DOES
A RISING TIDE LIFT ALL BOATS?
HOW POVERTY HAS BECOME IMMUNE
TO ECONOMIC GROWTH
Charles M. A. Clark*
Professor of Economics
St. John's University
Professor Clark examines economic growth and its effect on poverty.
Reviewing the notion of "official" poverty rates, he notes
their gross inadequacy to measure the reality of living in poverty.
He also reviews the relationship between poverty and economic growth
over the past 30 years and concludes that economic growth does not
always help the poor. Clark maintains that in order to address poverty,
we need to address levels of income inequality, measures of economic
progress, and restore the link between productivity and real incomes.
Professor Clark developed this paper for a faculty colloquium as part
of the organizing activities of the Vincentian Chair of Social Justice
Moral Dimensions of Poverty Conference.
Introduction
When
President Kennedy made his famous "a rising tide lifts all boats"
statement, he was expressing the idea that the best policy for reducing
poverty is to promote economic growth. This idea is rooted in a belief
that the benefits of economic growth will be shared by all (if not
in equal proportions, at least all would be made better off). The
political benefits of using economic growth to fight poverty are fairly
obvious, for they allow the problem of poverty to be tackled without
requiring any sacrifice from the affluent. In the war on poverty policies
that followed Kennedy's speech, economic growth was a central part
of the battle plan for reducing poverty, but not the whole battle
plan. Kennedy and Johnson understood that economic growth was a necessary
condition for reducing poverty for it provided the wherewithal for
reducing poverty but not a sufficient condition. Alone, it was not
enough. Economic growth by itself could not reduce or eliminate poverty.
The
welfare reform policies of the 1990's are different from the "Great
Society" programs of the 1960's essentially in their belief that
economic growth is enough, that government support programs are a
hindrance to getting out of poverty. All that is necessary for government
to do is provide the right incentives for getting out of poverty.
Only if one believes that the economy will provide sufficient jobs
and incomes to bring everyone willing to work out of poverty, does
it make sense to pursue social policies designed to increase the poor's
willingness to work1 and expect that to be enough
to eliminate poverty. Much of the success or failure of these experiments
will depend on whether economic growth will be enough to significantly
reduce poverty in America.
The
purpose of my paper is not to look into the success or failures of
workfare policies, but instead look at the underlying premise of these
policies. Will economic growth under the current economy be enough
to lift everyone out of poverty? First, I will look at how poverty
is measured, what we are trying to reduce and how we measure success.
In section two, we see how the official poverty rate in the United
States grossly underestimates the extent of poverty in America. In
the third section, I look at the relationship between economic growth
and poverty since 1959, finding that economic growth has not always
been successful at reducing poverty in America. Section four, examines
why the economic growth of the past thirty years has not substantially
helped the poor. In the final section, I will propose alternatives
to the welfare reform policies of the 1990's to more adequately address
the problem of poverty.
SETTING THE BAR:
RELATIVE AND ABSOLUTE MEASURES OF POVERTY
Before we
look at the trends in poverty it will be useful to have a short look
at what exactly it means to be poor in America. That is, what does
it mean to be statistically considered poor, not necessarily the reality
of being poor in America, which is a central theme of this conference
but is beyond the limited scope of this paper. Generally one is poor
in a specific country if one's income, or the family or household
income one lives in, falls below a "poverty threshold."
If reducing or eliminating poverty is a social goal, then the establishment
of the "poverty rate" becomes a significant act of public
policy. Anthony Atkinson (1998) has recently argued that it is important
for governments to have an official poverty index or rate so that
there will be a way to measure the success or failure of government
policy. Most countries do not have an official poverty rate. However,
if a country is to have an official poverty threshold, it will be
in the interest of political officials to set the levels so as to
minimize the poverty rate and to make it easier to achieve lower poverty
rates. This, we will see, is the case in the United States.
Poverty
thresholds come in two basic varieties: the budget standard approach
and the relative income approach. The budget standard approach attempts
to calculate the minimum necessary income for families of different
sizes, usually based on food and other basic goods costs, and all
who live in households with incomes below this level are defined as
poor.2 The relative income approach takes a broader
view of poverty, going beyond merely feeding, housing and providing
clothes. Generally it defines poverty based on some relation to the
median or mean income of that society. Underlying these two approaches
are different philosophies, for want of a better term, toward the
poor (Atkinson, 1998, pp. 24-26). The standard budget approach is
based on a "standard of living" view, which seeks to have
all in society meet a minimum material existence standard, that is,
sufficient food, clothing and shelter. The relative approach follows
a "minimum rights" view, which takes the position that "people
are seen as entitled to a minimum income, which is a prerequisite
for participation in a particular society. It may be linked to citizenship,
in terms that a certain minimum level of resources is necessary in
order that people may enjoy effective freedom" (Ibid. p, 24).
