In Forbes, Tim Worstall explains why the shocking headline rate of child poverty in the US is not correct (and that’s a good thing):
The annual Kids Count, from the Annie F. Casey Foundation, is out and many are reporting that it shows that 23% of American children are living in poverty. I’m afraid that this isn’t quite true and the mistaken assumption depends on one little intricate detail of how US poverty statistics are constructed. This isn’t a snarl at Kids Count, they report the numbers impartially, it’s the interpretation that some are putting on those numbers that is in error. For the reality is that, by the way that the US measures poverty, it does a pretty good job in alleviating child poverty. The real rate of children actually living in poverty, after all the aid they get to not live in poverty, is more like 2 or 3% of US children. Which is pretty good for government work.
However, this is not the same thing as stating that 23% of US children are living in poverty. For there’s a twist in the way that US poverty statistics are compiled.
Everyone else measures poverty as being below 60% of median equivalised household disposable income. This is a measure of relative poverty, how much less do you have than the average? The US uses a different measure, based upon historical accident really, which is a measure of absolute poverty. How may people have less than $x to live upon? There’s also a second difference. Everyone else measures poverty after the influence of the tax and the benefits system upon those incomes. The US measures only cash income (both market income and also cash from the government). It does not measure the influence of benefits that people receive in kind (ie, in goods or services) nor through the tax system. And the problem with this is that the major poverty alleviation schemes in the US are, in rough order, Medicaid, the EITC, SNAP (or food stamps) and then Section 8 housing vouchers. Three of which are goods or services in kind and the fourth comes through the tax system.