Fighting Poverty and Inequality: A Conversation with Bruce D. Meyer

Editor's note: This story is one in a series,#PolicyForward, that spotlights how faculty, students and alumni at the Harris School of Public Policy are driving impact for the next generation. Leading up to the May 3 grand opening of Harris’ new home at the Keller Center, these stories will examine three of the most critical issues facing our world: strengthening democracy, fighting poverty and inequality, and confronting the global energy challenge.

How effective has the social safety net been in transporting people out of poverty? How much poverty still exists within the world’s wealthiest country—and which segments are most vulnerable? How has the face of poverty changed over the last 40 years? 

As politicians vigorously debate these and other related social and economic issues, Bruce D. Meyer, the McCormick Foundation Professor at the University of Chicago’s Harris School of Public Policy, has been researching these questions. He is looking for data-driven insights that can inform both the understanding of and the fight against poverty and income inequality in American society. 

Professor Meyer, widely recognized as one of the nation’s foremost experts on these topics, recently sat down to share his perspective, talk about his work, and examine why it’s so important that we accurately assess the state of poverty. 

Why is it important for us to have a clear and accurate picture of long-term poverty and income inequality patterns?

Each year the U.S. government transfers more than $1 trillion in money, goods and services to those in need. But to maximize our returns on this investment, we need to know whether this support is reaching the right people, and which programs are most effective in lifting people and families out of poverty. Though we’ve been studying this issue intensely for more than 15 years, it’s surprising how misunderstood poverty still is because the data traditionally used to measure it is not up to the task.   

What are some of the flaws inherent in the data that lead to inaccurate conclusions?

Much of the data on poverty is collected via surveys, then supplemented by other information available from government databases. But these days, people either resist surveys or don’t have the time, patience or inclination to provide complete answers. For example, about half of the people who receive cash welfare, food stamps or pension benefits don’t report them.  Many people with earnings or assets don’t report them as well.  And if they did, many would look more like middle class people in terms of where they live, the cars they drive and the goods they own. 

How can we measure poverty and income inequality more accurately?

About 20 years ago, I began to think that studying consumption patterns—what people are able to purchase for themselves in terms of housing, food, transportation and other household items—might be a better way to measure poverty. And I’m glad I started down this road, because the quality of information collected through traditional surveys has only plummeted since then.  Because ironically, new measures introduced by the Census Bureau to better incorporate government benefits into measures of poverty have actually given us a less accurate picture of who is poor.  To illustrate this point, whereas truly low income people who receive benefits tend to report them, higher income people are less likely to do so and they end up looking poorer than they really are. 

Why is consumption-based data more accurate than income-based data for measuring poverty/

Consumption patterns provide a much better picture of actual living standards, because they account for important variables such as in-kind housing benefits and other nontraditional income. Ultimately, we need a two-pronged approach. What are people actually spending on housing, food, transportation, and other goods and services?  And what benefits do they receive from the government in the form of social security and other retirement benefits, unemployment insurance, housing assistance, veterans’ services, Medicare and Medicaid, welfare, child support payments, and government supported child care? 

What do you consider the current state of poverty/inequality in the U.S. today vs. 40 years ago?

Poverty looks very different today. Forty years ago, we worried about malnutrition and people living in shacks, but there’s much less of that now. Today people generally have enough income to feed themselves and get the calories they need.  Homelessness has also declined over the last decade, and low-income people have better housing options.  However, it’s important to note that poverty is still a major problem for American society today.  Life is more complicated today, and people face new and different issues. Too many people don’t graduate from high school, can’t find a job they are happy to take, and lack the health insurance they need.  And some people simply have trouble organizing their very complex lives. That can lead to a variety of problems that hold people back—from drug addiction to family problems.

What segments of the population remain most vulnerable to poverty, and what more can we do to support them?

Income-based analysis suggests that single-parent households and the elderly are most vulnerable, but consumer-based analysis tells a different story. In fact, though single-parent households still experience the highest poverty rate, government benefits have improved the circumstances for these households over time. But because these benefits are underreported, these programs don’t get the recognition they deserve. We anticipate that the data we are collecting now will paint a more accurate picture.

Similarly, consumption-based analysis reveals that fewer elderly people live below the poverty line than “official” poverty measures report. That’s because this segment often underreports both pension receipts and retirement savings, and in many cases they have paid off the homes and cars they use.

A third demographic, single people who live alone, are increasingly vulnerable to poverty.  They are overrepresented among those at the very bottom of the income distribution.  Concern about this segment has led to new proposals to extend the earned income tax credit to individuals without children. Providing incentives to work has been the most effective way to reduce poverty over the long term. 

What general conclusions about poverty can we draw from your consumption-based data? 

For decades, some congressional leaders have argued that we have received little return on the trillions the government has invested to reduce poverty. And in fact, the official poverty rate suggests that it is the same today as it was 40 years ago. But research shows that properly measured, the poverty rate has declined significantly over time—both because of government investments and an expanding economy. In fact, I collaborated with one of my research partners to create a dashboard that shows how simple corrections of the well-known flaws in the official poverty measure result in a very different story about how poverty has changed over time.

Poverty remains one of the most highly charged political issues in American life today. In your opinion, what do the left and right, respectively, get wrong about poverty? And what pathways look most promising for the future?

Perhaps not surprisingly, both the left and the right have used inaccurate, income-based data to support their own entrenched perspectives. Many on the left argue that poverty levels have not declined at all, and that much more government investment in things like free health care and free college tuition is necessary to move the needle. Many on the right cite the same income-based data to argue that long-term investments to build a safety net have not generated adequate returns—and have largely failed to solve the poverty problem. In fact, consumption-based survey data—supplemented by government records—suggests that investments in Social Security and Medicaid, along with the Earned Income Tax Credit (EITC), have proven very successful in reducing poverty.  Shoring up Social Security and extending the EITC to households without children would be important steps to sustain this momentum.

About Bruce D. Meyer

Bruce D. Meyer, the McCormick Foundation Professor at the University of Chicago Harris School of Public Policy, studies poverty and inequality, tax policy, government safety net programs such as unemployment insurance, workers' compensation, food stamps, and Medicaid, and the accuracy of household surveys. His most recent work includes research on trends in poverty and inequality, the consequences of disability, the effects of Medicaid, and the accuracy of household surveys.

Read more #PolicyForward stories that spotlight how faculty, students and alumni at the Harris School of Public Policy are driving impact for the next generation.