A recent viral essay claims that a typical household needs $140,000 per year to live. The current official poverty line of $32,000 for a family of four, writes Wall Street portfolio manager Michael W. Green, amounts to “measuring starvation.”

The claim is startling, but economists say it doesn't add up.

Dr. Jeremy Horpedahl says Green is wrong for three main reasons: He ignores changes and improvements in how poverty is calculated, drastically underestimates how much income Americans have, and dramatically overestimates how much people need to spend on basic items.

Scott Winship with the American Enterprise Institute notes that there are multiple measures of “poverty” done by the federal government. And no matter which one you pick, “far fewer Americans are poor today than in the past.”

Americans tend to be spared the problems experienced by poor people around the world. People in the United States, including the poor, spend less of their household income on basic necessities like food. Americans are less likely to experience nutritional deficiencies, live in overcrowded homes, lack health care, or have no access to transportation. In other words, people today are far more likely to have access to genuine necessities than they used to be.

So why did Green’s claim find so many supporters?

A key reason is that as income has increased, people spend more on everything that’s available. Trying to measure poverty by what people can spend or even are spending on necessary items is not telling us as much as measuring what items actually cost. Measuring spending patterns may only show how much more people are willing to spend because a household has extra income. Measuring costs helps us gauge actual material poverty.

Poverty measurements that consider average spending on necessities like food, clothing, housing and cars often show that people are getting richer and spending more. The best way to determine poverty is to measure what the basic necessities actually cost and figure out if people can afford them. Accurate measures must also include all household resources, including government programs.

There are measures of poverty that attempt to do that. But the recent viral essay does not. Neither do other measures that make a splash in the media, like the United Way’s ALICE methodology. ALICE claims to be a better measure of poverty, but it doesn’t measure what it says it does, primarily considers average spending rather than necessary spending, and ignores other measurements as well as historical context.

Many people feel it’s tougher to get by today than it used to be. But this may be due to societal differences rather than material ones. If we want to know how much families are really struggling, we’ll need to look at better assessments.

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