The main difference between the two approaches comes out in how they
are adjusted over time. The budget standard approach makes a judgment
as to what is the minimum necessary level of income. Then it updates
the poverty threshold each year to account for inflation, linked either
to the general price level or to the prices of the goods that make-up
the bundle of consumption goods that are included in the standard
budget. Relative poverty thresholds are adjusted along with changes
in either the mean or median levels of income or consumption. The
main drawback of the standard budget method is it assumes that all
other factors have remained the same, with only prices changing. Yet
the level of minimum necessary consumption is socially and historically
specific, different today than it was 10 or 20 years ago. The historical
evidence shows that poverty lines, based on the budget standard method
updated to changes in consumption patterns and recalculated, and not
just adjusted to changes in the price level, rise at a rate faster
than the price level. If the budget standard method is not updated
for contents as well as prices it will, when used over extended time
periods, result in too low a poverty threshold and thus an undercounting
of the poor. Amartya Sen, who holds the 1998 Nobel Prize in Economics,
has attempted to get past the absolute/relative debate by switching
the discussion to "capabilities" rather than commodities
or incomes. Sen argues that the money or commodities do not provide
for an individual's well-being, but the capabilities these may provide.
"At the risk of oversimplification" Sen writes, "I
would like to say that poverty is an absolute notion in the space
of capabilities but very often it will take a relative form in the
space of commodities or characteristics" (Sen, 1983, p.161).
An example might help to illustrate this point. The human capital,
skills and education necessary to participate in the economy of 50
or 100 years ago was fairly limited and is much less than what is
required today. This is the case even if we keep the income class
of the worker constant. What is important in both cases is for the
person to have the capabilities to fully participate in a given society
(a strong back and work ethic in the 19th century, years of education
and computer skills today), but how these capabilities are met will
change from society to society, and from year to year.
The
official poverty level in the United States is based on the budget
standard approach, whereas most European research on poverty (few
European countries have an official poverty rate3)
typically follows the relative approach.4 Which measure
is used is very important for the question we are asking here-the
relationship between economic growth and poverty. If a country adopts
the budget standard approach, and fails to update it, than it will
be easier for the country to lower its "official" poverty
rate without actually lowering the number of people actually living
in poverty. Relative poverty thresholds are typically linked to the
mean or median income and thus will automatically go up to reflect
higher standards of living and minimum necessary levels of consumption.
How Poverty is Measured in the United States
As
stated above, the United States uses the budget standard method. Originally
developed by Mollie Orshansky for the Social Security Administration
in 1963-64, the "official" poverty threshold for the United
States is based on the consumption patterns of the early 1960's and
adjusted, since 1969, to changes in the Consumer Price Index. Numerous
government and academic reports have demonstrated that this method
has serious flaws when used over extended time periods. They recommend
updating the budget standard upon which the poverty threshold is based.5
The main reason for updating the standard budget is that the society
of the 1990's is fundamentally different from the one of the 1960's,
and thus the necessities today will be different from yesterday. As
Gordon Fisher has written, "the only kind of American society
in which it would be sociologically justified to have had the same
fixed-constant-dollar poverty line since the mid-1960's would be a
society in which there has been essentially no technological change
or innovation since 1960. In a society in which there had been extensive
technological changes and innovations since 1960, the appropriate
course would be to have a poverty line which is higher than the poverty
line developed in the 1960's and which does rise in real terms over
time in response to increases in the general standard of living"
(Fisher, 1996, p. 12). Thus an official poverty rate of 13.3% in 1997
is only a meaningful statistic if we had the society of the 1960's
in 1997.
Alternative Measures
If
the United States adopted the broader measure of poverty based on
the relative conception of poverty, as is done in Europe, then we
would get a different view of poverty in America. In Table 1 we see
the poverty rate in the United States based on relative measures from
1969 to 1997 compared with the official rate based on the budget standard
method (and a 1960's budget standard).
