July 30, 2008

Poverty Gets a New Measuring Cup

But what are we putting in it?

I don't know how I missed it, but Slate's Tim Harford wrote a very interesting post on Saturday about how the poverty line is measured. Harford goes through a couple of different, often used methods of assessing poverty, and then compares them to the recent research of an anti-poverty group, the Joseph Rowntree Foundation, in Britain that has recently put forward a new method (or, more accurately, a mix of old methods).

I'm not going to rehash most of either JRF's research or Harford's analysis because I think both stand on their own and are very well done. The methods we use to determine who is in poverty and who isn't, though admitedly often overlooked, is absolutely essential to the work that we do, and reflects something of the way we view "the poor" in our society. Both JRF and Harford appear to have come up with a very thorough way to determine a threshold, but I do take exception to one point, and I think it is an important one.

One of the methods talked about and dismissed is putting the poverty threshold at 60% of the median income of the population of a region. In response to this sort of approach, Harford states:

This has an unfortunate consequence: Poverty is permanent. If everyone in Europe woke up tomorrow to find themselves twice as rich, European poverty rates would not budge. That is indefensible. Such "poverty" lines measure inequality, not poverty, and they do so clumsily.

The Joseph Rowntree Foundation makes a similar claim, stating that "this arbitrary measure is not a standard rooted in a considered view of what people need to live on." They instead suggest that a better method would be to use an "acceptible minimum" that is based off of a "minimum income standard." The MIS takes into account "the sum of hundreds of costed items and allowances for activities and services," and is available through their website.

This is a great method, but let's not throw out the 60% of median income so quickly. Let's consider the sort of things in your region that are based on the median income in the area: apartment rents, pay scales at your job, what stores come into or leave your neighborhood, school tuition costs, and childcare (to name a few huge ones). Basing the assessment of poverty on regional data (as a percentage of median income does when it is calculated correctly) indirectly takes into account what access to resources your community will actually have.

Though it's a simplistic example, let's take the neighborhood around 14th and P NW. There's no Metro directly next to this neighborhood, which means that, more than likely, your grocery shopping will be done at the nearest grocery store. That store happens to be Whole Foods, which is significantly more expensive than other grocery retailers. Rent will also be higher than in other parts of the Metro Area. The reason we see higher rent and retail is because the income in that immediate area is very high. A low-income person who is, say, in the Logan Circle Apartments (4 Logan Cirle NW, 20005), has to spend more to remain stable in their neighborhood than a person with equal income but less expenses.

Mayor Bloomberg recently adopted a poverty scale somewhat based on median income, and it seems to work rather well. I would add, to get back to Harford's criticism, that adoption of this method does not lead to poverty being permanent, it merely indicates a truism of economics. If all of Europe were suddenly to double their incomes, prices would double to match, leaving people in the exact same stratification as they had before. The benefit of the sliding "60% of median income" method is that it indicates when the economics of the region have changed.

On a large scale, a method like this would be an absolute failure because it wouldn't give you any information you didn't have before (say, if you were to take the median income of all of Britain), but it is next to magical in smaller regions (like specific city wards) where income level can vary dramatically.


Mari said...

It's curious you picked 14th and P NW as opposed to somewhere in NE, SE or SW DC. But the saw there is no metro around is bad. Would it kill anyone to walk up to 13th and U to the U Street metro or take one of several buses that goes up and down 14th. And as far as stores go there are smaller bedega kind of places tucked away in the more residential parts of the neighborhood.
I lived in that area before Whole Foods even showed up and there were other options. Yes, some of those options are no more but at least one (Giant at 8th & P) remains.
Don't willfully ignore the other options an area has and the option that people may actually do their shopping elsewhere besides the area where they live (like the area where they work).

Matt Siemer said...

Hey Mari,

Thanks for taking the time to write that. I picked 14th & P NW because that intersection is a very interesting one as far as demographics, and I used to work in that area so I also have some first-hand knowledge. There are plenty of examples in NE, SE, and SW (as you point out), but since I was familiar with this one it was my first thought.

Yes people can shop at any grocery store they would like, but that doesn't change the economics of the region. Other methods want to take the proximity of Whole Foods into account when determining an accurate poverty threshold (which, as I stated, is not that bad of an idea), but I think you could get a picture that is just as accurate by taking a percentage of the median income of the region. Using that percentage would not assume that people are shopping at Whole Foods like other poverty calculators would.

You're right that grocery stores are never a direct indicator of where people are shopping, but they are an indicator of how businesses are currently viewing the cultural and economic landscape of a community.