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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

How Poor Are America’s Poor?



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Andrew Prokop of Vox observes when we look at figures for 2000, we see big differences between the share of children in single mother families living in poverty across a few select countries — the U.S., Finland, Norway, and Sweden. (With apologies to our friends at Vox, I’ve borrowed the chart below, which Prokop borrowed from the think tank Demos.)

This comparison is dated, to be sure, and it could be that the U.S. position has deteriorated over the intervening years. But it is worth noting that in terms of “predistribution,” i.e., when we consider the distribution of income before taxes and transfers, the U.S., where union density is notably low and where the political culture has tended to be more neoliberal and less laissez-faire than in the Nordic countries, where union density is notably high, is as close to its Nordic counterparts as it is. One interpretation is that solidaristic wage bargaining did not do as much to lift relative market incomes at the bottom of the income distribution in the late 1990s as we might have expected. On the other hand, it seems likely that higher union density contributes to the volume of redistribution via the tax and transfer system. 

Yet it is also worth keeping me in mind that we are contrasting relative poverty levels across countries in the chart above, with poverty defined as incomes 50 percent or below the median income, rather than absolute incomes. This raises an interesting question: what if median incomes are substantially higher in some of these countries than in others? (For more on this contrast, I recommend reading Nicholas Eberstadt’s worth on the U.S. poverty rate, which he briefly summarized in 2010. I also recommend University of Arizona sociologist Lane Kenworthy’s important work on low-end incomes.) 

In “Income Inequality in Richer and OECD Countries,” Andrea Brandolini and Timothy M. Smeeding and report real equivalized incomes in 2000 across countries. Real income at P10 (the tenth percentile), P90 (the ninetieth percentile), and the median (the fiftieth percentile) are computed as a fraction of the U.S. median income, thus giving us a helpful portrait of absolute income differences. 

  United States Finland Norway Sweden
P10 39 39 50 39
P50 100 70 89 68
P90 210 114 141 114

Note that I am not comparing apples to apples. This chart compares disposable incomes across low-income, median-income, and high-income families; it does not tell us anything about single mother families as such. It is, however, suggestive. Brandolini and Smeeding define disposable income  as market income less direct taxes, including employee’s contributions to social insurance, while ignoring indirect taxes (like property, wealth, and value added taxes); it adds back cash transfers, including cash and near-cash public income transfers (for social retirement, disability, and unemployment), universal social assistance benefits, and targeted income transfer programs. They include food stamps, housing allowances, and in-work benefits like the EITC. The idea is that we’re getting a portrait of the money households have at their disposal after taxes and transfers. And what is really interesting is that even after Finland and Sweden do so much to raise P10 household incomes, disposable incomes were roughly the same across these three countries at the low end. Norway, a petrostate with a population of 5 million that is among the world’s weathiest countries, is in a category by itself, where disposable incomes at P10 are quite high and incomes at P50 and P90 are surprisingly low. I’ll leave aside the question of whether or not higher disposable incomes at P50 and P90 are a good thing that we shouldn’t dismiss out of hand. 

Brandolini and Smeeding offer a number of important caveats for those inclined to read too deeply into these numbers. Real disposable income is useful, but important goods and services like medical care and education are provided in different ways across different countries, and so real disposable income might not offer a comprehensive portrait of what a given level of real disposable income actually buys. Low-income citizens in some countries have to pay more in out-of-pocket costs to access these services than in others. 

So allow me to share another chart that might be of interest. Back in January, Slate.fr published a fascinating chart (which, once again, I’m borrowing) reports the results of a French cross-national survey on access to medical care. The question, for those of you who, like me, can’t read French, is as follows: “During the past year, have you or a member of your household been obliged to forgo or defer healthcare treatments due to financial difficulties?” (The data is from the pre-Obamacare era; the survey was conducted by Baromètre Santé et Société Europ Assistance-CSA 2013.)

At first glance, the really impressive thing is that so few Swedes, and so few Britons and Spaniards, report that they chose to forego healthcare treatments due to financial difficulties, which reinforces the case that low-income Swedish households are perhaps better off than their disposable incomes would lead you to believe. (Britons and Spaniards often complain about rationing, waiting lists, and denials of care that often accompany free-at-the-point-of-use systems, and so I wouldn’t count these systems as quite so successful.) 

It is interesting, however, that the U.S. is not an outlier when compared to European countries; it is clustered with a number of countries that offer universal coverage in which cost-sharing plays a substantial role, and in which rationing is less a feature of the landscape. 

So a few concluding thoughts: (a) it is useful to think about absolute household incomes as well as household incomes in relative terms; (b) the quality of public services matters a lot, and Sweden, a country where (for example) the market for education services is much freer than it is in the U.S. seems to do a pretty good job of offering high-quality public services; and (c) it turns out that universal coverage does not mean that households no longer face financial difficulties when it comes to securing medical care, as we see in countries like Germany and France with relatively well-regarded health systems.

Many Americans romanticize European social models, and this in turn leads them to embrace public policy solutions that aren’t a good fit for the particular challenges and demands that obtain in the U.S. My view is that the particular challenges facing the American poor are extremely complex. They reflect social isolation as much, if not more, than they reflect economic deprivation as such. Social isolation is about more than family structure: it is about geography, racialization, and history, and problems that are about more than money require solutions that are about more than money. Some increases in redistribution might be appropriate, if well-designed, and I favor increases in in-work benefits, among other things. But spending levels are only part of the picture.



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