The Use and Misuse of Income Data and Extreme Poverty in the United States

62 Pages Posted: 7 Jun 2019 Last revised: 24 Sep 2021

See all articles by Bruce Meyer

Bruce Meyer

University of Chicago

Derek Wu

University of Chicago - Harris School of Public Policy

Victoria Mooers

University of Chicago

Carla Medalia

U.S. Census Bureau

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

Recent research suggests that rates of extreme poverty, commonly defined as living on less than $2/person/day, are high and rising in the United States. We re-examine the rate of extreme poverty by linking 2011 data from the Survey of Income and Program Participation and Current Population Survey, the sources of recent extreme poverty estimates, to administrative tax and program data. Of the 3.6 million non-homeless households with survey-reported cash income below $2/person/day, we find that more than 90% are not in extreme poverty once we include in-kind transfers, replace survey reports of earnings and transfer receipt with administrative records, and account for the ownership of substantial assets. More than half of all misclassified households have incomes from the administrative data above the poverty line, and several of the largest misclassified groups appear to be at least middle class based on measures of material well-being. In contrast, the households kept from extreme poverty by in-kind transfers appear to be among the most materially deprived Americans. Nearly 80% of all misclassified households are initially categorized as extreme poor due to errors or omissions in reports of cash income. Of the households remaining in extreme poverty, 90% consist of a single individual. An implication of the low recent extreme poverty rate is that it cannot be substantially higher now due to welfare reform, as many commentators have claimed.

Suggested Citation

Meyer, Bruce and Wu, Derek and Mooers, Victoria and Medalia, Carla, The Use and Misuse of Income Data and Extreme Poverty in the United States (May 2019). NBER Working Paper No. w25907, Available at SSRN: https://ssrn.com/abstract=3399283

Bruce Meyer (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Derek Wu

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Victoria Mooers

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Carla Medalia

U.S. Census Bureau ( email )

4600 Silver Hill Road
D.C., WA 20233
United States

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