Relative Deprivation
One topic I discuss a lot here on Keywords is inequality, but one thing I’ve never thought about before I read this New Yorker article is proposing a change in the way that the poverty rate is calculated. By using a relational, as opposed to absolute, measure, the poverty rate can better reflect the importance of relative depravation.
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.)
Adopting a relative-poverty threshold would put to rest the debate over how to define a subsistence threshold. As long as the new measure captured those at the bottom of the social hierarchy, it wouldn’t matter much whether the income cutoff was set at forty per cent or fifty per cent of median income. If poverty is a relative phenomenon, what needs monitoring is how poor families make out compared with everybody else, not their absolute living standards.
I have to think about this some more…
(via Arts and Letters Daily)
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Comments
Michael: As I understand it he’s making the opposite argument. A fixed poverty rate doesn’t let you see changes in relative inequality over time the way something like the Gini index does.
Now, as I understand it, the criticism Sen et. al make of the Gini index is that it is too closely focused on income (as opposed to the whole bundle of goods and services available to people) - and I would imagine that the same could be said of the solution in the New Yorker.
But, given such problems, I think it is not the case that 1/4 would always be in poverty. Rather, it would be much clearer that more and more people are ending up at the bottom despite absolute raises in their incomes. The importance of such a change in measurement would precisely be to highlight such growing inequality - which traditional poverty rates do not.
An anthropologist and documentary filmmaker, 
But Kerim, you can’t get rid of poverty that way, because however you cut it, 1/4 of the nation is always in poverty regardless of how high income levels are. The Gini co-efficient or some other income distribution measure plus minimum standards is a clearer method.
Michael