Saturday, December 17, 2011

This Would Be Funny If It Weren't Tragic

Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income....

Many formerly middle-class Americans are dropping below the low-income threshold — roughly $45,000 for a family of four — because of pay cuts, a forced reduction of work hours or a spouse losing a job.
This is based on the new "supplemental" measure of "poverty" which defines poverty as anyone below the 33rd percentile in household income:
About 97.3 million Americans fall into a low-income category, commonly defined as those earning between 100 and 199 percent of the poverty level, based on a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty. Together with the 49.1 million who fall below the poverty line and are counted as poor, they number 146.4 million, or 48 percent of the U.S. population. That's up by 4 million from 2009, the earliest numbers for the newly developed poverty measure.
Therefore, up to twice the income of the lower third is defined as low income.  Any simple statistics course will show that we have now essentially defined anyone in the lower half of the income distribution as "low income".    All income distributions have a centroid (let's use the median, as it has half the distribution above it and half the distribution below it. Curiously, the median income in the United States is just slightly less than $50,000 as of 2010, quite close to the point at which the government is willing to call "low income".  No recognition that some jobs are more demanding than others, or that people earning power changes as the they age and gain skill.  Never mind that the lowest income American has access to health care and technology that mush of the world would die for, and an Egyptian Pharaoh would kill for.

By the governments new definition of "poverty" and "low income", no possible improvement can be made in the income distribution.  There will always be a lower 33rd percentile, and always exactly half will fall below the median.  Only if all incomes are equal can this be alleviated, as we would all have the median income.

I guess the Obama administration envisions the US as a large version of Lake Woebegone, where all the incomes should be above average.

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