By James Owen<\/p>\n\n\n\n
Editor\u2019s note: This is one in a series of blog posts to critically examine how poverty is defined, measured, and talked about, and how those conversations influence public policy.<\/em> <\/p>\n\n\n\n If you\u2019ve been keeping up with our series on poverty<\/a>, it\nshould be clear that how the United States measures poverty needs an update. <\/p>\n\n\n\n As we explained,<\/a> the poverty line is based on the 1960s assumption that a basket of food comprised almost 30 percent of your expenses. As such, the poverty line is three times what that 1960s basket of food bought. Further, the poverty calculation is only updated using the consumer price index (CPI) to account for inflation \u2013 how much prices for goods have risen over the past year. <\/p>\n\n\n\n There is another problem with this calculation. <\/p>\n\n\n\n As a report<\/a> by The Center on Poverty and Social Policy at Columbia University points out, we often assume that inflation is the same for everyone.[1]<\/a> Saying inflation is the same for everyone makes calculations easier but can sacrifice accuracy. In this case, evidence suggests inflation is different depending on how much income you take home. <\/p>\n\n\n\n Enter inflation inequality. <\/p>\n\n\n\n Price and expenditure data, for example, from scanners from\nretail stores, revealed that prices have not risen at the same rate. Goods that\nfamilies closer to the poverty line bought got more expensive more quickly than\ngoods that wealthier households consume. <\/p>\n\n\n\n Why? The paper posits that as income inequality has\naccelerated, companies have competed for the business of wealthier customers.[2]<\/a>\nThis competition has actually led to a relative decrease in inflation among\nwealthier consumers. However, as businesses compete for wealthier market\nsegments, competition has decreased for those near or below the poverty line.\nIn turn, fewer competitors has led to increased inflation for the bottom 20\npercent. <\/p>\n\n\n\n When the study normalized for these relative changes in inflation, it found that in real terms, 3.2 million more people live below the poverty line \u2013 about $25,000 for a family of four \u2013 and that the bottom 20 percent of households have lost about seven percent of their income due to inflation.[3]<\/a> <\/p>\n\n\n\n The assertion that more people than the population of the state of Arkansas might be living in poverty but are not accounted for in government measurements suggests a change is needed. Good thing we\u2019re already looking into a solution. [1]<\/a>\nWimer, Christopher, Sophie Collyer and Xavier Jaravel. 2019. \u201cThe Costs of\nBeing Poor: Inflation inequality leads to three million more people in\npoverty.\u201d Center on Poverty & Social Policy at Columbia University. <\/p>\n\n\n\n
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