Defining Poverty; H. Hazlitt

viding line between the poor and the not-poor would be an arbi trary one. Is the poorer half of the population anywhere to be called the Poor, and the richer half the Rich? The discussion today is con ducted dominantly in these com parative terms. Our reformers are constantly telling us that we must improve the condition of the low est fifth or the lowest third of the population. This way of discussing the subject was made fashionable by President Franklin D. Roose velt in his Second Inaugural ad dress in January, 1937: "I see one-third of a nation ill-housed, ill-clad, ill-nourished." (The ob jective standards on which this statement was based were never specified. ) It is obvious, however, that all merely relative definitions of pov erty make the problem insoluble. If we were to double the real in come of everybody, or triple it, there would still be a lowest third, 539 540 THE FREEMAN September a lowest fifth, or a lowest tenth.

Comparative definitions lead us, in fact, into endless difficulties. If poverty means having less than one wants, nearly all of us are poor. If poverty means being worse off than somebody else, then all but one of us is poor. An enormous number of us are, in fact, subjectively deprived. As one writer on poverty succinctly put it nearly sixty years ago: "It is part of man's nature never to be satis fied as long as he sees other peo ple better off than himself."! Attempt at Definition A discussion of the role that envy plays in economic and all human affairs can be deferred to another place. In any case we are driven to try to find an absolute or objective definition of poverty. This turns out to be more difficult than it might at first seem. Sup pose we say that a man is in pov erty when he has less than enough income, or less than enough in nutrition (and shelter and cloth ing), to maintain himself in nor mal health and strength. We soon find that the objective determina tion of this amount is by no means simple.

Let us turn to some of the recent "official" definitions in the United States. In January, 1964, 1 Hartley Withers, Poverty and Waste (1914), p. 4. when President Johnson was launching his "war on poverty," the annual report of the Council of Economic Advisers contained a long section on the problem. This offered not one but several defini tions of poverty. One was relative: "One fifth of our families and nearly one-fifth of our total popu lation are poor." A second was at least partly subjective: "By the poor we mean those who are not now maintaining a decent stand ard of living - those whose basic needs exceed their means to satis fy them." Each of us might have his own conception of a "decent" standard, and every family might have its own ideas of its "needs." A third definition was: "Poverty is the inability to satisfy mini mum needs." The Council of Economic Ad visers, basing its estimates on "low-cost" food budgets compiled by the Social Security Admini stration, decided that the poverty "boundary line" was established by "a family whose annual money income from all sources was $3,000 (before taxes and expressed in 1962 prices)." Yet, on the very next page the Council report de clared that in 1962 "5.4 million families, containing more than 17 million persons, had total incomes below $2,000." How could these 17 million persons exist and sur vive if they had so much less than 1971 DEFINING POVERTY 541 enough "to satisfy minimum needs" ?

In a 50-page study published in 1965,2 Rose D. Friedman subjected these Council estimates to a thor ough analysis. Using precisely the same data and the same concept of "nutritive adequacy" as the Coun cil, she found that the dividing line between the poor and the not poor would be not $3,000, but a figure around $2,200 as the rele vant income for a nonfarm family of four. Where the Council on the basis of its figure estimated that 20 per cent of all American fam ilies in 1962 were poor, Mrs. Friedman found that on her ad justed calculation only about 10 per cent were poor. I must refer the interested reader to the full text of her study for the details of her excellent analysis, but two of her disclos ures will be enough to illustrate the carelessness of the Council's own estimates. One astonishing error by the Council was to use its $3,000 a year estimate as the "poverty boundary" for all families of any size. Mrs. Friedman's estimates ranged from $1,295 for 2-person households, to $2,195 for 4-person households, to $3,155 for house holds of seven persons or more.

2 Poverty: Definition and Perspective. American Enterprise Institute, Wash ington, D.C. (The official "poverty line" esti mates now also specify a similar range of differences for families of different sizes.) A second error of the Council was equally astonishing. Based on a previous official estimate that a poor family of four needed about $1,000 a year in 1962 for adequate nutrition, the Council multiplied this amount arbitrarily by three to get what the family needed for all purposes. But it is notorious that pooorer families spend a larg er proportion of their income on food than do richer families. Mrs. Friedman found that this multiple of three was much higher than the level at which three-fourths of the families concerned did get along on and still get an adequate diet. She found that the amount actu ally spent for food, on the aver age, by a family of four with an income of $2,200 was about $1,250 a year. In other words, the frac tion of income spent on food at this level was about 60 per cent and not 33 per cent. Yet the of ficial "poverty line" estimates, at this writing, are still kept unreal istically high by continuing to be implicitly based on this arbitrary multiple of three times adequate diet costs.

