Poverty Tracker & Michael Weinstein: Exclusive Interview

Written by on May 28, 2014 in Measure Impact - No comments

The official poverty estimate for New York City is about 21 percent. It’s wrong. Michael Weinstein explains.

(Justmeans/3BL Media) — According to the federal government, around 1.8 million New Yorkers live in poverty. That’s more than a fifth of the city’s population. But a first-of-its-kind survey has revealed that the situation is actually much worse. Created through a partnership between Columbia University’s Population Research Center and the Robin Hood Foundation, a charity that has been fighting poverty in New York since 1988, the Poverty Tracker is a dynamic in-depth examination of income poverty, material hardship and health, using data gathered by surveying the same households four times each year over two years. After two years, a new panel of households will be recruited and quarterly surveys will start anew. I had a chance to talk to Michael Weinstein, Chief Program Officer at the Robin Hood Foundation, about poverty, education, housing, income inequality and the unique insights that the Poverty Tracker brings to the fight against poverty in New York.

What is the biggest misconception that people have about poverty?

I think that there a lot of them, but certainly the one that recurs often is the presumption among most Americans that our poverty rates are low compared to western Europe and other industrialized countries, and that the poor are better off here. Neither is true. If you compare poverty rates to northern Europe, Scandinavia, Canada and Australia, U.S. rates are higher. And perhaps the most counterintuitive fact is that if you look at the poorest fifth of families in the United States and go to the top—so go to the family that’s poorer than 80 percent of the other families in the U.S.—that family has a lower income, measured in purchasing power, than their counterpart in western Europe. In this very rich country, we’re not doing very well by international standards for the poorest among us. And that’s a statement just about the facts of income. That’s not getting into politics.

Last month, New York Times economic policy reporter Annie Lowrey wrote, “It’s not just the income inequality between America’s very rich and everyone else that’s at issue. There is also a significant wealth gap as well.” She cites a preliminary report of a new study by researchers from the Paris School of Economics and the University of California, Berkeley, who found that “at the very top, wealth is distributed as unevenly as it was in the early 20th century. And the wealthiest 0.1 percent, and especially the 0.01 percent, have left the rest of the 1 percent in the dust.”{1} What are the main factors driving this growing divide?

Since the early 1970s, there’s been a raging debate within the economics profession about the cause of the burgeoning inequality and the persistence of poverty at relatively high rates. If you look at the U.S. from the mid-1970s to now, the poverty rates remain steady between 12 and 15 percent, but inequality has gotten worse. The gap between the upper 20 percent and the lowest 20 percent has increased. Why? Lots of reasons given. The one that I rivet on the most is that the inflation-adjusted wages of the lowest-skilled workers haven’t risen, in post-inflation terms, since the 1970s. That is astonishing. Over decades, the real wages of our lowest-skilled workers haven’t budged, haven’t risen. And that’s as good an explanation as any for what’s going on. The private markets have been punishing toward low-skilled workers. Some people attribute that to technology. Some to globalization. But the fact is, if you’re low-skilled, your wages aren’t going anywhere. And that explains a lot of the poverty we’re talking about.

How much of this can be attributed to private market forces and how much to public policy?

We have allowed the minimum wage to disintegrate in post-inflation terms. Our tax policies. Our patent policies. Our copyright laws. Our trade laws. Our importation of low-priced drugs. There are lots of public policies that differentially affect low-income and high-income families. It’s not just the private market. Indeed, if you look at what the private market is doing, if you look at poverty rates across, again, western Europe, counting Australia and Canada and other western industrialized countries, if you look at the rate of poverty that occurred there and here before government policies kick in, before you have tax rebates, tax credits and transfer programs and food stamps, before all those government programs kick in, if you look at the private market-driven poverty rates, they’re about the same. They’re not that different. They’re at 25 percent, plus or minus a couple of percentage points across western industrialized Europe and the United States. If you look at the post-government rates—how poverty falls after government kicks in with food stamps and cash assistance and housing vouchers and all the other public programs—the U.S. does a less good job of reducing poverty than most of western Europe and Canada. Yes, our poverty programs work to some extent, they drive down poverty from where it would be if only the private market were operation, but we don’t do nearly as much as western Europe. So that’s a policy choice. We could look at our fellow countries abroad and mirror what they do, but we choose not to.