Thus
if the United States adopted the standard 50% of the median income
measure of poverty then not only would the poverty rate be nine points
higher in 1997, (22.3% instead of 13.3%) it would have risen since
1969, and not 1979. This would put the number in poverty in the United
States at 59.9 million instead of 35.6 million under the current official
poverty guidelines. Our analysis below is almost exclusively on the
relationship between economic growth and the official poverty rate,
but it is worth noting that our conclusion (that economic growth alone
will not substantially reduce poverty) is strengthened greatly if
we use the more realistic measure of poverty.
RELATIONSHIP BETWEEN ECONOMIC GROWTH AND POVERTY
The theoretical
linkage between economic growth and the number of people below the
poverty rate is fairly straightforward. More economic growth leads
to potentially more income for all. If any of this increase in income
"trickles down" to the poor we will get a rise in their
standard of living and a reduction in the poverty rate, ceteris
paribus. If one looks at the long-term relationship between economic
growth and the poverty rate, or the number of people in poverty, it
is clear that there has been a close and inverse relationship between
the rate of economic growth and the poverty rate. Increases in GNP
coincide with declines in the poverty rate. When economic growth slows
down, or when the economy experiences negative growth in GNP (recession),
the poverty rate rises. We can see this in two ways. In Table 2 below,
we see the relationship between economic growth, as measured by GDP
and per capita median income, and poverty, as measured by the number
in poverty and the official poverty rate. All references to the poverty
rate and numbers in poverty refer to the official measure of poverty
unless otherwise indicated.
In
Table 2 we see that the expected fall in the poverty rate and the
numbers in poverty from 1959 to 1969 as economic growth, by both measures
(GDP and per capita income), rises. From 1969 to 1979 we see both
measures of economic growth increase and the poverty rate falls, yet
the number in poverty rises by almost 2 million. From 1979 to 1989,
we see a fall in per capita income and a rise in both measures of
poverty, again the expected relationship. However, from 1989 to 1997,
we have both economic growth and both poverty measures rising, which
is the reverse of the historical trend and the accepted "rising
boats" theory of economic growth.
In Graph
A, we see a more detailed look at the relationship between the poverty
rate, numbers in poverty and the state of the economy. Here we see
that both the number in poverty and the poverty rate are generally
falling from 1959 until the mid 1970s, except in the shaded areas
which represent recessions. However, this relationship seems to end
in the mid to late 1970s, where the general trend for the number in
poverty climbs significantly, while the poverty rate rises from 11.4%
in 1978 to 13.3% in 1997 with peaks at 15% and 15.1% in 1982, and
1992, respectively.
The secular
trend upward of the poverty rate can be seen in Table 3 below, which
gives the average poverty rate for each of the business cycles from
1959 to 1997. Here we see that the poverty rate reached its lowest
average level in the 1973-79 cycle and has been rising with each successive
business cycle.
In
Graph B. below, we see a breakdown of the increase in poverty by age.
Here we see that much of the increase in the poverty rate can be attributed
to the large rise in children in poverty, yet there is still a noticeable
secular trend upward for adults (18 to 64 years old) rates, and there
is a continual decline in poverty rates among the elderly (which by
the late 1990's had the lowest poverty rate), but it is clearly flattening
out.
Economic
growth's ability to reduce poverty has been greatly weakened since
the early 1980's, as has been shown by Mishel, Bernstein and Schmitt
(1999 pp. 292-4). They have updated Rebecca Blank's 1991 model which
links poverty rates to various macroeconomic variables, such as economic
growth, unemployment, inflation and government transfers. Her model
successfully predicts changes in the actual poverty rates based on
changes in these variables, up until the early 1980's. Their update
of the Blank model shows the divergence between actual and predicted
poverty rates in the mid 1990's up until the late 1990's is significant,
indicating that economic growth no longer has the impact on poverty
rates it once had. What has changed from the 1960's to the 1990's?
That is the question we now turn to.
WHY GROWTH DOESN'T ALWAYS BENEFIT
THE POOR
One of the
most perplexing economic issues of the 1990's is the question: why
are "the Poor" missing out on the "greatest economy
of all-time." Certainly such positive economic conditions as
eight years of sustained economic growth, low inflation, low unemployment
rates, and high job creation should lead to substantial reductions
in poverty rates. Two issues seem to be at the heart of this question:
1) maybe this isn't the "greatest economy of all time,"
and 2) clearly the benefits of economic progress are not being shared
by all (i.e. the distribution of income). We will deal with this latter
question first and return to the question of how well GNP growth reflects
improvements in economic and social well-being.
