The next series of posts will attempt to disentangle the concepts of poverty, income ranking, social mobility, wage stagnation, and inequality. All these posts will focus on the US. We’ll start with poverty. Poverty means you don’t have sufficient resources to meet the bare necessities of life. Having a disposable income means one has enough to cover the necessities, plus more to spend on non-necessities, invest, or save for a rainy day. Without getting into the sticky details (yet) of how much income is enough to cover what necessities, it seems safe to say that the more disposable income one has, the less poor one is. (For the purpose of this discussion, I’m collapsing all resources into the concept of “income”, acknowledging that in some cases necessities may be provided for in other ways).

Economists Bruce Meyer and James Sullivan looked at income and spending patterns in the US over the past 50 years and concluded that the poverty rate has fallen significantly during that time, from an astonishing 32 percent in 1963 to 12 percent in 1979, and then to 7 percent in 2000. In 2010, 8 percent of Americans were living in poverty, according to their figures. Meyer and Sullivan found that the disposable income of an American at the bottom 20th percentile has risen somewhere between 24 and 41 percent since 1979, depending on what factors were included in the analysis.

Despite this impressive fall in poverty in US, there has been no corresponding increase in intergenerational mobility. This means there has been little social mobility between generations. So, although Americans are less poor than ever, their income ranking tends to be similar to that of their parents. For example, those in the lower quintiles more often than not had parents who were also in the lower quintiles.

Speaking of quintiles, the poor may not always be with us – but the lower income quintiles will be around as long humans have incomes (assuming some inequality, even if minimal). Poverty has to do with standard of living. Quintiles refer to relative rankings of income. Being at the bottom of that ranking may or may not mean one is poor. (Yes, some distinguish  "relative" poverty and "absolute" poverty, but the nature of these problems and their potential solutions are quite different and it doesn't help to refer to both as types of poverty.)

So when we talk about helping people out of poverty, the conservation should start with what constitutes an acceptable standard of living. What are those necessities that no one should go without?

References for the above: