Extreme Poverty in the US

I’ve always been drawn to working with underserved populations. I’ve worked at some sort of free clinic or community health project ever since undergrad. I stopped that work in 2017 for reasons my readers are aware of.

Ever since undergrad I’ve been fascinated with the topic of poverty in the US, specifically, extreme poverty. This is defined as living on less than $2/person/day. That comes out to $60/month or $730/year.

The census bureau collects such information which policy makers use to petition for socioeconomic changes. SIPP is such a survey done annually by the census bureau and reports are available on their website.

Of interest, we have 329 million lives in the US and gaining one life every 14 seconds. By comparison, there are 7.5 billion people in the world. Making the US population account for only 4.4% of the world; the 3rd most populated country in the world, after China and India.

Census Bureau Report – 2011

A 2011 SIPP report showed that 3.6 million households in the US were having an income of less than $2/person/day. The SIPP report excludes homeless individuals.

A paper from the National Bureau of Economic Research went back and analyzed the data collected by the SIPP report and found that 92% of the households categorized as extreme poor were misclassified. In fact, the majority were better off than the average US household.

Major Errors in the Report

This research articles from NBER shows that only 0.24% in the US lived on less than $2/person/day in a given 4-month period. Most of them were single individuals, unburdened by children.

This is very different than the current impression we have of extreme poverty in the US. It highlights how weak and ineffective surveys can be and teases out the economic biases in the less-wealthy.

Children in Poverty

The SIPP survey showed millions of children being in extreme poverty. But the 2019 research study cited above showed that out of all the households surveyed none with children were found to be in extreme poverty. That’s shocking – none.

True Poverty

Only 285,000 households in the US were found to be in true poverty. 90% of these households were made up of a single individual. The other 10% was made of multiple individuals living together.

Again, no children.

Disproving the Extreme Poverty Report

So what data did the SIPP report collect and what data did this research study use to prove the report wrong?

SIPP is a survey where low-income households are asked about their income and wealth every 4 months. It includes questions about:

• demographics
• labor force participation
• work history
• government program participation
• earned and unearned income received
• transfer of payments received
• noncash benefits received
• asset ownership
• private health insurance
• assets/liabilities
• school enrollment
• marital history
• fertility
• migration
• disability

The SIPP is a survey. And surveys tend to have very biased results depending on the population who is being surveyed. Some might fear losing government benefits and others just don’t have a good sense of incomes/outflows.

This research article took those households and played some detective work in order to find objective data on these households instead of relying on self-reported data.

They used the following tactics to determine how much cash/money/asset inflows and outflows took place in these households:

• SNAP
• SSNP
• WIC
• Housing Assistance
• Underreported earnings
• Ownership of substantial assets
• asset income
• retirement distributions
• disability or other insurance payouts
• SSI
• tax credits
• tax reports
• bank accounts (?)
• cash income (under the table income)

Topic of Poverty

Now imagine that, a high-income physician talking about poverty. The audacity! But there is a reason why I talk about poverty so much. Many of us are bombarded by anti-wealth sentiments – the fortunate 1%-ers.

As physicians we are considered to be part of the problem in rising healthcare costs. Yes, your $300,000 salary is potentially why we spend trillions on healthcare in the US.

Welfare reform is also at the heart of the topic of poverty in the US. It has been believed that changes in welfare laws have given rise to the supposed drastic increase in poverty in the US. Census bureau data has been used to prove this point.

I’ve discussed before that poverty is the norm. It’s not like you are promised wealth and then you get unlucky and become poor. Wealth is fighting the entropy of economic resources. It is incredibly hard work to keep a dollar in your pocket and incredibly easy to spend it.

Economic Opportunity

A totally different discussion is economic opportunity. As in, is a particular household able to fairly participate in the economy. Well, even female physicians can’t participate equally in the economy. It would only be logical to infer that if you are a particular minority, you’re screwed.

I’m not saying that just because you have more skin pigmentation you don’t have the same chance as myself. It’s just that statistical laws will place you in environments which are much tougher to navigate.

I can commit a petty theft and will get a slap on the wrist and my mother might be called. Another person will go to jail or maybe they’ll get into an altercation with police officers who will be less than forgiving.

It’s a hierarchy tree as well. My parents loved and love the shit out of me. Even though I was a disaster as a child, they were always patient and supportive. Now imagine you have abusive parents who might have substance abuse or mental health problems – you’re handicapped before you can even start partaking in the same economy as me.