Poverty
The Supplemental Poverty Measure (SPM), which measures income net of government taxes and transfer programs (see examples below).
Why did we include this measure?
There is general agreement that people should be able to provide the most basic material needs for themselves and their families. Poverty measures capture this by identifying households where these needs are not being met.
An advantage of the Supplemental Poverty Measure we use is that it accounts for a wide variety of factors affecting the economic resources people have available. First, it counts more than just wage income and includes cash benefits and some in-kind government supports that are intended to prevent poverty. Income from Social Security, Supplemental Nutrition (SNAP), Earned Income Tax Credit (EITC), Child Tax Credit, and housing subsidies are all included, for example. Second, this supplemental poverty measure subtracts necessary expenses, such as taxes and out-of-pocket health expenses, from that income when deciding whether someone is living in poverty. (Medicare and Medicaid benefits are not directly counted as income, but these programs affect out-of-pocket health expenses, which are accounted for as necessary expenses.)
How does the US rank globally?
- Specific Measure: Relative poverty rate.
(Source: Authors’ analysis of Luxembourg Income Study Database data).
- Percentage of countries the US outperforms: 25% (out of 20 countries)
- International Rank Trend: Stable
National Trend Improving
What do the data show?
Poverty declined slowly between 2010 and 2019, then fairly sharply during the COVID pandemic, to an all-time low before rising sharply back to pre-pandemic levels in 2022. Three out of every four high-income countries do better on this measure than the US. We rank just below Italy, followed by Poland and Germany.
There are several breaks in the trend because poverty is not consistently measured by a single source over the relevant time period. The first break is due to a change in data source, and the remaining three are due to changes in the data collection and calculation methods. However, the fact that each of the partial trends tracks the prior one gives us confidence in the general patterns. (See Data Notes for more detail.)
What might explain these patterns?
In the discussion above, we noted some of the factors affecting income inequality generally, and most of these also affect poverty. One reason the US likely has higher poverty is that we spend less on the government programs intended to reduce poverty, but there is debate about the degree to which the government should address poverty directly, given the costs to taxpayers. Also, government programs may reduce employment, which could increase poverty over the longer term.
For more information about data sources and treatments, download the Data Notes.