A decent and rising income floor

Lane Kenworthy, The Good Society
May 2015

One of the principal goals of a good society should be to improve the living standards of the least well-off.1 How poor are the least well-off in the United States and other affluent nations? How much has their standard of living risen in recent decades? Why have some countries done better than others?

HOW POOR ARE THE POOR?

Think of the income distribution in the United States as a ladder with five rungs, each of which holds 20% of the population. Among the 25 million households on the bottom rung, the average income as of 2013 was just $19,500.2

Income data are never perfect. However, these data, compiled by the Luxembourg Income Study, are quite good. They include earnings, government cash and near-cash transfers, and other sources of income. Tax payments are subtracted. These data give us a pretty reliable picture of the incomes of American households.

Few of these low-income Americans are destitute. Most have clothing, food, and shelter. Many have a car, a television, heat and air conditioning, and access to medical care.3 But making ends meet on an income of $19,500 is a challenge. That comes out to $1,625 a month. If you spend $600 on rent and utilities, $300 on food, and $200 on transportation, you’re left with just $525 each month for all other expenses. It’s doable. Tens of millions of Americans offer proof of that. But this is a life best described as “scraping by.”4

There are important caveats. First, since $19,500 is the average among these 25 million households, about half have an income above this amount, and for them making ends meet will be a little easier. But it still won’t be easy. And the other half have incomes below the $19,500 average. Some solo adults make do with an income of $10,000 or $5,000. Some families with one or more kids get by on $15,000 or even less. About 1% of families with children and 4% of those without children have, for at least three months during a year, an income of less than $2 a day — an astonishingly low amount. That includes food stamps, EITC payments, and housing support they receive. 5 As Kathryn Edin and Luke Shaefer have documented, some of these Americans live in abysmal conditions and engage in demeaning or dangerous activities in order to subsist.6

Second, some of these households have assets that reduce their expenses or provide a cushion in case expenses exceed income in a particular month or year. Some, for example, own a home and therefore have no rent or mortgage payments. But many aren’t saved by assets. Approximately 26% of Americans are “asset poor,” meaning they don’t have enough assets to replace their income for at least three months.7

Third, these data very likely underestimate the true incomes of some households at the bottom. The data come from a survey in which people are asked what their income was in the prior year. People in low-income households tend to underreport their income, perhaps out of fear that accurate disclosure will result in loss of a government benefit they receive.8

Fourth, some of these 25 million households have a low income for only a short time. Their income may be low one year because the wage earner leaves her job temporarily to have a child, is sick, or gets laid off. By the following year, the earner may be back in paid employment. Some low earners are just beginning their work career. Five or ten years later, their earnings will be higher, or perhaps they will have a partner whose earnings add to household income. On the other hand, some who move up the economic ladder will later move back down. Shuffling in and out of poverty is common. Using a data set known as the Panel Study of Income Dynamics (PSID), which tracks the same set of households over time, Mark Rank, Thomas Hirschl, and Kirk Foster calculate that 10% of Americans spend ten or more years with an income below 1.5 times the US government’s official poverty line (about $18,000 for a single adult and $34,500 for a household of four as of 2013) between the ages of 25 and 60.9

Fifth, some of these households are made up of immigrants from much poorer nations. They are better off than they would have been if they had stayed in their native country. But that doesn’t change the fact that they are scraping by.

How much should these qualifiers alter our impression of economic insecurity due to low income in the United States? It’s difficult to say. Suppose the truly insecure constitute only half of the bottom fifth. That’s still 10% of American households, quite a large share for a nation as rich as ours.

Since the early 1990s the Survey of Income and Program Participation (SIPP) has asked a representative sample of Americans about their living conditions. Here’s what the most recent survey, in 2011, found for households in the bottom fifth of incomes10:

  • 54% don’t have a dishwasher.
  • 47% don’t have a computer.
  • 31% don’t have a clothes washer.
  • 22% report two or more of the following: unmet essential expenses, unpaid rent or mortgage, unpaid utilities, disconnected utilities, disconnected phone, insufficient amount of food to eat, didn’t see a doctor when needed, didn’t see a dentist when needed.
  • 11% say their neighborhood is unsafe.

