Monday, September 27, 2004

Growing Gap Between Sense And Nonsense

The U.S. Census Bureau tracks statistics on poverty. They show that the 12.5% poverty rate in 2003 was lower than during any of the years from 1980-1998. The poverty rate did go up from 1999 to 2003, but by less than one percent. So why do we hear so much gloom and doom in the media?

Kevin at WizBang shows how a misleading analysis can make good economic news sound bad. As part of an article with the ominous title As Income Gap Widens, Uncertainty Spreads, the Washington Post compares 1967 data with 2003 data and worries over the fact that there are "more high earners but . . . fewer in the middle."

Why phrase it in terms of an income "gap" and "fewer in the middle?" If things are so bad, why not simply say "the poor make up a larger percentage of Americans now than in 1967"? They can't say that because that is false. The data shows that the percentage of poor people went down over this period, from 14.2% to 12.5%. So they have to invent a different way to scare us.

"Fewer in the middle" sounds scary, but the data in the Post story shows that the middle is disappearing upwards. If people in the middle got richer and moved up into one of the higher groups, while at the same time the percentage of poor people went down, that sounds like on the whole, people are better off than before.

Another trick the media sometimes uses to scare us is to talk about absolute numbers instead of percentages. The number of poor people went up from 27.7 million to 35.8 million from 1967 to 2003, because the population increased. Remember, the percent of poor people went down. With a growing population, there will tend to be more of everything: more poor people, but also more rich people.

4 comments:

Anonymous said...

Sorry, but the above falls into the nonsense category.

"Why phrase it in terms of a 'gap' [...]"?

Maybe because there's a gap, genius. Maybe a widening gap between rich and poor makes it more difficult for the poor to emerge from poverty. By contrast, it's not really newsworthy that the economy has improved in the last 37 years.

You slide right past the newsworthy point in your last paragraph. "With a growing population, there will tend to be more of everything [...]" Don't you think that a diminishing middle class under those circumstances just might be worth examining? Or is that just another scare tactic?

Tom said...

Responding to the anonymous comments:

> "Maybe a widening gap between rich and poor makes it more difficult for the poor to emerge from poverty."

That's an interesting theory, but the data in the Post article's chart does not support it. Since the percentage of poor people went down, it would appear that it became easier, not harder, to emerge from poverty.

> "Don't you think that a diminishing middle class under those circumstances just might be worth examining? Or is that just another scare tactic?"

It might be worth examining, but the article's data shows that the percentage of people in the two highest income groups went up, while the percentage of people in every other group went down. That is good news! If I had to write a headline for that, it would be "On The Whole, People Are Better Off."

On the other hand, if the percentage in the middle group had decreased while the percentages in the lower groups had *increased*, I would consider that something to worry about. But that is not what the data shows.

Anonymous said...

There are several things that need to be taken into account. One is how the Census Bureau determines poverty.
http://www.census.gov/hhes/poverty/povdef.htmlThe most important, in my mind, is:

"... they are intended for use as a statistical yardstick, not as a complete description of what people and families need to live ..."For example, the poverty level for a single person is about $9,500.

http://www.census.gov/hhes/poverty/threshld/thresh03.htmlCan you imagine trying to live on $9500? It depends on where you are... I think it is unreasonable to make poverty definitions disregard geographic location.

I don't take issue with your argument, but instead the underlying data. I think the flawed definition of poverty masks the real number of "poor" people.

Jon

Ƶ§œš¹ said...

Oh man, a "low" poverty rate? Isn't that some sort of double negative? Is it good? Maybe the media makes it sound bad because it's confusing.