Economy & Business

America’s Unexceptional Poverty Rate

Does the U.S. lead the world in childhood poverty? Absolutely not.

Bernie Sanders often claims that America has the highest child-poverty rate of any advanced democracy in the world. He uses this fact to justify his call for a European-style social-welfare state. But what if it’s simply not true?

In a new article for the journal Education Next, we demonstrate that when cross-national poverty rates are calculated appropriately, it becomes clear that America is rather unexceptional, at least on this score. We have a significantly lower proportion of children living in poverty than Ireland and the United Kingdom, and about the same as Germany and even Finland.

USA Child Poverty Statistics

How can that be? For years, scholars, international organizations, and liberals have put forward the notion that America has sky-high rates of poverty, especially childhood poverty. But the measures they used were “relative”; they considered a family to be poor if it earned less than half of its own country’s median income.

The simplicity of this approach makes it appealing, but also highly misleading. That’s because it’s more a measure of income inequality than of poverty.

To see why it’s so misleading, we analyzed how relative poverty rates compare with absolute poverty rates for each of the American states. For relative poverty, we calculated the proportion of people living in households that earn less than half of their own state’s median income. For absolute poverty, we looked at the percentage of all people in a state living in households below the federal poverty line.

RELATED: Poverty in the U.S. — We Spend Much More Per Person on Social Welfare than Europe Does

For some states, whether one looks at relative poverty or absolute poverty makes little difference. Arizona, Mississippi, and Louisiana have a lot of poor people however you slice the data.

But it makes a big difference for wealthier states, like Massachusetts and Connecticut. Their absolute-poverty rates are among the lowest in the country, but their relative-poverty rates are above average — higher than those for Texas, Tennessee, and Oklahoma. Massachusetts has a higher relative-poverty rate than Georgia, Kentucky, and Alabama.

Because the U.S. is wealthier than most nations, many U.S. households that are counted as poor on a relative measure would be considered middle-class on an absolute measure.

Of course, Massachusetts doesn’t really have more poverty than Alabama — but it does have more income inequality. And the same dynamic plays out when we use relative-poverty rates to compare countries: The United States doesn’t really have more childhood poverty than Germany or the U.K. — but it does have more income inequality.

Because the United States is wealthier than most of our international competitors, many of the U.S. households that are counted as poor on a relative measure would be considered middle-class on an absolute measure. That’s because the amount of money they earn would put them far above the median incomes of these other nations.

RELATED: Poverty, Despair, and Big Government

Why is this important? Senator Sanders is certainly correct that poverty is a problem in America, and we should work on ways to reduce it. But he’s incorrect when he says that it’s worse here than in other large, industrialized nations. That raises serious questions about his critique of American-style capitalism.

It’s also important because some Americans like to point to our supposedly high poverty rate as an excuse for our lackluster international performance on a variety of social indicators, from health-care outcomes to test scores and beyond. Some teachers’-union leaders, in particular, like to argue that we have a “poverty crisis,” not an “education crisis.”  That excuse turns out to be a crutch that’s unfounded in the evidence.

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