One of the great problems in volved in arriving at any objective standard of poverty is the con stantly changing concept of what 542 THE FREEMAN September constitutes "adequate" nutrition. This was once measured in cal ories. As time has gone on, and scientific research has continued, it has been insisted that adequacy also requires certain amounts of protein, calciurn, iron, Vitamin A, thiamine, riboflavin, niacin, ascorbic acid, etc. The newest in sistence has been on the need for a multitude of amino acids. Re cently a nutrition survey done at Pennsylvania State College con cluded that "only one person in a thousand escapes malnutrition 1"3 On this basis even affluence is no assurance of nutritional adequacy. Yet compare this scientific ideal not only with the historic situa tion before the present century, when getting enough to eat was the major problem of the great majority of the populace of the world, but with the conditions that still prevail among that majority.

Compared with a supposed sub sistence minimum of 3,500 cal ories, half the people of the world today still get less than 2,250 cal ories per day, and live on a diet primarily of cereal in the form of millet, wheat, or rice. Another 20 per cent get less than 2,750 cal ories per person per day. Only the well-to-do three-tenths of the hu man race today get more than S Foundation for Nutrition and Stress Research. Redwood City, Calif. Bulletin No.1, July, 1968. 2,750 calories as well as a varied diet which provides the calories that not only satisfy hunger but also maintain health.4: Official estimates of "poverty threshold" income by Federal bur eaus are still unrealistically high. -I quote from a recent official bulletin: "The decade of the sixties has witnesseda. sizable reduction in the number of persons living in poverty. Since 1959, the first year for which data on poverty are available, there has been an aver age annual decline of 4.9 per cent in the number of poor persons.

However, between 1969 and 1970, the number of poor persons in creased by about 1.2 million, or 5.1 per cent. This is the first time that there has been a significant increase in the poverty popula tion. In 1970, about 25.5 million persons, or 13 per cent of the population, were below the poverty level, according to the results of the Current Population Survey conducted in March, 1971 by the Bureau of the Census." Yet though the estimate of the poor was then only 13 per cent of the population compared with about 20 per cent in 1962, the government statisticians were still using their old high estimate. for 4 Rose D. Friedman. op. cit .• and M. K. Bennett. The TVorld's Food (New York: Harper & Bros., 1954).

1971 DEFINING POVERTY 543 1962 - and writing up the dollar amount year by year to correspond with increases in the Consumer Price Index. The same bulletin quoted above informs us: "The poverty threshold for a nonfarm family of four was $3,968 in 1970 and $2,973 in 1959.5 If Mrs. Fried man's more careful calculations had been used, the "poverty thresh old" for a nonfarm family of four would have been closer to $2,900 than to $3,968 in 1970 and the percentage of "the poor" would have been closer to 7 per cent than to 12.6. In fact, an earlier bulle tin of the Bureau of the Census,6 which had estimated that "about lout of 10 families were poor in 1969, compared with about lout of 5 in 1959," informs us that if the Bureau's various "poverty thresholds" for families of differ ent sizes were decreased to 75 per cent of its existing estimates (Le., to approximately the levels suggested by Mrs. Friedman's cal culations), then "the number of poor persons would drop by 40 per cent in 1969, and the poverty rate for persons would drop from 12 per cent to 7 per cent."

It is clear from all this that government bureaucrats can make the numbers and percentage of 5 May 7, 1971, U. S. Department of Commerce, Bureau of the Census. Con sumer Income, Series P-60, No. 77. 6 Series P-60, No. 76, December 16,1970. "the poor," and hence the dimen sions of the problem of poverty, almost whatever they wish, simply by shifting the definition. Changing the Answer And some of our American bu reaucrats have been doing just that. On December 20, 1970, for example, the Bureau of Labor Statistics announced that, as of the spring of that year, it took a gross income of $12,134 to main tain a family of four on a "mod erate" standard of living in the New York northeastern New i ersey area. The implication was that any family of four with a smaller income than that was less than "moderately" well off and presumably the taxpayers should be forced to do something about it.

