Sorry, Bernie: America's Poorest Are Richer Than 60 Percent of Developed Countries
A new study debunks liberal claims about grinding poverty in the U.S. compared to other developed countries. Accounting for how much America's poorest 20 percent consumes — rather than measures like income that can be misleading for reasons explained below — the study finds that the poorest fifth of Americans consume more resources than the average person in 64 percent of other countries in the Organization for Economic Co-operation and Development (OECD).
On average, a person among the poorest 20 percent of Americans consumes more goods and services than the average person in Canada, Greece, the United Kingdom, Sweden, Australia, Spain, Portugal, Japan, Denmark, Iceland, New Zealand, Slovenia, Slovakia, Israel, South Korea, the Czech Republic, Estonia, Poland, Chile, Hungary, Turkey, and Mexico.
"Our study shows that because of unreported income, charity, and non-cash government benefits like Medicaid and food stamps, consumption by America’s poorest 20 percent exceeds the national averages even in developed nations like Japan, New Zealand and Denmark," James Agresti, president of Just Facts, said in a statement on the report.
Dr. Henrique Schneider, professor of economics at Nordakademie University in Germany and the chief economist of the Swiss Federation of Small and Medium-Sized Enterprises, analyzed the report and endorsed its methods. "This study is sound and conforms with academic standards. I personally think it provides valuable insight into poverty measures and adds considerably to this field of research," Schneider said.
The report, published Monday, set out to counter claims from a July 1 New York Times video op-ed claiming to present "a more truthful approach" to "the myth of America as the greatest nation on earth." Times producers Taige Jensen and Nayeema Raza claim that the U.S. has "fallen well behind Europe" and has "more in common with 'developing countries' than we'd like to admit."
The video claims that while "America is the richest country" in the OECD," the U.S. is "also the poorest, with a whopping 18 percent poverty rate—closer to Mexico than Western Europe."
This claim echoes the constant refrain of Sen. Bernie Sanders (I-Vt.) that America has "the highest rate of childhood poverty of any major country on Earth."
In order to examine how the poorest in the U.S. truly stack up, Just Facts analyzed data from the OECD, the World Bank, and the U.S. Bureau of Economic Analysis. The study "found that the Times is not merely wrong about this issue but is reporting the polar opposite of reality."
The Times reported OECD poverty rate data. The OECD measures relative poverty within nations, not between them. The figures represent the proportion of people with "less than half the median household income" in their own countries, so "two countries with the same poverty rates may differ in terms of the relative income-level of the poor."
The OECD assigns a higher poverty rate to the U.S. (17.8 percent) than to Mexico (16.6 percent). World Bank data, however, shows that 35 percent of Mexico's population lives on less than $5.50 per day, compared to only two percent of people in the U.S.
OECD data focuses on "income," which excludes many non-cash benefits the poor receive from the government and private charity. Just Facts listed a few examples: health care from Medicaid, free clinics, and the Children's Health Insurance Program; food from food stamps, school lunches, soup kitchens, food pantries, and welfare programs; housing and amenities provided through rent subsidies, utility assistance, and homeless shelters.
Even the World Bank data, which includes these items, is incomplete because it is based on "household surveys." Low-income households greatly underreport their income and non-cash benefits in these surveys, according to a 2015 paper in the Journal of Economic Perspectives. The U.S. Bureau of Economic Analysis and the Census Bureau have also admitted there is widespread underreporting in these surveys.
"When politicians and the media talk about income inequality, they often use statistics that fail to account for large amounts of income and benefits received by low- and middle-income households. This greatly overstates inequality and feeds deceptive narratives," Just Facts reported.
The more reliable measure of material well-being is the consumption of goods and services. The World Bank prefers this measure due to "practical reasons of reliability and because consumption is thought to better capture long-run welfare levels than current income.
The Just Facts report included two graphs showing how the bottom 20 percent of U.S. households stack up against OECD countries and developing countries, but does not provide the exact consumption number.
When reached by PJ Media, Agresti said the exact consumption number from the most recent Bureau of Economic Analysis (BEA) study (2010) is $57,049 per household for the poorest 20 percent of Americans. To adjust this to a per-person basis like the World Bank dataset, Agresti said he divided the number by 2.6, the average number of people per household for the poorest 20 percent of U.S. households in 2010. Like the BEA study, the Congressional Budget Office (CBO), which yielded the 2.6 number, uses an expansive definition of income including non-cash benefits.
"Hence, the average consumption number for the poorest 20 percent is $57,049 per household / 2.6 people per household = $21,673 per person. This figure, along with all of the other data and calculations, is provided in this spreadsheet linked in the article," Agresti told PJ Media. "I wrote BEA to ask for later data, but none is available. This was a special study, not a dataset that they regularly update. I also put in a request to make this part of their regular data offerings."
While many of the 34 OECD countries had an average consumption level above the lowest 20 percent of Americans, the poorest Americans still consumed more, on average, than 64.7 percent of the OECD countries in 2010. (Since then, both Latvia and Lithuania joined the OECD, making the current number of countries 36.)
Just Facts noted that the high consumption of the poorest Americans "doesn't mean they live better than average people in the nations they outpace, like Spain, Denmark, Japan, Greece, and New Zealand. This is because people’s quality of life also depends on their communities and personal choices, like the local politicians they elect, the violent crimes they commit, and the spending decisions they make."
Sadly, U.S. households receiving food stamps spend about 50 percent more on sweetened drinks, desserts, and candy than on fruits and vegetables. Households not receiving food stamps spend slightly more on fruits and vegetables than on sweets. Even so, the fact remains that the bottom 20 percent in the U.S. consume more than the average in 64.7 percent of OECD countries.
In order to rebut The Tiimes' claim that the U.S. has "more in common with 'developing countries' than we'd like to admit," Just Facts included a graph charting the consumption of the poorest Americans against the consumption of a host of developing countries in 2010. That year, even America's poorest consumed 3 to 30 times more goods and services than the averages for all people in these countries.
These numbers do not prove that America is the greatest country on Earth, but they do show that even the poor in America are better off than millions in other rich countries — and billions in developing countries like China. Bernie Sanders and others like him are misleading the American public with relative rates of poverty, when the poor in the U.S. consume a great deal more than the average in so many other countries.
Follow Tyler O'Neil, the author of this article, on Twitter at @Tyler2ONeil.