What is an example of an anti-poverty policy in Europe that has been proven to work that is not done in the U.S.?

Take France or several of the other western industrialized countries. They pour a lot more money into pre-K and early childhood programs. By the way, in western Europe, people work a lot less. So even if you look at their incomes after inflation—what economists call “real income”—they’re a little bit lower than the U.S. But they’re not hugely lower. And they’re working many fewer hours. So again, they are all kinds of policies that kick in that affect income, purchasing power, etc. Also, unionization plans. If you look at Canada, their unionization laws are rules are very different from ours. Basically the same kind of economic system, not terribly different, but they’ve made different political choices. They’re all reasonable political choices, but they’re just different. So I was quarreling with the notion that the poverty or inequality or other phenomenon that we experience here has nothing to do with government policy, that it’s all about the private market. That’s not true.

In April, New York City Mayor Bill deBlasio released the first Center for Economic Opportunity (CEO) Poverty Measure Report under the new mandate by the New York City Charter requiring the mayor to issue an annual report on poverty. The report acknowledged a need for a new poverty measure to the current official poverty measure, which was developed in the 1960s, based on the cost of a minimum diet. The CEO report includes recommendations by the National Academy of Sciences (NAS) to include clothing, shelter, utilities and food in the poverty threshold measure.{2} Your survey uses the Supplemental Poverty Measure issued by the Census Bureau which also is based on the NAS recommendations. Are there any substantive differences between the CEO report and yours?

No, all of it’s based on the recommendations widely accepted within the economics and public policy professions to move beyond the official poverty standard of the U.S. to a standard that takes account of government programs and regional housing costs and things of that sort. The National Academy reported in the early 1990s to make these changes. What was distinct about New York is that the Bloomberg administration created this poverty office to apply that to New York. What would our poverty rates be and what would we learn if we used a modern definition of poverty? Just to get the highlights: The official poverty measure of the U.S. government is based on pre-tax cash income. Now that sounds like a pretty boring phrase. But what it means it’s not based on are any transfers that poor people receive from the government, because that’s not pre-tax, and also anything that’s received in-kind, anything that’s not received in cash. So, when the government provides food stamps, that does not cut poverty according to the official definition of poverty. When the federal government provides massive tax refunds, which is what Robin Hood does—gets poor families in New York their food stamps and arranges for low-paid workers to get tax refunds—all of those things that government provides are not counted in the official poverty rate, so on that basis, the official poverty rate is too high. There are other parts of what the official poverty rate ignores that work in the opposite direction. So, for instance, it may well be that $10,000 or $12,000, whatever the poverty threshold is for an individual, that income in that range is OK if you’re in Racine, Wisconsin. It may pay your housing costs, it may pay your food bill, etc. But in New York, you’ll exhaust $10,000 in rent alone. It will leave you no money for your food, your pharmaceutical drugs and your clothing and everything else. The official poverty measure pays no attention to differences in regional costs. For New Yorkers, that means that the official poverty threshold is way too low. Even people who are considerably above it can’t make ends meet and are poor. So the official poverty measure is wrong on both ends: It undercounts some people, it overcounts others. The supplementary measure that’s experimental at the federal level and the measures that we use in the Poverty Tracker and what the CEO is using for the city now—they are all making approximately the same adjustments.

The NAS made its recommendations to amend the poverty measure in 1995, but it was only in 2010 that the federal government announced that the Census Bureau was going to be creating the Supplemental Poverty Measure based on those recommendations. It was just two years earlier that the CEO said that it was going to be using those recommendations. Why did it take so long for officials to apply these recommendations?

The gears of government grind slowly, but more importantly, this is heavily political. How many people we say are poor will eventually filter back into legislation. What happens to food stamp legislation? What happens to cash assistance, housing programs for federal, state and city governments? This is a heavily political matter. So it’s not surprising that it would take years before measures are adjusted, before the politics plays out in Congress, and even now, the supplementary measure is essentially experimental. It’s not the official measure of poverty for the U.S. There’s a lot of legislation that depends on what the government reports are poverty levels. Some people will be helped, other people will be hurt, it’ll affect the federal budget.

