Poverty rate: Are Americans really poorer than in 1960?

Poverty rate rose to 14.3 percent in 2009, but government figures don't capture very well the long-term rise in living standards.

By , Business editor

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    A woman stocks up on bread at Sacred Heart Community Center in San Jose, Calif., Sept. 16. The ranks of the working-age poor climbed to the highest level since 1959 as the recession threw millions of people out of work last year. The poverty rate jumped to 14.3 percent.
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Poverty shot up last year in the United States with one in seven Americans falling below the poverty line. And it's likely to get worse, because unemployment remains stubbornly high.

But the poverty rate, as calculated by the US Census Bureau, only tells part of the story.

It makes it easy to figure out that a shocking number of Americans – nearly 44 million – couldn't afford a minimal basket of goods. That's the highest total since 1959.

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What these numbers don't capture very well is the long-term improvement in living standards. And that has big political implications.

"There are so many people out there who have used for political arguments [the idea] that we've lost the war on poverty," says James Sullivan, a professor of economics at the University of Notre Dame in South Bend, Ind. "Maybe we haven't won the war on poverty, but in terms of long-term changes in deprivation, there is considerable evidence that we have made long-term progress there. And that evidence is just missed in the official numbers."

A major problem is that by strictly looking at income, as the Census Bureau does, the poverty measure doesn't capture the changes in consumption patterns.

Consider, for example, all the things that people, even poor people, have come to take for granted that didn't even exist in 1959: countertop microwave ovens, touch-tone phones, cellphones, personal computers, the Internet, e-mail, GPS systems, air-cushioned running shoes, CDs, DVDs, videogames, and modern ATMs. [Editor's note: This sentence was changed to reflect the fact that bulkier, under-the-counter microwave ovens did exist in 1959.]

Some of these items may not necessarily qualify as progress. But by focusing on consumption patterns, Dr. Sullivan says, researchers can at least get a more realistic handle on what's happening with people's living standards. And there are signs of progress since 1959 (or 1960, when the census came out), he adds.

For examples, back in 1960:

  • A 21-inch black-and-white Philco tabletop TV cost about $1,800 in today's dollars and could receive only a handful of channels;
  • A refrigerator with freezer cost the equivalent of $1,510 in today’s dollars;
  • A two-speed automatic washing machine, primitive by today's standards, cost the equivalent of $1,100;
  • Only 12 percent of homes had air-conditioning (versus 84 percent last year);
  • Only 8 percent of the population had completed four years of college (versus 27 percent today).

Not everything was more expensive back then. People didn't have to pay for television or ring tones. By 1960's standards, it would cost 30 cents to mail a letter today, not 44 cents.

Even there, however, strict comparisons don't offer a complete picture, Dr. Sullivan says. Many people have replaced hand-written letters with e-mails or text messages because they're cheaper and faster.

Modern Americans may pay for cable television, but they have 30 to 60 times the channels that were available in 1960. They have a cellphone bill but can call from anywhere without extra charges for long-distance calls.

The challenge now is that those 50 years of progress have come crashing to a halt, analysts say.

"The great recession is a significant setback," Sullivan says. "At least as I see it right now, there's no evidence of us coming out [of it] in the short term. There's a lot that needs to get back on track before we continue to make strides in fighting poverty."

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