Unequal Sharing of Economic Growth
Just
about all economists will now admit that there was a dramatic increase
in economic inequality in the 1980's, that the Reagan Revolution mostly
only benefited the already affluent. Table 4 gives the share of aggregate
income received by each quintile of households from 1967 to 1997.
Table 4
This
table clearly shows that the share of income going to the bottom 80%
of households lost ground from 1969 to 1997, although not at an even
rate. In 1968 the bottom 80% received 57.2% of aggregate income. This
share was at 56.3% in 1980, the last year of the Carter Administration.
By the end of the Reagan Administration (1988) the bottom 80% share
had fallen to 53.7%, and by the end of the Bush administration it
had fallen to 53.1%. And finally, after 5 years of the Clinton Administration
the bottom 80% of households share of aggregate income had fallen
to 51.6%. Increases in inequality overwhelmed the modest rise in median
household income, which has risen from $33,763 in 1980 to $35,492
in 1996 (a growth rate of 0.35% per year). Much of the population
has experienced declines in real incomes, not merely smaller shares
of aggregate income. Most of the economic gains to the affluent have
come not from economic growth, but from redistribution.
There is
a large literature on the extent and causes of the rise in inequality
in the 1980's (but not so for the 1990's), and we will only briefly
go over some of the factors at work. While much of this literature
has centered on looking for price or market factors that generated
this increase in inequality, the pertinent factors have been institutional
changes and not market forces. Among the most important institutional
factors have been: the decline in union membership and power; the
decline in the real value of the minimum wage; rise in capital income
(due in part to the rise in the real interest rate due to monetary
policy); anti-worker labor policies of Federal Government; and decline
in social protection for workers and the poor (Clark 1996b). All these
factors have broken the link between productivity and the real wage.
This linkage is the primary mechanism for insuring that the benefits
of economic progress are shared down the economic ladder. This break
in the linkage is seen by the fact that in the seventh year of the
longest peacetime expansion in US history and the lowest unemployment
rate in 30 years, real wages still haven't risen all that much. This
break in the linkage between productivity and wages can be seen in
Table 5 below, where we see the annual growth rates in productivity,
wages and hours worked. Here we see that since 1973-79 productivity
increases have not been passed on to workers, whose income has gone
up mostly due to more hours worked.
In
the period of 1967-73 productivity increases were passed on to workers
in the form of higher hourly wages which also allowed for a decline
in hours worked, yet since then productivity gains have not, for the
most part, been passed on to workers. In fact, in order to keep income
from falling, the average worker works 148 hours more a year in 1996
than s/he did in 1973. Add to this the total increase in work per
household (the increase in two worker households). The average family
has had to work more and more just to remain average (the obvious
limit to this is both parents working full time unless we repeal the
child labor laws!).
The state
of poor workers is even more depressing. With the decline in the real
value of the minimum wage we have seen a rising in the number of workers
who are below the poverty rate, from 23.5% in 1973 to 28.6% in 1997
(Mishel, Bernstein and Schmitt, 1999, p. 136-7). A full time worker
earning the minimum wage will not bring a family of three above the
poverty threshold (it barely does this for a family of 2). Thus, more
work at existing low wages has not lowered the numbers in poverty.
To expect this to work in the future is unreasonable.
Is All Growth Progress?
There
is another reason why economic growth doesn't seem to be lowering
the poverty rate, even the "official" poverty rate that
most would agree grossly undercounts the poor. Much of the rise in
Gross Domestic Product (GDP) (the main measure of economic growth)
since the early 1970s, has been due to increases in pollution, crime
and the breakdown of the American family, and not to real economic
progress. The good work of redefining progress has shown that the
"official" measure of economic progress is as outdated as
the "official" measure of poverty. The Genuine Progress
Indicator (GPI) which adjusts GDP for such factors as: income inequality;
value of home economic activity; costs of pollution; depletion of
natural resources; costs of commuting; costs of family breakdown;
crime, among other factors. They have shown that many things that
are bad for society and individuals, like crime, actually add to growth
in GDP. In fact, nothing could be better for GDP than a man going
through a divorce and cancer treatment at the same time (both generate
large amounts of market transactions, what GDP measures), yet this
is hardly economic progress.
