U.S. consumption poverty has fallen 27 percentage points since 1980

Story: 2024 C.E.  |  Last updated: January 10, 2024

A major new study from researchers at the University of Notre Dame finds that American poverty has declined far more sharply than official statistics suggest — dropping 27 percentage points since 1980 C.E. when measured by what families actually buy rather than what they report earning. The findings, published in the Annual Report on U.S. Consumption Poverty: 2022, offer a substantially more optimistic — and, the researchers argue, more accurate — picture of economic progress over the past four decades.

At a glance

• Consumption poverty: The U.S. poverty rate fell from 33.8% in 1980 C.E. to 6.0% in 2022 C.E. when measured by household spending on food, housing, transportation, and other goods — compared with only a 1.5 percentage point drop in the official income-based measure over the same period.
• Poverty measurement: Researchers drew on data from the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey and the U.S. Census Bureau’s Current Population Survey to build a consumption-based alternative to the federal poverty line.
• Anti-poverty programs: Over six decades, the researchers found poverty was reduced through a combination of Social Security expansion, refundable tax credits, broader safety net programs, greater educational attainment, and overall economic growth.

Why the official number tells an incomplete story

The federal poverty measure — the one that shows up in most news coverage — is based on income. That sounds intuitive, but income is a noisy signal. It spikes when stimulus payments arrive and collapses when employment dips, even if a family’s actual standard of living barely shifts. Consumption, by contrast, measures what people are genuinely able to purchase and use in their daily lives.

“Government surveys miss many income sources that are important to those struggling to make ends meet, and income varies for many reasons that are unrelated to well-being,” said James Sullivan, professor of economics and director of the Wilson Sheehan Lab for Economic Opportunities at the University of Notre Dame. Sullivan co-authored the report alongside researchers from the University of Chicago and Baylor University.

The team identified three specific flaws in official poverty accounting: imprecise inflation adjustments to the federal poverty line, a narrow definition of what counts as income, and biased methods for measuring family resources. Each flaw, the researchers argue, causes the official statistics to undercount real progress.

What actually drove the decline

The 27-point drop in consumption poverty didn’t happen by accident. The researchers traced it to a range of overlapping forces: expansion of Social Security benefits transformed outcomes for older Americans, who once faced some of the country’s highest deprivation rates. Refundable tax credits like the Earned Income Tax Credit directed money into working households at tax time. Broader educational attainment lifted long-term earnings. And sustained economic growth created more opportunity across the income spectrum.

The pandemic years illustrated the difference between the two measures in real time. Income poverty appeared to fall sharply in 2021 C.E. and then spike in 2022 C.E. — a pattern many analysts attributed to the expanded Child Tax Credit. But Sullivan’s team found that stimulus payments, not just the Child Tax Credit, drove much of the income swing. Consumption poverty, meanwhile, declined steadily through both years, because many families saved portions of those transfers rather than spending them immediately, smoothing out their actual standard of living.

A cleaner signal for policymakers

The researchers release updated consumption-based poverty reports each year to coincide with the Census Bureau’s official report, creating a parallel data stream at povertymeasurement.org. The goal is to give policymakers and the public a more reliable read on whether interventions are working — in closer to real time than academic research typically allows.

That kind of feedback loop matters. Poverty measurement methodology, as Brookings Institution researchers have documented, shapes everything from program design to political will. When the official numbers suggest that four decades of policy effort produced only marginal gains, it’s easy to conclude the effort isn’t worth making. When consumption data shows a 27-point drop, the conclusion shifts: sustained investment, carefully designed, produces real and lasting results.

Progress has not been evenly distributed. The Urban Institute’s poverty research consistently finds that gaps between white, Black, and Hispanic Americans in poverty rates have narrowed over recent decades but have not closed. Structural disparities in wages, housing costs, and access to capital remain beyond what safety net programs alone can address. Rural communities and post-industrial cities have also seen slower gains than metro areas with stronger labor markets.

The 27-percentage-point decline since 1980 C.E. is not a signal that the work is finished. It is evidence that the work has been effective — and that continuing it, rather than dismantling it, is what the data actually supports.

Read more

For more on this story, see: Futurity — Consumption poverty in the U.S. has fallen 27% since 1980

For more from Good News for Humankind, see:

• The global suicide rate has fallen by 40% since 1995
• U.K. cancer death rates are down to their lowest level on record
• The Good News for Humankind archive on economic justice

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