Perhaps we should measure low income in another way. We could, for example, identify the minimum income needed for a decent standard of living and then see how many households fall below this amount.11 A team of researchers at the Economic Policy Institute did this, estimating “basic family budgets” for metropolitan and rural areas around the country and calculating the share of families with incomes below these amounts in 1997-99.12 They concluded that approximately 29% of US families could not make ends meet. More recently, researchers for United Way have calculated household “survival budgets” in six states — California, Connecticut, Florida, Indiana, Michigan, and New Jersey — as of 2012. Their estimates for a family of four range from $46,000 in Indiana to $65,000 in Connecticut, and they find that 35% or more of the households in each of the six states had an income below the needed amount.13 Researchers with Wider Opportunities for Women and the Center for Social Development at Washington University have calculated basic-needs budgets for various household types as of 2013. They estimate that to meet basic expenses, a single adult needed, on average, about $30,000, and a household with two adults and two children needed about $71,000. According to their calculations, 45% of American households fell below the threshold.14

This helps us understand a striking finding in a 2014 study by the Federal Reserve. Among 5,000 American adults asked how they would pay for a hypothetical emergency expense totaling $400, 37% said they would be unable to pay for it with cash or money in their bank account.15

ARE THE POOR BETTER OFF IN AMERICA THAN IN OTHER AFFLUENT COUNTRIES?

The United States is one of the world’s richest nations. Among the affluent longstanding democracies, only Norway has a higher per capita gross domestic product (GDP). How do the incomes of America’s poor compare with those in other affluent countries?

As figure 1 shows, household income at the tenth percentile of the income ladder is lower in the US than in many other wealthy nations. (The appendix has a separate graph for each country.) It’s only a little below some of the other countries, but $5,000 to $10,000 below the leaders. That’s a sizable difference.

Figure 1. Tenth-percentile household income
Posttransfer-posttax household income. The incomes are adjusted for household size and then rescaled to reflect a three-person household, adjusted for inflation, and converted to US dollars using purchasing power parities. “k” = thousand. The lines are loess curves. Data sources: Luxembourg Income Study; OECD.

What if we look at a more direct measure of living standards, such as material hardship? Two OECD researchers, Romina Boarini and Marco Mira d’Ercole, have compiled material deprivation data from surveys in various nations.16 Each survey asked identical or very similar questions about seven indicators of material hardship: inability to adequately heat one’s home, constrained food choices, overcrowding, poor environmental conditions (noise, pollution), arrears in payment of utility bills, arrears m mortgage or rent payments, and difficulty making ends meet. Boarini and Mira d’Ercole create a summary measure of deprivation by averaging, for each country, the shares of the population reporting deprivation in each of these seven areas. As figure 2 indicates, the United States fares just as badly on this measure.17

Figure 2. Material hardship rate
Average of the deprivation rates (share of households experiencing deprivation) in the following seven areas: inability to adequately heat home, constrained food choices, overcrowding, poor environmental conditions such as noise and pollution, arrears in payment of utility bills, arrears in mortgage or rent payment, difficulty in making ends meet. Measured in 2005. Data source: OECD, Growing Unequal?, 2008, pp. 186-188, using data from the Survey on Income and Living Conditions (EU-SILC) for European countries, the Household Income and Labour Dynamics in Australia survey (HILDA) for Australia, and the Survey of Income and Program Participation (SIPP) for the United States.

HOW DO RICH COUNTRIES LIFT UP THE POOR?

