Defining Poverty in an Era of Extreme Inequality
*Names in bold indicate Presenter
I argue, based on studies of consumption and firm behavior, that US economic life is no longer centered on the median person. This is reflected in the sets of goods and services provided by the market, which are increasingly targeted at higher income consumers. I then propose two modifications to the standard relative poverty metric that allow it to reflect the way the economy has shifted due to rising income inequality in general and income divergence between regions of the country in particular.
Trends using the updated measure diverge sharply from those using standard poverty metrics. While the standard relative poverty rate has been fairly stable over time, trends using the updated measure show a dramatic rise in economic exclusion. Further, when updated to account for income differences across the country the new measures show much higher rates of poverty in high income areas.