Last week’s 20th anniversary of welfare reform event put income-based poverty measures on trial and drew skeptics from many circles. Michael Tanner stated that you would be hard-pressed to find “anyone on the left or right to defend the current [income-based] measure,” Robert Rector compared the current poverty measure to wearing glasses with cracked lenses, and Scott Winship presented research indicating income-based measurements distort U.S. poverty estimates.
Criticisms of the poverty metric during the event were only a microcosm of objections that have been occurring for some time.
Specifically, academics have taken issue with the failure of income-based poverty measures to accurately capture the realities of poverty. Measuring poverty incorrectly can have deleterious results, because it leads to misunderstanding the problem itself and, by extension, the solution.
So, what’s wrong with using income to measure poverty?
It turns out a lot, because income does not provide an accurate picture of economic well-being. It does not, for instance, provide information about an individual’s access to welfare benefits or access to formal or informal insurance. Income also can’t say anything about an individual’s accumulation of wealth or access to credit. Practically speaking, the income measurement often ignores dollars earned under-the-table on the so-called “gray market.” Importantly, for poor individuals, the resources that income overlooks are often substantially larger than income itself.