by Rick Kahler
A reader recently suggested on Twitter that even though our government borrows almost one dollar for every two we spend, we need to spend even more because 25% of Americans are in poverty.
That brought up several questions for me: Are 25% of Americans really poor? How do we define poverty? And how does poverty in the U.S. compare with that in other countries?
I found some answers in a paper, "How Poor are America's Poor?", published in August 2007 by Robert Rector, a senior research fellow with The Heritage Foundation. First, the numbers. Rector cites data from the 2005 Census Bureau showing the U.S. with 37 million poor people or 12.6% of our population, which is about half of my Twitter correspondent's estimate.
Then the definition. I think of "poor" as being unable to meet basic needs for nutritious food, adequate housing and clothing, medical care, and transportation. In a 2005 poll taken by the Catholic Campaign for Human Development, the overwhelming majority of responses agreed with that definition.
This perception of poverty certainly squares with that promoted by politicians and others desiring more help for the poor. The Census Bureau, however, defines poverty as a family of four having a household income of less than $22,350 a year.
Rector summarizes the Census Bureau data this way: "Overall, the typical American defined as poor by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry and he had sufficient funds in the past year to meet his family's essential needs."
He adds, however, "Of course, the living conditions of the average poor American should not be taken as representing all the poor. There is actually a wide range in living conditions. While the majority of poor households do not experience significant material problems, roughly 30 percent do experience at least one problem, such as overcrowding, temporary hunger, or difficulty getting medical care."
When you compare our "poor" with the rest of the world, our systemic prosperity as a country becomes astounding. As just one example, the average living space per person in the U.S. is 721 square feet; per poor person, it is 439 square feet. Our poor have more floor space per person than the average person (not the average poor person) living anywhere in the world except Australia, Norway, and Canada.
A January 2011 New York Times article by Catherine Rampell, "The Haves and the Have-Nots," reports that someone in the bottom 5% of the American income distribution is still richer than 68% of the world’s inhabitants. Even more, Rampell points out that America's poorest are, as a group, about as rich as India’s richest.
Certainly, the U.S. has real poverty. There are those among us who don’t have enough to eat and live in deplorable conditions. However, in part because of the success of our welfare programs, the data suggests that under 10% of the poor (less than 2% of our population) actually fit the common perception of living in poverty.
Any time we refer to "the poor," it's important to remember that they, just like anyone else, are real people whose living conditions, needs, life skills, and viewpoints vary widely. It is unreasonable to lump all "the rich" into one category. It's equally unreasonable, as well as disrespectful, to do the same with "the poor."
Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!