The Bottom 1%

In the last decade, pioneering work by a group of economists including Thomas Piketty, Tony Atkinson, and others has enabled us to obtain a much clearer understanding of the top of the distribution, by combining traditional survey data with tax data (i.e., individuals’ tax returns). But we have no equivalent solution for revealing what is going on at the bottom of the distribution.

There are plenty of reasons for being skeptical about what surveys tell us about the bottom of the distribution. Two concerns loom large: Are surveys interviewing the right people, and are respondents giving the right (truthful) answers? Some of the poorest people in the U.S. (unregistered migrants, institutionalized populations, people living in informal housing, people on the move, etc.) are missed by surveys, resulting in sampling bias. And there are several reasons why people at the bottom of the distribution may provide inaccurate responses to survey questions, especially those regarding their income. For instance, respondents may be reluctant to declare earnings from informal work out of fear that this would prompt a visit from the IRS.  

What we try to do in our paper is to discern what different estimates of $2-a-day poverty in the U.S. can tell us about the characteristics of the country’s poor. For instance, we obtain lower estimates of poverty when we extend the reporting period over which income is assessed. This suggests that a significant amount of $2 poverty appears to be temporary. Like Luke and Kathryn, we obtain lower estimates when we include various government benefits and tax credits in our definition of income. This tells us that these programs are making a critical difference for millions of individuals—at the very least, the difference between living above or below the $2 threshold.  

R.R.: What might we gain from further research into such extreme poverty? Why is it important to improve our understanding of what this poverty looks like?

L.C.: First and foremost, I think there’s a moral obligation to get a better handle on the condition of the poorest people in the country. If we accept a shared responsibility for the poor in our society, then surely that responsibility is greatest for the poorest of the poor.

There’s a lively political discussion underway, sparked in part by the 50th anniversary of LBJ’s declaration of a War on Poverty, as to whether the government’s approach to tackling poverty is working and how it might be strengthened. There is some suggestive evidence that welfare reforms over the past two decades did most to assist those living just above and below the poverty line, while doing little for those furthest below the line; and that the deepest poverty in the U.S. is becoming more prevalent. If there is to be another round of welfare reforms, it is imperative that these are informed by good empirics and a thorough understanding of the condition of America’s poorest people.

One of the points we make in our paper is that even if these people have their most basic material needs met, they may be deprived in other important ways. A reliance on in-kind transfers can leave people virtually excluded from the cash economy and with little agency to address unexpected needs. We describe this in our paper as a state of purgatory. These are the sorts of challenges that need to be understood and addressed if poverty is to be overcome.  

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Rebecca J. Rosen is a senior editor at The Atlantic, where she oversees the Business Channel. She was previously an associate editor at The Wilson Quarterly.

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