[PEN-L:5215] defining the poverty line

[Jim Devine <JNDF%LMUACAD.BitNet@xxxxxxxxxxxxxxxxxx>]

Yesterday, I asked if there were any efforts to define the poverty
line using a theory of poverty (e.g., as a vicious circle). Rudy
Fichtenbaum sent me his thoughts. They are interesting, so I'm
forwarding them to you (with his permission). BTW, it's probably
true that _all_ measures of the extent of poverty convey some
useful information.  I'm not wedded to a single one.

--forwarded message---

>From a theoretical perspective could you argue that when incomes
fall below the value of labor power you are in poverty.  Marx
argues that the value of labor power has a social and historical
element.  This would imply that poverty standards should change
as society develops.  Interestingly, before the development of the
offical definition of poverty most economists viewed poverty
as being relative (distributional) or in terms of a changing
absolute standard.  For example, Orshansky who is famous for the
offical definition argued that one should take food consumption necessary
to sustain a family of 4 as a percentage of income and use this
to create a multiplier.  For example she found that families spend
about 1/3 of their income on food.  Thus to get the poverty
cutoff she multiplied 3 times the food budget.  Apart from
adjusting for inflation this number has remained constant.  However,
she argued that as food consumption decreased as a percentage of
income the multiplier would increase.  Today food consumption
is about 20% of income so using Orshansky's method would could
estimate the poverty line by taking 5 times the food budget.
Doing this would raise the poverty line.

Another approach to this problem is to survey people and ask them
what they need to "just get by" in their community.  The Gallup
Poll did this for some time and there is a remarkable correlation
between real wages and the amount that people feel they need to just
get by.

Another approach is to periodically develop budgets which
you believe represent subsistence.  Subsistence is of course a
relative term.  John Schwarz has done this in the Forgotten
Americans.  Again, over time these budgets tend to increase
in real terms as the overall standard of living increases.

If you view the value of labor power as an average then some
members of the working class with have wages that are above the
value of labor power and others below the value of labor power.  Those
who fall below this average would be poor.  This of course
introduces a relative element i.e., a distributional element,
but there is also an absolute element in the sense that over time
as society becomes more productive there is a tendency for
the value of labor power to rise.

Well I have rambled on enough.  These are just a few thoughts
off the top of my head.  Hope they are not too disorganized.

best wishes

Rudy

  =====================================================================
  + Rudy Fichtenbaum        +  Internet Fichtenbaum@xxxxxxxxxxxxxxxxx +
  + Department of Economics +  Internet Fichtenbaum@xxxxxxxxxxxxxxx   +
  + Rike Hall               +  Bitnet   Fichtenbaum@xxxxxxxxxx        +
  + Wright State University +  Telephone 513-873-3085                 +
  + Dayton, OH 45435        +  FAX 513-873-3545                       +
  +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

in pen-l solidarity,

Jim Devine
jndf@xxxxxxxxxxxxxx or jdevine@xxxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (daytime, during workweek); FAX: 310/338-1950
"There can be no doubt that it is a rule of borrowing and
lending that _to him that hath shall be lent_. -- J.R. Hicks.