The relative poverty threshold differs from country to country because of the way poverty is defined. Many countries do not calculate the poverty rate, and other countries define it in different ways. Experts alleviate this problem by defining it as the number of people beneath a percentage of that country’s median income. The problem with this is that many make the mistake of comparing the poverty rate between countries as if that is saying something about the differences in the real standard of living for the poor. What has to be done in order to compare the absolute standard of living of those in poverty in different countries is use the same country’s definition of poverty.
A little secret is that the United States has a very high median income compared to most developed countries. That means that when they carve the poverty line out of that median income, it is setting a higher bar. What happens when we keep that bar constant and see how other countries compare the the United State’s poverty threshold?
Coyote Blog points out a study which compares apples to apples in the definition of poverty between country. Tim Worstall takes credit for pointing it out in the comments. The study is here, and it is intended to shed negative light on the United State’s poverty problem compared to other countries. But it does so by defining poverty the same way many other studies do it – by defining it is 50% of that country’s median income.
“A majority of cross-national studies define the poverty threshold as one-half
of national median income, and we will follow that convention in most of this
paper.”
When other developed countries are compared to the United States using the same poverty threshold (50% of U.S. Median income, the United States does alright – not spectacular, not horrendous – but okay. Juxtapose that to comparisons where the definition of poverty varies country by country, and United States hits dead last.
Its okay to make the case that income relative to your peers matters. But it needs to be made clear what the data is saying and is not saying. It is not saying that there are more poor people in America living below a particular standard of living than in other developed countries. But that is the idea that most people derive from these kinds of international comparisons. And that is the idea that incites all kinds of aghast feelings and social justice revolts. What the data is saying is that there are at or near the same percentage of the American population living beneath a particular standard of living as other countries, but the people above it are doing better in America than in other countries… And if one wants to point out that that is a bad thing because there is additional utility to be derived from equality, then be my guest. But make that distinction because the typical viewer won’t.