The gap
between GDP and real economic progress is even greater for the poor,
who often are forced to shoulder the "costs" of greater
economic activity without receiving the "benefits." One
example of how the poor pay for economic growth without benefiting
from the results of economic growth stems from the contribution pollution
makes to economic growth. Poor neighborhoods are often used as dumping
grounds for industrial pollutants, and as locations for high polluting
activities (such as incinerators). People who live in these neighborhoods
do not receive the profits that these activities create. They also
do not benefit all that much from the lower cost of production, and
hence lower consumer prices, that are the result of shifting part
of the production costs onto the poor residents who live near such
production facilities. Much of this type of activity is carried on
at an international level, where part of America's prosperity stems
from shifting some of the costs of our high consumption society onto
the world's poor. Furthermore, many of the other "negative"
factors that have contributed to economic
growth, such as crime and family breakdown, fall disproportionately
on the poor, and they are less likely to afford assistance to counteract
the costs (as is also the case with the health effects of pollution
or private communities to escape crime). Lastly, one of the most important
factors in creating the so-called "greatest economy of all time"
is the effect of stagnant wages on inflation. For the past thirty
years the government has followed an economic policy that seeks to
keep inflation down at the cost of the poor and low paid. In the 1970s
and 1980s high unemployment was used to keep wages from growing. Today
it is the global economy and labor market flexibility that keep wages
from rising. The benefits of this policy are higher profits for producers
and lower costs to affluent consumers. Thus another example of the
poor paying the price while the rich get the benefit.
HOW CAN THE BENEFITS OF ECONOMIC PROGRESS BE BETTER SHARED?
The
first step toward a just economy is getting a better understanding
of the purpose of the economy. The economy should serve people, and
not the reverse. Thus it is imperative that some understanding of
what is "real" social and economic progress must be behind
our understanding of the economy, especially how we measure economic
activity. Ultimately this requires some notion of the "common
good" and an underlying value system that reflects this notion.
But more immediately, it requires a full accounting of the costs and
benefits of the economy, one centered on what promotes the economic
and social well-being of all. The Genuine Progress Indicator is a
step in the right direction here.
Our second
task is to restore the link between productivity and real incomes.
This link was broken partly due to the decline in unions and the globalization
of the economy, and partly due to anti-worker and anti-poor policies
of the federal, state and local government. It would be helpful to
reverse these trends where possible (an increase in, and indexation
of, the minimum wage would be helpful here). But we might have to
concede that many of the forces of the global economy, particularly
the new labor market flexibilities, might be too big a force to counteract.
Without some mechanism to dramatically reduce capital mobility, it
is just too easy for large corporations to pick up stakes and go elsewhere.
Therefore,
some mechanism that provides for a fairer sharing of the benefits
of economic progress must be developed, one which partially separates
work and wellbeing. A guaranteed income paid to all citizens regardless
of their level of economic activity would provide for a fairer sharing
of the benefits of economic progress, raise all Americans above the
poverty line, eliminate all means tested programs and the stigma and
humiliation that are, by government decree, a part of accepting government
assistance (unfortunately Corporate Welfare Clients are not treated
with the same lack of dignity) and at the same time provide all the
labor market flexibilities the new global economy requires. Such a
Basic Income policy must be a central part of any serious attempt
to reduce and eliminate poverty in America.8
Conclusion
The
past thirty years has shown that America can not, under its current
economic system, grow itself out of its high poverty rates. Even with
the out-of-date measure of poverty, increasing the Gross Domestic
Product has not been a successful policy for helping the poor. The
picture gets worse when we use a more realistic poverty measure, as
is seen in Table 6.
As
we have seen, part of this lack of success in bringing poverty rates
down comes from how the benefits of economic progress are shared,
and part of it goes to the issue of how accurate a reflection of economic
progress is Gross Domestic Product. A rising tide isn't going to lift
all boats if some of the boats are not sea worthy in the first place
and if some people do not even have a boat. Furthermore, raising the
tide with pollutants rather than clean water certainly doesn't make
much sense. Clearly, if reducing and eliminating poverty in the richest
country in the world is a goal, something else must be tried.
*Charles
M. A. Clark is a Professor of Economics in The Peter J. Tobin College
of Business at St. John's University. Professor Clark is the author
of Economic Theory and Natural Philosophy and the editor of
Historians of Political Economy, Institutional Economics and the
Theory of Social Value, and co-editor of Unemployment in Ireland.
He holds a Ph.D., from the New School for Social Research. He has
lectured widely in Ireland, Europe, and throughout the U.S. He serves
on the steering committee of the International Conferences on CST
& Management Education organized by the John A. Ryan Catholic
Social Thought and Management Institute.
REFERENCES
Atkinson, Anthony. 1998. Poverty in Europe.
Oxford, UK: Blackwell Publishers.
