We have been having a pretty intense discussion on poverty over at the European Tribune, in this thread, which I can only encourage you to read if the topic is of any interest to you.

One of the most interesting comments came from afew, with the following graph, which I will comment below:

click on any graph to have a bigger version

Poverty is usually defined as having less than 50% of median income of the population (the 2004 threshholds can be found here). Many of you are undoubtedly familiar with the difference between the median income and the average income.

  • The median is the level at which half the population is above, and half is below.

  • The average income is the sum of all incomes divided by the number of people.

To simplify: median levels tell us how the middle class does. If only the rich get richer, then the average will increase, but the median will not move. If the poor get richer, both will increase.

So, how has median income done?

(from http://www.census.gov/prod/3/98pubs/p60-200.pdf)

So, so… It’s been basically stagnant since the lates 60s, in fact. This page provides more recent numbers. They are not directly comparable to those in the graph above (in 2003$ vs 1997$ – about a 15% difference), but you can tell that median income increased until 2000 and then declined – back to the 1997 level in 2003). More interestingly, this graph (from from here) details what’s happened:

Male median income has been declining steadily, but has been complemented by growing female income. However, for young people, neither male nor female incomes have been growing for the past 20 years, which suggests that female income growth is going to stagnate now that female work participation has reached close to maximum possible levels.

But back to poverty. Poverty numbers seem to follow median income pretty closely:

(from http://www.census.gov/hhes/www/poverty/poverty04/pov04fig03.pdf)

The most recent numbers are pretty damning though: poverty numbers are increasing despite the economy officially being out of a recession (and median income is still declining. How is that possible?). Note thatthis happened under BOTH Bush presidencies…

How about – because inequaility is rising – as this graph from the Census bureau demonstrates)

And if you wonder why, here’s a reminder:

The income of the top 1% is growing, but not that of others, and the Bush tax cuts have only reinforced this:

(from http://usa.usembassy.de/etexts/econ/eop/2004/eop-ch1.pdf)

Post tax incomes grew faster than pre-tax incomes – but guess for who?

Which brings us back to our initial graph:

the left-hand number represents the percentage of children in households under the poverty line, before social and fiscal transfers, i.e. on the basis of income. The right hand number represents that same percentage after such transfers – i.e. on the basis of actual living standards. The percentage change refers to the change in the left hand number between 1991 and 2000. See afew’s comment for more detail

Poverty levels in the USA and Europe are not too different to start with, but what government does is starkly different: it does a lot in Europe, and pretty much nothing in the USA. And Bush is clearly worsening things.

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