Yet the median income of a typical American famiIy7 was esti mated by the Bureau of the Cen sus to be only $9,433 in 1969. This means that half of the number of American families were receiving less than that. Clearly a good deal less than half of American fami lies were lucky enough to be re7 Not necessarily a family of four. The term "family" as used by the Bureau for this calculation "refers to a group of two or more persons related by blood, mar riage, or adoption and residing together; all such persons are considered members of the same family." Economic Report of the President, February, 1971, Table C-20, p.220.

544 THE FREEMAN September ceiving the "moderate" income of $12,134. Most of those who try to frame a definition of poverty no doubt have in mind some practical pur pose to be served by such a defini tion. The purpose of the Federal bureaucracy is to suggest that any income below its definition consti tutes a problem requiring govern ment relief, presumably by taxing the families who earn higher in comes to supplement or subsidize the lower. If the present official U. S. definitions of poverty were applied to a country like India, we would have to label as poverty· stricken the overwhelming maj or ity of its population. But we do not have to go to India for such an example. If we go back only a little more than forty years ago in our own country, we find that in the so-called prosperous year 1929, more than half of the people in the United States would have been labeled "poor" if the "pov erty-threshold" income since de veloped by the Council of Eco nomic Advisers had then been applied. (This is based on statis tical comparisons that fully allow for the changes in the price level in the meantime.) 8 8 Source: Jeanette M. Fitzwilliams, "Size Distribution of Income in 1962,"

Survey of Current Business, April, 1963, TEl,bIe 3; Herman P. Miller, Rif'h Man Poor Man, (New American Library, 1964), p. 47. Let us look at one more example of the consequences of establish ing an excessive or merely rela tive definition of poverty: "The term poverty may connote hunger, but this is not what is usually meant in discussions about poverty in America. Consider, for example, the facilities available to the poor. Tunica County, Mis sissippi, is the poorest county in our poorest state. About eight out of every ten families in this coun ty had incomes under $3,000 in 1960 [Le., under the official "pov erty-threshold" level] and most of them were poor by national stand ards; yet 52 per cent owned tele vision sets, 46 per cent owned automobiles, and 37 per cent owned washing machines. These families might have been deprived of hope and poor in spirit, but their ma terial possessions) though low by American standards, would be the envy of the majority of mankind today.9 Preserving the Incentive To sum up: It is difficult, and perhaps impossible, to frame a completely objective definition of poverty. Our conception of pover ty necessarily involves a value judgment. People in different ages, in different countries, in different 9 Herman P. Miller, Rich Man, Poor Man (New York: Thomas Y. Crowell Co.

1971), pp. 110-111.

1971 DEFINING POVERTY 545 personal circumstances, will have different ideas of what constitutes poverty, depending on the range of conditions to which they them selves are accustomed. But while the conception of poverty will nec essarily be to some extent relative and even individual, we should make every effort to keep it as objective as we can. Otherwise if, for example, our national income in real terms continues to rise as much in the next forty years as in the past forty years, our social reformers will tend to raise cor respondingly their standard of what constitutes "poverty." And if this happens, the paradoxical result will be that the problem of poverty will seem to them to be getting larger all the time when it is .really getting smaller all the time. One writer has seriously sug gested that we "define as poor any family with an income less than one-half that of the median fam ily."lo But on this definition, if the income of all groups increased more or less proportionately, as in the past, and by no matter what rate or what multiple, the percentage of "the poor" would never go down, while the implied absolute amount of relief required would keep ~oaring.

Our definition obviously should not be such ,as to make our prob lem perpetual and insoluble. We must avoid any definition that implies the need of a level of help or any method of help that would tempt the recipient to become per manently dependent on it, and un dermine his incentives to self support. This is likely to happen whenever we offer an able-bodied adult in charity or relief more than or even as much as he could earn by working. What he needs is a level of subsistence sufficient to maintain reasonable health and strength. This subsistence level must constitute our working defi.. nition of the poverty line. Any relief program that tries to pro vide more than this for idle able bodied adults will in the end do more harm than good to the whole community~ 10 Victor Fuchs, "Toward a Theory of Poverty," in U.S. Chamber of Commerce, The Concept of Poverty, Washington, D. C., 1965, p. 74.