Clark, Charles M. A. 1998. "The Future of Capitalism" Doctrine
& Life, Vol. 48, No. 5, May/June, pp. 258-277.
---. 1997. "A Basic Income for the United States: Ensuring that
the Benefits of Economic Progress are Equitably Shared" Vincentian
Chair of Social Justice, 1997, Vol. 3, pp. 38-48.
---. 1996a. "Basic Income: Providing an Adequate income for All"
Vincentian Chair of Social Justice, 1996,Vol. 2, pp. 12-16.
---. 1996b. "Inequality in the 1980's: An Institutionalist Perspective"
in Inequality: Radical Institutionalist Perspective on Race, Gender,
Class and Nation, edited by William Dugger, (Westport, CT.: Greenwood
Press) pp. 197-222.
--- and Catherine Kavanagh. 1996a. "Basic Income, Inequality,
and Unemployment: Rethinking the Linkages Between Work and Welfare"
Journal of Economic Issues, June, 1996, Vol. 30, pp. 399-406.
--- and ---. 1996b. "Progress, Values and Economic Indicators"
in Progress, Values and Public Policy, edited by Brigid Reynolds
and Sean Healy, (Dublin: CORI) pp. 60-92.
Fisher, Gordon M. 1997. "The Development and History of the U.S.
Poverty Thresholds-A Brief Overview" GSS/SSS Newsletter,
Winter, pp. 6-7; http://aspe.hhs.gov/poverty/papers/hptgssiv.htm.
---. 1996. "Relative of Absolute-new Light on the Behavior of
Poverty Lines over Time" GSS/SSS Newsletter, Summer, pp.
10-12; http://aspe.hs.gov/poverty/papers/relabs.htm.
Lerner, Sally, Charles M. A. Clark and Robert Needham. 1999. Basic
Income: Economic Security for All Canadians. (Toronto: Between
the Lines).
Mishel, Lawrence, Jared Bernstein and John Schmitt. 1999. The State
of Working America, 1998-99. Ithaca: Cornell University Press.
Redefining Progress. 1999. "The Genuine Progress Indicator: 1998
update-Data and Methodology."
Ruggles, Patricia. 1990. Drawing the Line: Alternative Poverty
Measures and their Implications for Public Policy (1990)
ENDNOTES
1 The person in charge of New
York City's welfare reform has stated the object of the policy is
to create a crisis situation that will spur the poor out of poverty.
2 Actually, the originator of the
official poverty thresholds for the United States, Mollie Orshansky,
stated in her
1965 article that the thresholds measured income inadequacy "If
it is not possible to state unequivocally ‘how much is enough,'
it should be possible to assert with confidence how much, on average,
is too little." (Quoted in Gordon M. Fischer's excellent brief
history of U.S. poverty thresholds, "The Development and History
of the U.S. Poverty Thresholds-A Brief Overview" GSS/SSS Newsletter,
Winter 1997, pp. 6-7; http://aspe.hhs.gov/poverty/papers/hptgssiv.htm).
3 The
example of Ireland is enlightening in this regard. Although they never
developed an "official" poverty rate, a Social Welfare Commission
in 1986 set a minimum income level necessary to avoid deprivation,
using the standard budget method. For over ten years, bringing social
welfare payments up to this level became a stated goal of most governments.
As the government came close to achieving this goal, the poverty advocacy
community soon discovered what their USA counterparts long understood,
the march of time will make almost any standard budget method measure
way out of line with the reality of poverty and social exclusion.
4 One of the effects of having an
"official" poverty rate is that most policy analysts adopt
the "official" rate as the primary benchmark, even thought
most would also note the numerous drawbacks to how the official rates
is determined. This is certainly the case in America.
5 Space limitations prevent us from
examining all the issues that go into setting poverty lines, such
as on what unit to base your analysis: individual, household, family;
what incomes to include or exclude; using income or expenditure as
your measure of poverty and the list could go on. The interested reader
should consult Patricia Ruggles's Drawing the Line: Alternative
Poverty Measures and their Implications for Public Policy (1990)
as well as Fisher (1996 and 1997) excellent work on this subject.
6 See Clark 1996b for a discussion
of the rise in inequality in the 1980's and the relative merits of
market and institutional factors.
7 For an extended discussion of
the problems with standard measures of economic progress see "Progress,
Values and Economic Indicators" (Clark and Kavanagh, 1996b).
8 For more of the topic of providing
a Guaranteed Income see Clark 1997; 1996a and Clark and Kavanagh,
1996a)
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