Date: Fri, 6 Mar 1998 05:17:29 -0500
From: Richard Jensen <h4900@APSU01.APSU.EDU> Reply-To: Social Class in Contemporary Societies

Subject: "How Hard are Hard Times?" by Elia Kacapyr

from <http://www.marketingtools.com/publications/ad/98_ad/9802_ad/ad98029.htm> American Demographics, February 1998
Current Conditions

"How Hard are Hard Times?"
by Elia Kacapyr
America has a surplus of poverty, but meaningful measures of poverty are in short supply.
Americans who travel to less-developed countries are often shocked by the degree of deprivation and poverty they encounter. Until they go overseas, most Americans never see communities that do not have running water, or people who cannot afford shoes. But America's rate of poverty is still embarrassingly high. In 1996, 36.5 million Americans lived in families that did not earn enough to rise above the official poverty thresholds. That amounts to 13.7 percent of the population.

One in five children in the U.S. lives in poverty. Research has shown that the share of children who will experience poverty at some point in their lives is closer to 40 percent, because families move in and out of poverty over time. The United States has the highest child poverty rate of 18 industrialized nations, according to a United Nations survey. One reason is that America also has the lowest government benefits to families with poor children.

In her recently published book, It Takes a Nation, Rebecca Blank considers the poverty problem in the United States and what can be done about it. One of her main findings is that job creation in the 1990s has not cut into poverty the way it did in the 1960s. The "stagnation of wages at the lower end of the wage spectrum is preventing employment gains from reducing poverty rates," says Blank, who is chief economist for the Council of Economic Advisors. Recent increases in the minimum wage will "help some, but exactly how much is hard to predict." A substantial number of the working poor in America already earn the minimum wage.

These sorry statistics prevail even though many experts believe that the official thresholds used to determine the number of poor families are too strict. A family of two adults and two children with an income of $15,911 was not counted as officially poor in 1996, because their income was too high. The rules that determine poverty thresholds were set by the Office of Management and Budget (OMB) in 1978. While the OMB is not yet committed to revising the rules, they are leading a research program to examine alternative ways of measuring poverty.

Some analysts might consider the poverty rate or the degree of income disparity when attempting to measure national levels of well-being. The American Demographics Index of Well-Being does not include poverty rates or income inequality measures, for two reasons. First, figures on poverty and income disparity are only available on an annual basis, and our Index is updated monthly. Second, the income data included in the Index make poverty measures redundant. Since 1983, poverty has fallen whenever the Well-Being Index has risen, except in 1992-93. The inverse relationship between the Well-Being Index and the poverty rate is quite strong, with a correlation coefficient of -0.57.

The Well-Being Index advanced four tenths of a percent in September 1997. Only the leisure sector of the Index registered a decline, due to a decline in per capita recreation expenditures. The income and employment sector edged up because of a slight increase in after-tax income. The productivity and technology sector spurted higher, as both energy efficiency and labor productivity made substantial gains. Consumer attitudes continued their upward trend, due to substantial improvement in consumer expectations of future economic conditions. The social and physical environment index also increased, based on declines in both crime and divorce rates. The number of endangered species held steady at 879. Overall, the Well-Being Index stood at 102.66 in September. This figure implies that the typical American is 2.66 percent better off than in April 1990, the base month of the Index.

For more information on alternative poverty measurements, see Measuring Poverty: A New Approach, a 1995 report of a panel convened by the National Research Council. It is $48.95 from National Academy Press; telephone (800) 624-6242. A summary and more information is posted at the Census Bureau's Internet site: http://www.census.gov, or contact Charles Nelson at (301) 763-8029.

About the author
Elia Kacapyr is professor of economics at Ithaca College in Ithaca, New York, and author of Economic Forecasting (M.E. Sharpe, 1996).

Trends in Well-Being
(values for American Demographics Index of Well-Being and five major components for selected months, benchmarked to April 1990 level of 100) September August September September
1997 1997 1996 1995
AD Index of Well-Being 102.66 102.25 101.83 100.66 Income and employment opportunity 103.60 103.55 102.61 101.67 Productivity and technology 111.32 109.57 108.37 106.83 Leisure 104.14 104.18 103.09 102.38
Consumer attitudes 115.47 113.97 102.77 90.06 Social and physical environment 76.35 75.54 82.07 79.87

Source: Author's analysis of government and Conference Board data