Poverty and inequality in the U.S.

Poverty measures

One of the world’s richest countries has seen remarkably little progress against absolute poverty over the last 40 years, as can be seen from the following graph, based on the U.S. Census Bureau‘s estimates using the official poverty line.


The official poverty line for the U.S. has often been criticized as no longer being relevant to perceptions of what “poverty” now means in America. (EOP Chapter 2 summarizes the debate.) Unlike the statistical offices in most other rich countries, the US Census Bureau has only aimed to maintain the real value of its poverty line over time (i.e., adjusting only for inflation). (The official line was based on a line developed in 1965 by Mollie Orshansky, an economist working for the Social Security Administration.)

At around $13 per person per day in 2005 (for a family of four with two children—about $16 a day in 2014), the official poverty line in the U.S. is roughly 10 times higher than one finds in the poorest countries. However, the U.S. line is low when compared to other similarly rich countries today. At roughly the same average income, Luxembourg has a line of $43 a day. A better comparison is with the average value among the rich countries, which is around $30 a day, roughly double the U.S. line. In fact the U.S. line is the average line for countries with only about one third of the mean consumption level of the US.

Poverty lines

For more on the debates on the US poverty line and proposed alternatives see EOP (Chapters 2 and 4). For more on poverty lines and how they are set Poverty lines across the world.

Inequality measures

The fall and rise of inequality in the US has attracted much recent attention. These two graphs tell the story very well. EOP Chapter 2 discusses the reasons.  The data are from World Top Incomes Database and are based on income tax records. The reported incomes are  pre-tax and does not include government transfer payments.




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