This is a very dubious assertion. It is well known that PPP calculations are based on typical middle class households and cannot be used to accurately assess the purchasing power of poor households, which spend most of their income on food and necessities. This means that in order to compare the living standards of the poor across countries, you would have to develop PPP factors based on what poor people actually can afford, not based on what the middle class can afford.

There are other reasons why absolute income comparisons may be misleading. The extent to which government subsidizes services that are vital to the poor has a big impact on their living standards. Four areas come immediately to mind:
- Mass transit
- Health care
- Child care
- Education

Many among the US poor are not covered by Medicare and we all know that health care expenses can take a big toll on their income, which is less of a problem in most other developed countries. In a 2007 survey of health care experiences in seven countries (http://content.healthaffairs.org/cgi/content/abstract/26/6/w717), 36% of Americans responded that they had skipped a doctor’s visit, medication or diagnostic test at least once during the last year, and 19% reported having serious problems paying medical bills. Both figures are significantly higher in the US than in the other countries surveyed. Surely we have to agree that if you have to skip a doctor’s visit because you can’t afford it, you are poor.

The same is true if for financial reasons you cannot attain your educational goals.

Working low-income parents with children in the US often have to spend a high proportion of their income on child care.

Finally, the cost of owning and maintaining a car can make a hole of several thousand dollars in a tight budget. In most places in the US, you just can’t survive without a car (or two for a family), let alone hold a job. In Europe, in general the car is less of a necessity. I have lived in Central Europe in cities of comparable size to where I live now. Not only did I never even think of owning a car, but I felt more mobile there without a car than I feel in the US despite owning a car, and I spent less on my transportation needs than I spend on my car here (not counting the plane tickets that I also need).

For these reasons and from my own experience, I conclude there is strong evidence that you need a higher nominal income in the US to attain the same absolute living standard.

I have problems with some of these comparisons from LIS but for different reasons from the normal critique.

This is that the poverty figures and calculations of income in inome surveys don’t really match up well with what we know about people’s benefit entitlements in different welfare states.

It’s worthwhile looking at OECD figures on social assistance entitlements in different countries, which are available at
http://www.oecd.org/document/0/0,3343,en_2649_34637_34053248_1_1_1_1,00.html

You then open each spreadsheet and can go and look at the level of welfare benefits for different family types in different years up to 2004. The figures are in national currencies, but you can adjust these to US dollars (or whatever) by using Purchasing power parities also on the OECD website.

I haven’t time to do this, but if you take the example of a lone parent with two children, you will see that in the US their basic welfare entitlement (when private income is equal to Zero) was $9,960. (This refers to Michigan).

This doesn’t include Medicaid or SCHIP, but it also doesn’t include Medical assistance in any other country. It does take account of housing benefits where relevant. (See the pdf country descriptions on the same web address.)

For the UK a similar family would receive about £13, 800 (and in Australia the same family would receive just over A$25,000.) These figures are much, much higher than for the US in absolute terms! bout twice as high roughly.

And the same applies to virtually all of the household types used in the OECD analysis. (There is a conceptual problem with the OECD assumptions about the benefits received by couples without children in Australia and New Zealand, which I can explain if wanted.)

If you are able to look at the chart in the main publication http://www.oecd.org/document/33/0,3343,en_2649_34637_39619553_1_1_1_1,00.html (but this requires a subscription) then you will find that relative to a 50% of median income poverty line then Australian and UK benefits (including housing benefits) are three times higher than in the US.

Indeed after taking account of housing benefits, the UK and Australia consistently rank towards the top of OECD countries. The same is true of low income working families, as relative to median wages and also median incomes, the minimum wage in the UK and Australia are about twice as high as in the US (and in-work benefits are also much higher).

The US comes consistently towards the bottom of OECD rankings in terms of relative generosity of basic entitlements for the non-aged. Where figures are available only Greece, Italy and Turkey have lower benefits – but Mexico and Korea are not included in this analysis, and are also likely to have low benefit entitlements.

Now there are lots of reasons why entitlements may differ from recorded incomes for low income households. Benefits in the US for older people are probably more generous than in other Anglo countries (but I wouldn’t have thought so for the poor). There may be problems of take-up of entitlements, and the household at the 10th percentile in the US could be working, while in the other Anglo countries they may be on benefits. Alternatively they may be on social insurance benefits in the US and various European countries, whereas these don’t exist in Australia and are practically non-existent in the UK.

However, I think we have a paradox – what people are entitled to in Australia and the UK is in relative and in absolute terms much more generous than what people are entitled to in the US.

TANF: yes
Energy assistance: yes
WIC: yes
Medicaid: no
SCHIP: no
Housing assistance: no
School breakfast/lunch: no

A valuable feature of the Luxembourg Income Study database is that these inclusions and exclusions are harmonized across countries as much as possible — though that doesn’t mean it’s perfect in this respect.

Lane

*TANF (about $3100 per family)
*housing assistance (about $5,400)
*Medicaid (about $6,000 for a family of four)
the State Children’s Health Insurance Program (SCHIP) (about $1,000 per child)
*energy assistance (about $400)
*the school lunch and breakfast programs (as much as $600 per child)
*the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (about $400 per person)

the income of cohabitors and nonfamily household members

(2002 estimates)