As a nation grows richer, the living standards of its least well-off ought to rise. Historically, economic growth has tended to benefit all households, and that continues to be the case in many of the world’s developing nations.18 But the fruits of economic growth don’t automatically trickle down to everyone. In many affluent countries, a host of developments over the past generation — economic globalization, the proliferation of computers and robots, shareholder obsession with short-term profits, union decline, and more — have reduced the likelihood that economic growth will boost the incomes of the least well-off.

Have these countries continued to lift up the poor since the 1970s? Figure 3 shows that the United States has been particularly ineffective at doing so. Many other countries achieved larger increases in the incomes of low-end households (vertical axis) despite smaller increases in GDP per capita (horizontal axis).19

Figure 3. Tenth-percentile household income growth by economic growth
Change is per year, 1979-2013. Because the actual years vary somewhat depending on the country, change is calculated by regressing household income or GDP per capita on year. Household incomes are posttransfer-posttax, adjusted for household size (the amounts shown are for a household with three persons). Household incomes and GDP per capita are adjusted for inflation and converted to US dollars using purchasing power parities. Ireland and Norway are omitted; both would be far off the plot in the upper-right corner. Data sources: OECD; Luxembourg Income Study.

Why is that? We often think of the trickle down process as one in which economic growth produces rising earnings via more work hours and higher wages. But in almost all of these countries, the earnings of low-end households have increased little, if at all, since the late 1970s. Instead, as figure 4 suggests, it is increases in net government transfers — transfers received minus taxes paid — that have tended to drive increases in incomes when they occurred.

Figure 4. Change in low-end households’ earnings and net government transfers, 1979-2007
Households on the bottom fourth of the income ladder. Change is per year. The actual years vary somewhat depending on the country. Earnings and net government transfers are adjusted for household size, adjusted for inflation using the CPI, and converted to US dollars using purchasing power parities. Data source: Luxembourg Income Study.

Governments in some of these nations have done more to pass the fruits of economic growth on to the poor. For the most part, this hasn’t entailed increasing the share of GDP allocated to public transfers. Such increases were common in the 1960s and 1970s. But in most of these affluent nations — even the most generous ones, such as Denmark and Sweden — increases in the share of GDP allocated to public transfers largely stopped after the 1970s. In recent decades, the distinction has been between countries that have kept transfers rising in line with GDP versus those that haven’t.

Sometimes doing so requires no explicit policy change, as benefit levels tend to rise automatically as the economy grows. This happens when, for instance, pensions, unemployment compensation, and related benefits are indexed to average wages. Increases in other transfers, such as social assistance, typically require periodic policy updates. That’s true also of tax reductions for low-income households.

In the United States, only one of the main government transfer programs, Social Security, is structured in such a way that benefit levels automatically increase when the economy grows. Social Security retirement benefits are indexed to average wages, so they have tended to rise more or less in concert with GDP. Unemployment benefit levels are determined by state governments. In many instances, the benefit level is a “replacement rate,” which means the payment is a certain fraction of the unemployed person’s former wage or salary. Because real wages in the bottom half of the distribution have not increased in the past several decades, unemployment benefits for Americans in low-wage jobs have failed to keep up with growth in the economy. Other programs, such as the Earned Income Tax Credit (EITC), the Supplemental Nutritional Assistance Program (SNAP, formerly called Food Stamps), Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI), are indexed to prices. This means they keep up with inflation, but not with economic growth. Temporary Assistance for Needy Families (TANF, formerly AFDC) payments are determined by state policymakers; there is no automatic increase, not even for prices. AFDC-TANF benefit levels have fallen steadily in inflation-adjusted terms over the past several decades.

If most of the poorest Americans were Social Security recipients, the US position on the vertical axis in figure 3 probably would be a good bit higher. But in the US, as in many other countries, most of the least well-off aren’t retirees. Many elderly Americans have no income from earnings, but Social Security benefits, payments from employer-based retirement programs (company pension or 401k), and other income (from the sale of a house, for instance) combine to keep them out of poverty. The fact that most of our other government transfers have only kept up with inflation rather than with the economy, coupled with the decline in AFDC-TANF benefits, is a key cause of slow income growth at the bottom in the United States.

