a bank account with say approximately 100,000 dollars and having paid off their homes means that they might live on Social Security and 1000 dollars a year of interest. This makes them look impoverished yet they live well and have all the necessitates in life. Since they are retired, they are not saving for a house, college for kids, or anything. There are many factors the government ignores because it would be too costly to attempt to accurately measure. Still, the government needs a baseline and so the simplest formula is used.

There is no single “poverty line.” The US Federal Government has two main versions: the poverty thresholds employed by the Census Bureau for numerical analysis purposes and the poverty guidelines used by the federal Department of Health and Human Services to determine program eligibility and other administrative matters. Many other organizations have their poverty thresholds. More important than the level chosen is what metric is used. Household income is a common choice for the EPI poverty threshold and is usually adjusted for family size and local cost of living (ASPE, 2021). But there are important flaws in that. It is usually measured over a year or shorter period, so a college student well supported by wealthy parents may show zero income, while a retiree with healthcare costs twice her income may show up as wealthy. The measure does not take into account major sources of consumption, and it also ignores assets.

The problems with EPI’s poverty threshold significantly affect people’s ability to escape poverty. If “poverty” means inadequate access to necessities of life, then consumption is a better measure of poverty than income. Also, if it means the inability to participate as a fully-valued member of society, then income is only a part of that and if it means not having the economic resources for a dignified and satisfying life, again income is only a small part. In urban places, the poverty threshold is nearly 50 dollars a day (Gould, 2021). Even accounting for price differences, the American poverty threshold is not remotely comparable to the international concept of extreme poverty. Many people living in poverty in the US live in a home built to modern US living standards, own a car or have access to public transportation, have access to safe and healthy food, have electricity and phone service, and other amenities that a person living in extreme poverty can only dream of.

The poverty level applicable to the US is referred to as the poverty threshold. Thus, it is hard for many people to escape poverty due to the definition of the poverty line in the country (Fisher, 2021). This is because many people in poverty is that there is virtually zero extreme poverty in the US. Individuals will only find it in homeless populations. The cause is not related to economic conditions but to a lack of participation in the economy for various reasons. The US safety net generally provides a minimum of $35,000 a year in free benefits to any poor people who apply. That is around 50 times higher than extreme poverty levels.

References

ASPE. (2021, March 16). Frequently Asked Questions Related to the Poverty Guidelines and Poverty. ASPE. https://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty.

Fisher, G. (2021, March 16). The Development and History of the U.S. Poverty Thresholds —A Brief Overview. ASPE. https://aspe.hhs.gov/history-poverty-thresholds.

Gould, R. • B. E. (2021). What Families Need to Get By: EPI’s 2015 Family Budget Calculator. Economic Policy Institute. https://www.epi.org/publication/what-families-need-to-get-by-epis-2015-family-budget-calculator/#epi-toc-8.