The Big Apple Gets Poorer

I have complained before about the poverty metrics in the US are bad, so I was glad to see someone actually doing something about it.

Michael Bloomberg, New York’s mayor, announced on July 13th an alternative to the federal poverty measure.

This measure, now 40 years old, assesses pre-tax cash income against a number of thresholds, based primarily on food spending. But this has decreased from one-third to one-eighth of average household spending over the past four decades. Housing, which now makes up more than 30% of family expenditure, is not taken into account. Nor are regional cost-of-living differences. A two-bedroom apartment, for instance, costs $1,318 a month in New York City and $1,592 in San Francisco, contrasting sharply with the national average of $867 and one Mississippi county’s $498. On the income side, non-cash benefits such as subsidised housing and food stamps, are ignored. So is the earned-income tax credit, a wage subsidy geared towards the working poor.

The new formula is based on recommendations made at Congress’s request in 1995 by the National Academy of Sciences, but never implemented federally. Defining who is poor is a touchy subject. The NAS measures reflect spending on food, clothing, shelter and utilities, which are assumed to equal about 80% of median family expenditures. Adjustments are made for transport costs, child care and out-of-pocket medical costs.

How does this change the level of poverty in NYC?

This measure increases the numbers of New York’s poor, from 19% of the population to 23%. Under the new calculus, the new poverty line for a family of four is $26,138, not the official federal level of $20,444. The new measure reveals that a smaller number of New Yorkers live in extreme poverty, but shows a higher proportion of working poor—and a shocking poverty rate among the elderly: 32%, compared with the federal estimate of 18%.

Now that Bloomberg has a better measurement for poverty, what is he doing to try and reduce it?

Poverty is an important part of Mr Bloomberg’s agenda. He set up the Centre for Economic Opportunity (CEO) in 2006 specifically to reduce it. The centre created Opportunity NYC, America’s first experiment in tying some benefits to conditions, such as turning up for parent-teacher meetings, having health-insurance or even going to the dentist. Last month it opened a financial-counselling centre for poor folk in the Bronx. Now the task of tackling poverty can truly get started.

The current measurement for poverty is broken, so I hope Bloomberg's initiative will cause the national government to look into changes as well.

via The Economist