Should we bemoan the fact that employment and earnings haven’t been the key trickle-down mechanism in recent decades? Not necessarily. At higher points in the income distribution, they do play more of a role.20 But for those at the low end there are limits to what employment can accomplish. Some people have psychological, cognitive, or physical conditions that limit their earnings capability. Some are constrained by family circumstances. At any given point in time, some will be out of work due to structural or cyclical unemployment. And some are retirees. We surely can do better at helping able adults get into (or back into) employment, but we shouldn’t pretend that paid work is a realistic route to guaranteeing rising incomes for everyone.

WHY SO LITTLE PROGRESS FOR AMERICA’S POOR?

Let’s look more closely at developments in the United States. Figure 5 shows average income among the bottom fifth of US households between 1979 and 2013. It increased by $1,500. That’s a very small improvement for a period of three and a half decades, especially given that for much of this time the American economy was growing at a healthy clip.21

Figure 5. Average income of households on the bottom fifth of the income ladder
Posttransfer-posttax income. The income measure includes earnings, government cash and near-cash transfers, and other sources of cash income. Tax payments are subtracted. The incomes are adjusted for household size and then rescaled to reflect a three-person household. The incomes are in 2013 dollars; inflation adjustment is via the CPI-U-RS. Data source: Luxembourg Income Study, series dhi.

Other indicators tell a similar story of limited improvement in living standards for America’s poor since the 1970s. Figure 6 shows two measures of the poverty rate.22 One is the official government measure, which includes cash government transfers but leaves out near-cash transfers such as the EITC and SNAP (“food stamps”) and doesn’t subtract taxes. The other is the “supplemental poverty measure,” which takes into account all transfers and taxes and also adjusts for homeownership and for medical, childcare, and work expenses.23 Both suggest that the country made significant progress through the mid-to-late 1970s but little, if any, since then.24

Figure 6. Poverty rate
Share of persons living in a household with income below the poverty line. Data sources: Carmen DeNavas-Walt and Bernadette D. Proctor, “Income and Poverty in the United States: 2013,” Current Population Reports P60-249, Census Bureau, 2014, table B-1; Liana Fox, Irwin Garfinkel, Neeraj Kaushal, Jane Waldfogel, and Christopher Wimer, “Waging War on Poverty: Historical Trends in Poverty Using the Supplemental Poverty Measure,” Working Paper 19789, National Bureau of Economic Research, 2014, figure 2.

Why has this happened? There are two main sources of income for low-end households: earnings and government transfers. And there are two main ways for households to increase earnings: more employment (increasing work hours or adding a second earner) and higher wages. So progress for the poor depends on increases in wages, employment, and/or government transfers.

Low-end wages rose steadily from the mid-1940s through the end of the 1960s. We don’t have reliable data for this period on wages at the tenth percentile, but a decent substitute is the statutory minimum wage. As figure 7 shows, the minimum wage (adjusted for inflation) increased sharply in the 1940s, 1950s, and 1960s and then decreased a bit in the 1970s. Since then it has been flat, as has the tenth-percentile wage level.

Figure 7. Minimum wage and tenth-percentile wage
The wage levels are in 2012 dollars; inflation adjustment is via the CPI-U-RS. Data source: Economic Policy Institute, stateofworkingamerica.org/data.

The pattern for employment is similar. Here a good measure is the average number of employment hours among low-income working-age households, shown in figure 8. In the 1980s and 1990s, hours rose during periods of economic growth, but they then decreased so precipitously during recessions that there was little or no net gain. In the 2001-2007 upturn, economic growth produced no rise in the country’s overall employment rate25 or in average employment hours for low-end households.

Figure 8. Average employment hours in households on the bottom fourth of the income ladder
Average annual hours worked in working-age (“head” aged 25-64) households in the bottom quartile of the pretransfer-pretax income distribution. Data source: Keith Bentele calculations using Current Population Survey data (IPUMS March Extracts).