You created a survey that is longitudinal, collecting information from the same households four times a year over two years. Is that different from how the CEO operates? And what unique insights can be gleaned from taking a longitudinal approach?

The CEO operates with data that exists. Overwhelmingly, their data is relying on the annual census data, the American community survey. The census now exists more than every ten years, it exists every year, obviously a smaller sample. That census data provides most of the information that the city poverty office uses. They’re not doing survey work the way we are. That’s why in many ways we’re having a conversation with them. They could use our information, we could use their help. So the longitudinal data is different because they don’t have that capacity at all. The census data is not longitudinal, it is taking a snapshot, random polls on an annual basis. Therefore, they can’t do what’s unique about the Poverty Tracker. They don’t have a dynamic picture of poverty. They can’t look at an individual family or families and trace what happens to them over time. The richness of this is going to be that we find out in January that you’re poor. What did you do about it? Did you look for job training programs, did you look for emergency food centers. What did you do about poverty? How did you try to solve the problem? Did you give up? Were you successful? All those kinds of pictures about what’s happening to people over time—we’ll be able to capture because we’re going back to the same family over and over again. That’s something you can’t possibly do by just calculating an average of some variable once a year in a random sample. That’s one of the key characteristics of the Poverty Tracker. The other one is that we’ve gone well beyond just tracking income, as in income poverty, we’re tracking all kinds of hardships. All kinds of ways in which you could be well in over your head as a family and not necessarily because your income is dreadfully low. Because of high need, you may not be able to afford your prescription medicines. You may not be able to afford your housing, particularly in a place like New York. You may be running out of money even for food as you come to the end of the month. So there are all kinds of deprivations, all kinds of hardships that we’re tracking that go well beyond merely your income. That’s the other key characteristic of the Poverty Tracker.

The fact that nearly 1 in 4 higher-income New Yorkers experience a severe hardship is surprising.
How will the success of this project be measured?

The information from our survey will be valuable no matter what or how we do it. Let me add a little detail. There’s a subsection of the families that are going to be interviewed each quarter that are participants in programs funded by Robin Hood. Columbia has cleverly created a kind of quasi-control group. We’re also going to interview the neighbors of the participants in the programs we fund on the grounds that the neighbors are pretty like the participants, but they’re not participating. And that’s going to give us some rich information about how successful our programs are at combatting poverty. We hope that because of this longitudinal characteristic, we’ll even be able to track the impact of poverty programs that aren’t funded by Robin Hood. How well are soup kitchens and food pantries dealing with hunger? How well are job training programs doing, whether they’re funded by Robin Hood, the city or other philanthropies? Are they graduation the people who come in? Are they placing them in jobs? Are those people keeping their jobs? There’s a wealth of information that we’re going to be collecting that is going to tell us something about how we collectively—private philanthropies, public philanthropies and city government—are addressing the problem.

What are the unique qualities that the Robin Hood Foundation and Columbia University each bring to the Poverty Tracker project?

We bring a couple things. I’m certainly not bashful about saying the we bring the cash to do this. We brought the resources that make this possible. The analytical expertise about how you form a survey, how you track, how you administer this very complicated longitudinal study—that’s firmly in the hands of Columbia University. We chose, I think, correctly, the survey center that’s best equipped to do this correctly and we will do it correctly. Robin Hood has a habit, perhaps call it a conceit, we prefer to call it a habit, of doing things correctly. And we’ll put the resources behind it so that it is done correctly. That’s really the combination. We’ve also been playing the in poverty game for 25 years. We have a lot of information about what we do, what other charities are doing, what city government is doing, what needs to be tracked, what needs to be improved, where are the vulnerabilities. We bring all that information to the table. And the survey center brings the analytical acuity of national poverty questions, poverty in general, but also, surveying is a very technical, very precise science and that’s their bailiwick.

