Data Methodology

Relatively Poor

An interesting New Yorker article about the methods used to measure poverty. The thing they point out that I would agree with is that poverty becomes a relative term when a country gets rich enough so the basic necessities can be made available to all. It is the distribution of wealth within a country (or your community) that determines whether you are deprived since it is only when you see what other people have that you realize you don't have enough. (Again, assuming you have food to eat and a home to live in and a sense of security that comes from knowing this will be that case in the future.) In the U.S., it is the presence of great inequality of wealth that undermines people's feeling of well-being and also places them at a disadvantage relative to their fellow citizens. From the article:

Since relative deprivation confers many of the disadvantages of absolute deprivation, it should be reflected in the poverty statistics. A simple way to do this would be to classify a household as impoverished if its pre-tax income was, say, less than half the median income—the income of the household at the center of the income-distribution curve. In 2004, the median pre-tax household income was $44,684; a poverty line based on relative deprivation would have been $22,342. (As under the current system, adjustments could be made for different family sizes.)

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Review of CBO Methodology

If after looking at the graphs I created (based the income data from the Congressional Budget Office) you decide you want to learn more about how the CBO calculates their numbers. You can take a look at an analysis of their report.

The following outlines the components of income included in the CBO's analysis:

* Cash income, taxable and tax exempt, including wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer payments, and retirement benefits * Business taxes, including corporate income taxes, the employer's share of Social Security, Medicare, and federal unemployment insurance payroll taxes (imputed to households, as per the assumptions on tax incidence above) * Employees contributions to 401(k) retirement plans * All in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance)

Note that CBO:

* uses the Census Bureau's fungible value measure for government in-kind transfers; * does not adjust capital gains for inflation, and does not include unrealized capital gains or imputed rents on owner-occupied housing (see [1], pp. 23--24); and, * double counts retirement income (see [1], p. 21).

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