As a result of these two trends since the 1970s — flat wages and flat employment — low-end households have seen hardly any increase in inflation-adjusted earnings. Figure 9 shows that market income among households on the bottom fifth of the income ladder increased by a relatively small amount between 1979 and 2007, both of which were peak years in the business cycle, before falling sharply during the Great Recession and its aftermath. In 2013 it was no higher than in 1979.

Figure 9. Average market income of households on the bottom fifth of the income ladder
Pretransfer-pretax household income among households in the bottom fifth of posttransfer-posttax incomes. The incomes are adjusted for household size and then rescaled to reflect a three-person household. Inflation adjustment is via the CPI-U-RS. Data source: Luxembourg Income Study.

With wages and employment failing to increase, we’re left with government transfers. As we saw in the previous section, this has been the key source of rising low-end incomes in a number of other affluent countries, but not in the United States (figure 4). Social Security benefits rose, as did the Earned Income Tax Credit. But social assistance (AFDC and TANF) coverage and benefit levels decreased. Figure 10 shows the difference between market (pretransfer-pretax) income and disposable (posttransfer-posttax) income for households on the bottom fifth of the income ladder. Government transfers have helped America’s poor, adding $7,000 to $10,000, on average, to their incomes. And they’ve played a particularly important role in propping up incomes during economic downturns. But their minimal increase since the late 1970s, coupled with stagnant wages and stagnant employment, means that there has been very little sustained rise in the incomes of low-end households.26

Figure 10. Net government transfers to households on the bottom fifth of the income ladder
Average posttransfer-posttax income minus average pretransfer-pretax income among households in the bottom fifth of posttransfer-posttax incomes. The incomes are adjusted for household size and then rescaled to reflect a three-person household. Inflation adjustment is via the CPI-U-RS. Data source: Luxembourg Income Study.

The United States could have done better. A noteworthy comparison case is the United Kingdom. Like the US, its public insurance programs are moderately generous,27 and it too was governed in the 1980s and early 1990s by a conservative party devoted to rolling back the welfare state. In 1997 a New Labour government was elected, headed by Tony Blair and Gordon Brown, and a year later Prime Minister Blair committed the government to ending child poverty in the UK within a generation. That led to a raft of policy initiatives which significantly boosted incomes among Britain’s least well-off.28 As figure 11 shows, household income at the tenth percentile rose much more in the UK than in the US, despite similar increases in per capita GDP.

Figure 11. Tenth-percentile household income by GDP per capita in the US and the UK
1979-2013. The lines are loess curves. Household incomes are posttransfer-posttax, adjusted for household size and then rescaled to reflect a three-person household. Household incomes and GDP per capita are adjusted for inflation using the CPI and converted to US dollars using purchasing power parities. “k” = thousand. Data sources: OECD; Luxembourg Income Study.

What about the argument that overly-generous social policy is the cause of slow income growth for the poor? According to this hypothesis, government benefits reduce the incentive for Americans with limited skills to take a low-paying, not-very-satisfying job, so economic growth fails to boost employment.29 A key problem for this hypothesis is that social assistance benefits in the United States — mainly AFDC/TANF and food stamps — have never been particularly generous, and their value has decreased steadily since the mid-1970s.30 Moreover, we see in figure 8 above that employment hours in low-end households in fact did rise quite sharply during the growth years of the 1980s and 1990s. Ironically, it was in the 2000s, after incentives for employment were significantly enhanced by the 1996 welfare reform, that we see no jump in work hours during a period of economic growth. The demographic group that was the focus of welfare reform, poor single mothers with children, did experience a rise in employment hours and consequently in market incomes.31 However, improvement for this group didn’t translate into improvement for America’s poor overall. Finally, the cross-country evidence suggests that countries with generous social policies have done just as well on employment and economic growth as those, like the US, that have a smaller public safety net.32

SUMMARY

Income isn’t a perfect measure of the material well-being of low-end households. We need to supplement it with data on actual living conditions, and governments now routinely collect such information (see figure 2). Unfortunately, those data aren’t available far enough back in time to give us a reliable picture of changes. For that, income remains our best guide.