You mentioned how Europe pumps money into pre-K education. In a 2011 New York Times op-ed, Helen F. Ladd, a professor of public policy and economics at Duke, and Edward B. Fiske, a former education editor of The New York Times, argued that “education policy seems blind to the relationship between poverty and student performance,” linking “the mediocre overall performance of American students on international tests…to the fact that one-fifth of American children live in poverty.”{3}{4} How has Robin Hood addressed the poverty and education link?

Education funds in the United States are overwhelmingly based on capitation across the board. Helen Ladd and others, many public policy experts and economists who study the education system, will tell you that if you’re dealing with heavy concentrations of low-income students, let alone disadvantaged students and learning disabled students, that you’ve got to spend a lot more than the average to get the job done, and so some have argued that we should have a much more progressive distribution of education money to take better account of the cost of getting the job done correctly for different kinds of students. In many ways, what Robin Hood’s role is has been in education in New York City is we’ve funded generously the best charter schools in the city. And we do that because to get the job done for the students who come into those charter schools—and all the charter schools we support are in the lowest income neighborhoods in New York—it’s going to take more than what the city and state provide in per capita reimbursement. So we’re giving them the money that they can stay open for many more hours during the school day, for more days during the school week, for more months during the school year. It’s those extra resources, plus we back the right people, people who know how to use extra resources to get educational achievement. That’s pretty much what we’re doing. In that way, we’re overcoming the political system that allocates education expenses pretty much across the board evenly. We know that to get the job done for the kids in the worst-off neighborhoods and the worst-off schools takes more resources and that’s what we provide.

In February, Edward Poteat, an affordable housing developer, adjunct professor at Columbia University, and author of the Fiscal Cliff which describes the fiscal crisis facing American Cities, wrote an opinion piece arguing that while Mayor DiBlasio’s goal of of preserving 200,000 units of affordable housing in New York City is laudable, his new appointees to his leadership team to spearhead that goal will have a difficult time making it happen. He cites the average rental rate in Manhattan—which exceeds $3,000—and the high demand from the rich to incentivize developers to create luxury rentals and condos instead of affordable housing.{5} How important is affordable housing to the anti-poverty equation as is 200,000 units enough?

Since it’s well larger than any other similar initiative, you have say it’s a stretch call. You can like stretch calls or not, but it’s certainly not a small addition by recent historical or any historical standards. Is it important? Yes. We know that in New York, a scary percentage of the population is spending well more than 40 and 50 percent of their income, let alone the government standard of 30 percent as what a family should devote to housing in order to have enough of their income left over for everything else they need to buy. So is housing crucial? Absolutely. Is that the right goal? I don’t know. I don’t know on what basis one would say yes or no, except that it’s going to be hard enough to meet on its own and recognize that a statement that DiBlasio makes about the goal himself. That’s not something at all controversial. And of course what is controversial is his stated policy that if a developer is going to need some zoning changes or other kinds of programs on their behalf from the city, they are going to tie permission, if I understand them correctly, to building many more units of affordable housing—and from Robin Hood’s point of view, hopefully, low-cost housing—than in previous administrations. Who knows how that’s going to play out. But the answer to your simple question, is housing crucial: yes. Just look at the data that the city put out recently on the percentage of families who are spending well above 30 percent of their income on housing. That does not leave you enough money for clothing, food and everything else.

A coalition of groups and elected officials, including the Working Families Party and 1199 SEIU, are mounting an attack on Governor Cuomo for proposing a $2 billion tax cut that they claim will benefit the rich.{6} This comes on the heels of the Census Bureau’s release of data last September showing that the poverty rate is up in New York City and the income gap is wide.{7} Is New York City becoming a city only for the wealthy?

As a public charity, we don’t comment on politicians and their policy views, so I won’t go down that road. It is true that New York has an unusual amount of inequality by the standards elsewhere in the country or the world. In large part, that is because of the disproportionate impact here of the financial community, which is where the huge gains have been over the last decade or decade-and-a-half. So that’s a function of the fact that we are the financial center of the world. What one does about that and can one channel that to the benefit of others is exactly why we have elections and political disputes. But the fact of the inequality is clear and even the source of it is pretty clear.

