The current issue (with a date of June 9) of the New York Review of Books has a review by Christopher Jencks of a book by Kathryn Edin and Luke Schaefer that came out last year, titled "$2.00 a Day: Living on Almost Nothing in America." The review is generally respectful, if somewhat skeptical; indeed Jencks's general acceptance of the book's findings is indicated by the title of the review, which is "Why the Very Poor Have Become Poorer." Several readers have asked me to comment.
When "$2.00 a Day" came out last year, it got the usual fawning reviews from the usual suspects. For example, consider this from the review in the New York Times by William Julius Wilson:
This essential book is a call to action, and one hopes it will accomplish what Michael Harrington’s “The Other America” achieved in the 1960s — arousing both the nation’s consciousness and conscience about the plight of a growing number of invisible citizens. The rise of such absolute poverty since the passage of welfare reform belies all the categorical talk about opportunity and the American dream.
You won't be surprised to hear that I have a different take. This book is completely preposterous.
Edin and Schaefer purport to have discovered -- through careful analysis of Census data -- that there is a greatly increasing number of people in "extreme poverty" in the United States. For their definition of "extreme poverty," they say they take a definition from the World Bank, which uses a figure of $1.90 per day per person; and then they round it up to the $2.00 in the title of the book. The methodology of the book consists of two parts. Schaefer, whose expertise is in government statistics, analyzes the Census data from the survey known as SIPP (Survey of Income and Program Participation) to get aggregate numbers of people who report income of less than $2.00 per day. This work yields figures of as much as 4 - 5% as the percent of the population of the United States "living" at this level of dire poverty, a figure which, according to the Schaefer's statistical data, nearly doubled between 1996 and 2011. Then Edin, whose thing is "talking to low income Americans," goes out and interviews a number of people with stories of serious personal hardship. And thus the book.
I hope that your first thought was, is there really anyone in America who lives on less than $2.00 per day, at least as averaged over some reasonable period of time? The idea is completely ridiculous, and frankly an insult to the hundreds of millions of people in the world who actually do live in grinding poverty at this very low level. Edin and Schaefer just intentionally confuse two very different concepts, which are, first, having "income" of only $2.00 per day, and second, only having $2.00 or less of resources per day available on which to live. The second is what the World Bank is talking about when it talks about serious poverty out there in the world. The first is a statistical artifact of the particular definition of "income" that you choose to use. As I have discussed many times on this blog, the Census Bureau, including in its SIPP surveys, defines "poverty" in terms of an arbitrary artifact of "cash income" that excludes almost all government programs and many, many other resources available to people, in order to generate ridiculously high "poverty" statistics to defraud the American people. To be fair to Edin and Schaefer, they do realize that they can't get away without at least discussing the plethora of government benefits available to those of low income; but their basic strategy is to just dismiss things like food stamps and housing assistance as not nearly as good as cash -- and therefore fair to just not count at all in a book that is supposedly about living on "$2.00 a Day" or less. And they don't even think about, let alone discuss, the many non-cash, non-income resources that people may be living on.
There are sensible reviews of the Edin/Schaefer book out there. For example here's one at Forbes by Tim Worstall titled "The Number Of Americans Living On $2 A Day Or Less Is Zero." From Worstall:
[T]he real incidence of $2 a day poverty in the US is zero. The numbers cooked up for this book look only at cash income, not any other form of aid that people might get. They are also measuring transient populations flowing through a rocky patch, not some vast underclass. And finally they are measuring income, not the thing that we really want to measure, consumption possibilities.
And I would say that even Worstall is somewhat misdirected by the Edin/Schaefer sleight-of-hand. The mistake is assuming that because the Census Bureau records someone as having no or next-to-no "income," that that person is "poor" at all in any meaningful sense. There are lots of people who have no "income" for some period of months or even years but have lots of resources. They may even be "rich" as you would normally think of the term. Large categories include retirees living off savings (consumption of savings does not count as "income") or reverse mortgages (borrowing doesn't count as "income"); students living off scholarships, fellowships and loans (scholarships, fellowships and loans don't count as "income"); kids supported by their parents while they look for their first job (family support doesn't count as "income"). My favorite category is business owners who have a losing year -- and many, many businesses, including large ones, have a losing year sooner or later. Hey, a big enough business could lose a million dollars in a year! Does an income of negative one million dollars in a year represent "extreme poverty" -- even as the owners continue to live in their mansions, paid for by the earnings of prior years, and expected earnings of future years?
For a serious analysis of the data that underlies the Edin/Schaefer work, consider this from Brookings -- "How Poor Are America's Poorest: U.S. $2 A Day Poverty In A Global Context." Brookings is not exactly part of the vast right wing conspiracy. Their conclusion:
Based on an assessment of consumption in the fourth quarter of 2011, we obtain a much lower $2 a day poverty rate of only 0.07 percent. To verify this result, we rerun our calculation using a more selective definition of consumption with the same survey data. This yields a similar poverty rate of 0.09 percent.
OK, it's not quite zero, but just about. And what does the World Bank itself say? Here's their data for the $1.90 per day benchmark. Again, they are talking about resources to live on, not some arbitrarily-defined "cash income." They find no extreme poverty in the U.S. by their definition.
So to Mr. Wilson, the New York Times, the Huffington Post, or others who took this ridiculous book seriously, I ask, if it is a "call to action," what is the action you are thinking of? More of the hundreds of billions of dollars of annual government spending that, according to your own statistics, only seem to be making "extreme poverty" worse? If not that, then what?
As to the real reason why Census's SIPP figures show increasing numbers of people with reported "income" under $2.00 per day, there could be many explanations. For example, today's near-zero interest rates mean that many retirees earn next-to-nothing on their savings. Perhaps more young people are staying in school longer, or living on their parents' nickel for longer. Obviously, none of these things has anything to do with "extreme poverty." Edin and Schaefer do not even give consideration to any such scenarios.