What the income data tell us is that the United States has done less well by its poor than a number of other affluent nations. The reason is straightforward. Like their counterparts abroad, America’s least well-off have been hit hard by shifts in the economy since the 1970s. But whereas some countries have ensured that government supports rise in sync with GDP, the US hasn’t.

APPENDIX

The appendix has additional data.


  1. John Rawls, A Theory of Justice, Harvard University Press, 1971; Lane Kenworthy, Progress for the Poor, Oxford University Press, 2011, ch. 1. 
  2. Posttransfer-posttax income. Data source: Luxembourg Incomes Study, series dhi, using Current Population Survey data. Household income is adjusted for household size (each household’s income is divided by the square root of the number of persons in the household) and then rescaled to reflect a three-person household. 
  3. Robert Rector, “How Poor Are America’s Poor?,” Backgrounder 2064, Heritage Foundation, 2007; Nicholas Eberstadt, “The Poverty of the Official Poverty Rate,” Amexican Enterprise Institute, 2008. 
  4. Kathryn Edin and Laura Lein, Making Ends Meet, Russell Sage Foundation, 1997; Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America, Henry Holt and Company, 2001; Jason DeParle, American Dream, Penguin 2004; David K. Shipler, The Working Poor, Knopf, 2004; Sasha Abramsky, The American Way of Poverty: How the Other Half Still Lives, Nation Books, 2013. 
  5. Christopher Jencks, “Why the Very Poor Have Become Poorer,” New York Review of Books, 2016, table 1. 
  6. Kathryn Edin and H. Luke Shaefer, $2.00 a Day: Living on Almost Nothing in America, Houghton Mifflin Harcourt, 2015. 
  7. Corporation for Enterprise Development, “Asset Poverty,” 2013, using Survey of Income and Program Participation (SIPP) data. The original measure of asset poverty is Asa Caner and Edward Wolff, “Asset Poverty in the United States, 1984-1999,” Challenge, 2004. 
  8. Susan E. Mayer and Christopher Jencks, “Recent Trends in Economic Inequality in the United States: Income versus Expenditures versus Material Well-being,” in Poverty and Prosperity in the USA in the Late Twentieth Century, edited by Dimitri B. Papadimitriou and Edward N. Wolff, St. Martin’s Press, 1993; Edin and Lein, Making Ends Meet. 
  9. Mark Rank, Thomas Hirschl, and Kirk Foster, Chasing the American Dream, Oxford University Press, 2014, table 3.1, using Panel Study of Income Dynamics (PSID) data. 
  10. Julie Siebens, “Extended Measures of Well-Being: Living Conditions in the United States: 2011,” Household Economic Studies P70-136, Census Bureau, 2013. 
  11. This is the idea behind calculation of a poverty rate. See below. 
  12. Heather Boushey, Heather, Chauna Brocht, Bethney Gundersen, and Jared Bernstein, Hardships in America, Economic Policy Institute, 2001. See also Elise Gould, Hilary Hething, Natalie Sabadish, and Nicholas Finio, “What Families Need to Get By,” Issue Brief 368, Economic Policy Institute, 2013. 
  13. United Way, “United Way ALICE Report: Six-State Summary,” 2014. 
  14. Shawn McMahon and Jessica Horning, “Living Below the Line: Economic Insecurity and America’s Families,” Wider Opportunities for Women, 2013. 
  15. Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2014,” 2015, pp. 18-19. 
  16. OECD, Growing Unequal?, 2008, ch. 7. See also Lane Kenworthy, “Measuring Poverty and Material Deprivation,” 2007; Brian Nolan and Christopher T. Whelan, “Using Non-Monetary Deprivation Indicators to Analyze Poverty and Social Exclusion: Lessons from Europe?,” Journal of Policy Analysis and Management, 2010; Christopher T. Whelan and Bertrand Maitre, “Understanding Material Deprivation: A Comparative European Analysis,” Research in Social Stratification and Mobility, 2012. 
