Walter E. Williams

What's defined as poverty is misleading in another way. Official poverty measures count just family's cash income. It ignores additional sources of support such as the earned-income tax credit, which is a cash rebate to low-income workers; it ignores Medicaid, housing allowances, food stamps and other federal and local government subsidies to the poor. According to a report by American Enterprise Institute scholar Nicholas Eberstadt, titled "Poor Statistics," "In 2006, according to the annual Bureau of Labor Statistics Consumer Expenditure Survey, reported purchases by the poorest fifth of American households were more than twice as high as reported incomes." That additional money might represent earnings from unreported employment, illegal activities and unreported financial assistance. A proper measure of well-being is what a person consumes rather than his income. A huge gap has emerged between income and consumption at lower income levels.

Material poverty can be measured relatively or absolutely. An absolute measure would consist of some minimum quantity of goods and services deemed adequate for a baseline level of survival. Achieving that level means that poverty has been eliminated. However, if poverty is defined as, say, the lowest one-fifth of the income distribution, it is impossible to eliminate poverty. Everyone's income could double, triple and quadruple, but there will always be the lowest one-fifth.

Yesterday's material poverty is all but gone. In all too many cases, it has been replaced by a more debilitating kind of poverty -- behavioral poverty or poverty of the spirit. This kind of poverty refers to conduct and values that prevent the development of healthy families, work ethic and self-sufficiency. The absence of these values virtually guarantees pathological lifestyles that include: drug and alcohol addiction, crime, violence, incarceration, illegitimacy, single-parent households, dependency and erosion of work ethic. Poverty of the spirit is a direct result of the perverse incentives created by some of our efforts to address material poverty.

Walter E. Williams

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of 'Race and Economics: How Much Can Be Blamed on Discrimination?' and 'Up from the Projects: An Autobiography.'
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