What are the main lessons that have come out the Poverty Tracker project thus far?

If there’s one lesson that came out of the initial data from the Poverty Tracker, it’s that, in my mind, a shocking percentage of New Yorkers—something on the order of 60 percent—are finding it hard to make ends meet at some point during the year 2012. And a quarter of the population is suffering from really severe shortfalls that are persistent. That’s really well above anything that we expected to see. And I think any of us should find these very sobering results. At Robin Hood, we are going to be poring over this data to figure out our best response and I would think that the city, other philanthropies and ordinary taxpayers are going to want to rethink this for themselves. But these are serious shortfalls, well beyond the 15 or 20 percent numbers that we use for poverty. It has been an eye-opener.

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ABOUT MICHAEL WEINSTEIN

Michael M. Weinstein holds a Ph.D. in economics from M.I.T. and has served as chief program officer for the Robin Hood Foundation since 2002. He served as the founding director of the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations while holding the Paul A. Volcker Chair in International Economics at the Council. During the 1990s, he served on the editorial board of The New York Times and as the Times’ economics columnist. He is co-founder and chairman emeritus of Single Stop U.S.A., a national nonprofit which helps low-income Americans solve financial problems. Michael is currently writing an intellectual biography of Paul A. Samuelson, the first American Nobel laureate in economics, and writes a syndicated column on public policy for Thomson/Reuters. Columbia University Press published his co-authored book, The Robin Hood Rules for Smart Giving in May, 2013. He co-authored The Democracy Advantage: How Democracies Promote Prosperity and Peace (Routledge and the Council on Foreign Relations, 2004), edited Globalization: What’s New? (Columbia University Press and the Council on Foreign Relations, 2005) and authored Recovery and Redistribution Under the N.I.R.A. (North Holland, 1980).

ABOUT ROBIN HOOD FOUNDATION

Robin Hood is New York’s largest poverty-fighting organization, and since 1988 has focused on finding, funding, and creating programs and schools that generate meaningful results for families in New York’s poorest neighborhoods.  Since its founding, Robin Hood has distributed more than $1.45 billion in grants and initiatives to hundreds of New York City-based soup kitchens, homeless shelters, schools, job training programs, and other vital services that give New York’s neediest citizens the tools they need to build better lives for themselves and their families.  In addition, Robin Hood’s board of directors pays all administrative, fundraising and evaluation costs, so 100% of your donation goes directly to organizations helping New Yorkers in need. More information at: http://www.robinhood.org.

NOTES

{1} Annie Lowrey. “The Wealth Gap in America Is Growing, Too.” The New York Times. April 2, 2014. http://economix.blogs.nytimes.com/2014/04/02/the-wealth-gap-is-growing-too.

{2} Office of the Mayor of New York City. The CEO Poverty Measure, 2005-2012. http://www.nyc.gov/html/ceo/downloads/pdf/ceo_poverty_measure_2005_2012.pdf.
{3} Helen F. Ladd and Edward B. Fiske. “Class Matters. Why Won’t We Admit It?” New York Times. December 11, 2011. http://www.nytimes.com/2011/12/12/opinion/the-unaddressed-link-between-p….
{4} See also Helen F. Ladd’s opinion piece, “How Poverty Hampers Education.” DemocracyJournal.org. July 10, 2013. http://www.democracyjournal.org/arguments/2013/07/to-help-disadvantaged-….
{5} Edward Poteat. “Affordable Housing in New York City—What’s Next.” Planetizen.com. February 20, 2014. http://www.planetizen.com/node/67452.
{6} Beth DeFalco. “Protesters say Cuomo’s proposed tax cuts as just for ‘the rich’.” New York Post. February 20, 2014. http://nypost.com/2014/02/20/protesters-say-cuomos-proposed-tax-cuts-as-….
{7} Sam Roberts. “Poverty Rate Is Up in New York City, and Income Gap Is Wide, Census Data Show.” New York Times. September 19, 2013. http://www.nytimes.com/2013/09/19/nyregion/poverty-rate-in-city-rises-to….

images: Poverty Tracker

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