  17. Is this due to the fact that the US data are from a different survey than those for most of the other countries? Probably not. The Pew Research Center conducted a survey in the early 2000s that included the following material deprivation question: “Have there been times during the last year when you did not have enough money (a) to buy food your family needed, (b) to pay for medical and health care your family needed, (c) to buy clothes your family needed?” Among the seven affluent countries included in the Pew survey, measured material hardship was highest in the United States. See Romina Boarini and Marco Mira d’Ercole, “Measures of Material Deprivation in OECD Countries,” OECD Social, Employment, and Migration Working Paper 37, 2006, p. 18. 
  18. David Dollar and Aart Kraay, “Growth is Good for the Poor,” Journal of Economic Growth, 2002; David Dollar, Tatjana Kleineberg, and Aart Kraay, “Growth Still Is Good for the Poor,” Policy Research Working Paper 6568, World Bank, 2013. 
  19. For more detail, see Kenworthy, Progress for the Poor. 
  20. Lane Kenworthy, “When Does Economic Growth Benefit People on Low to Middle Incomes — and Why?,” Commission on Living Standards, Resolution Foundation, 2011, figure 2. 
  21. Calculations by the Congressional Budget Office (CBO, “The Distribution of Household Income and Federal Taxes, 2011” ) suggest an increase of $4,000 rather than $1,500. About half of this difference results from the use of a different price index to adjust for inflation. Figure 5 uses the CPI-U-RS, while the CBO uses the PCE. The other half of the difference owes to the fact that the CBO adds an estimated income value of government-provided health insurance (Medicare, Medicaid, S-CHIP), and healthcare costs have increased dramatically in recent decades. This is problematic in three respects. First, the income value of other government services and public goods — education, safety, transportation, parks, and so on — isn’t similarly included. Second, while surely beneficial to the poor, public health insurance probably doesn’t free up income for them in the way that some other noncash benefits do. Christopher Jencks (“The War on Poverty: Was It Lost?,” New York Review of Books, 2015) explains: “Medical care is by far the most expensive of today’s noncash benefits, and Medicaid and veterans’ benefits now pay for most of the big medical bills that poor families incur. However, incorporating these programs’ value into poverty calculations is more difficult than incorporating food and housing subsidies. Most of what Medicaid spends on the poor is for ‘big ticket’ items, like nursing homes, heart surgery, and cancer treatments, that poor families have never been able to pay for out of their own income. Before Medicaid was created, the poor sometimes got such care from state and municipal programs or from doctors and private hospitals that offered ‘uncompensated’ care. Medicaid coverage has undoubtedly made such care available to many poor families that previously went without it, saving some lives and improving many others. But it has not had the same effect as food stamps or rent subsidies on poor families’ nonmedical standard of living. When a poor family gets food stamps or a rent subsidy, it spends less of its cash on food and shelter and has more to spend on the phone bill, fixing the family car, or taking a child to McDonald’s for her birthday. Medicaid frees up far less money for such uses than food stamps or a rent subsidy, because poor families without Medicaid cannot afford to set aside enough money for major medical emergencies. They know that if they need expensive care they will somehow have to get it free or else do without…. The best estimates I have seen suggest that in 2010 Medicaid reduced the average poor family’s out-of-pocket medical spending by about $500.” Third, given that other countries have achieved similar improvements in health despite much smaller increases in healthcare costs, it isn’t clear whether the cost increases in the US reflect improved living standards for America’s poor or simply additional income for healthcare providers and insurance companies. 
