Child poverty in America is not a global embarrassment

By Angela Rachidi of AEI.

"Earlier this month, an opinion piece published in US News and World Report was headlined “Our Childhood Poverty is a Global Embarrassment”. Citing a UNICEF report on income inequality, the author wrote:

The study took a comprehensive approach, comparing the gap between children at the very bottom to those in the middle across a range of criteria – including household income, educational achievement and self-reported health and life satisfaction. The central question was this: How far do countries let those at the very bottom fall? In the United States, the answer seems to be distressingly far.

The claim that America has let those at the bottom fall “distressingly” far misses some key points.

First, using a relative measure like income inequality tells us little about the material wellbeing of those at the bottom. Fairly indisputable is the fact that the United States has higher income inequality than most other developed countries, no matter how it is measured. But inequality and poverty are different things. When income is compared to an absolute threshold (not relative to how everyone else is doing), the United States does pretty well compared to other countries.

For example, researchers using data from the Luxembourg Income Study calculated fixed poverty rates (based on the United States official poverty threshold) across almost 30 countries and found that the United States was in the top one-third in terms of lowest child and adult poverty (Table 1, page 11). Countries like the United Kingdom, Australia, France, Spain, and Italy all had higher child and adult fixed poverty rates than the United States.

Even so, how well Americans do relative to each other is still important to know. But comparative inequality measures (like that used by UNICEF) typically do not factor in government benefits. This misses a large source of cash income for low-income households (like the earned income tax credit) and in-kind benefits (like food assistance) when calculating inequality. Researchers at Columbia University found that including these government benefits in the calculation of their “anchored poverty rate” (a rate that starts with a relative threshold and then adjusts for inflation) reduced child poverty by 10 percentage points when compared to a rate without these benefits (Figure 8, page 14). This false idea that America is a leader in child poverty misleads the debate over anti-poverty policies. It mistakenly makes the roughly $800 billion per year the federal government spends on programs for low-income Americans appear entirely ineffective. And it leads some to conclude that policies popular in other countries, such as higher minimum wages and universal basic incomes, are what America needs.

Rather than wrongly suggesting that we are a global embarrassment when it comes to child poverty, we should look to capitalize on what has worked and fix those things that don’t. Only then can we address child poverty in America, no matter how we compare to other countries."