  22. The poverty rate is the standard indicator of low income. But there is little agreement about where the poverty line should be drawn, so skeptics rightly worry that if the line is a little bit lower or higher, the estimate of how many are poor will change significantly. And the poverty rate doesn’t convey any information about the degree of poverty. I prefer to instead look directly at the incomes of the least well-off. See Gary Burtless and Timothy M. Smeeding, “The Level, Trend, and Composition of Poverty,” in Understanding Poverty, edited by Sheldon Danziger and Robert Haveman, Russell Sage Foundation and Harvard University Press, 2001; Lane Kenworthy, “How Should We Measure the Poverty Rate?,” Consider the Evidence, August 14, 2011; Kenworthy, Progress for the Poor. 
  23. For more on these poverty measures, see Constance F. Citro and Robert T. Michael, eds., Measuring Poverty: A New Approach, National Academy Press, 1995; Liana Fox et al, “Waging War on Poverty: Historical Trends in Poverty Using the Supplemental Poverty Measure,” Working Paper 19789, National Bureau of Economic Research, 2014; Kathleen Short, “The Supplemental Poverty Measure: 2013,” Current Population Reports P60-251, Census Bureau, 2014. 
  24. Bruce D. Meyer and James X. Sullivan conclude that there has been a significant decline in poverty in the US since the late 1970s (“Winning the War: Poverty from the Great Society to the Great Recession, Working Paper 18718, National Bureau of Economic Research, 2013). In the 1980s and 1990s this decline owes to their use of a different price deflator. Since 2000 it owes to their use of data for consumption (from the Consumer Expenditures Survey) rather than for income. See their figure 2. 
  25. Lane Kenworthy, “The Late American Jobs Machine,” Consider the Evidence, 2011. 
  26. This is evident in poverty rates as well. See Fox et al, “Waging War on Poverty,” figure 6a; Sheldon Danziger and Christopher Wimer, “Poverty,” Pathways: The Poverty and Inequality Report, 2014, figure 6. 
  27. Public social expenditures as a share of GDP in the United Kingdom are only a bit higher than in the United States. See Lane Kenworthy, “Public Insurance and the Least Well-Off,” The Good Society. 
  28. Tom Sefton, John Hills, and Holly Sutherland, “Poverty, Inequality, and Redistribution,” in Towards a More Equal Society? Poverty, Inequality, and Policy since 1997, edited by John Hills, Tom Sefton, and Kitty Stewart, Policy Press, 2009; Jane Waldfogel, Britain’s War on Poverty, Russell Sage Foundation, 2010. 
  29. Charles Murray, Losing Ground: American Social Policy, 1950-1980, Basic Books, 1984. 
  30. Christopher Jencks, Rethinking Social Policy, Harvard University Press, 1992; Edin and Lein, Making Ends Meet; Rebecca M. Blank, It Takes a Nation: A New Agenda for Fighting Poverty, Russell Sage Foundation and Princeton University Press, 1997; Kenneth Nelson, “The Formation of Minimum Income Protection,” Working Paper 373, Luxembourg Income Study, 2004; Yonatan Ben-Shalom, Robert A. Moffitt, and John Karl Scholz, “An Assessment of Anti-Poverty Programs in the United States,” Working Paper 17042, National Bureau of Economic Research, 2011; Fox et al, “Waging War on Poverty,” figure 9. 
  31. Rebecca M. Blank, “Evaluating Welfare Reform in the United States,” Journal of Economic Literature, 2002; Blank, “Was Welfare Reform Successful?,” Economists Voice, 2006; Christopher Jencks, “What Happened to Welfare?,” New York Review of Books, 2005; John Myles, Feng Hou, Garnett Picot, and Karen Myers, “The Demographic Foundations of Rising Employment and Earnings among Single Mothers in Canada and the United States, 1980-2000,” Population Research and Policy Review, 2009. 
  32. Kenworthy, “Public Insurance and the Least Well-Off.”