How much do poor households in the United States make? This is not an easy question to answer, but estimates are available that account in various ways for cash earnings, tax credits, government benefits, and so forth. Here are three estimates for the 10th percentile of income (i.e., poorer than 90% of all households):
The Survey of Consumer Expenditures (2020) places the cutoff for the bottom decile at $28,000. However, this accounts only for actual expenditures, not benefits like Medicaid that are paid directly by the government.
The Congressional Budget Office (2018) estimates that the average of the bottom 20%—which is probably close to the cutoff for the bottom decile—is $38,000. The median would be a little lower, or maybe around $35,000.
Clinton McCully (2010) placed mean consumption of the bottom quintile at $57,000. Median consumption would be a little lower than that, so figure that it's around $50,000 or so.
So we have three rough estimates:
- $28,000
- $35,000
- $50,000
The first one is clearly low since it leaves out some government benefits, and the third one is likely high due to its methodology, which uses NIPA accounts and probably casts too wide a net. The most likely number is around $35-40,000.
Another way of looking at this is the bottom decile as a fraction of the median for the entire country. Here it is:
- 58%
- 51%
- 74%
Roughly speaking, then, we can say that a household at the 10th percentile—in other words, quite poor—consumes about $35-40,000 per year in cash and benefits, which is about 60% of what a middle class household consumes.
"Roughly speaking, then, we can say that a person at the 10th percentile—in other words, quite poor—consumes about $40,000 per year in cash and benefits, which is about 60% of what the middle class consumes."
So, a family of four in the "quite poor" category consumes $160,000 a year! Something doesn't compute.
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CBO has it as income per household.
To be accurate and able to compare apples to apples (insofar as that's even possible given the distribution of household size and household formation), this needs to be a measurement of households not persons.
40K consumption for a family of 3 or 4 sounds about right to me. Why?
Because poorer people are less likely to even use their Medicaid. Why? Because it's inconvenient af and they're likely to only use it in emergencies.
Because it tracks, roughly, with the cost in my industry (supportive housing) to house a single person for a year (~32K in my county, which is wealthier and the rent more expensive than nearly all counties in the US), and about two thirds of that cost is housing and food, plus wrap-around services like healthcare. These programs are only available to those earning less than 50% (or in some cases less than 30%) of the Area Median Income (as well as they probably had to have been homeless, must have a disability, etc.).
Because other benefits, such as SNAP and WIC, are really not that generous, and the baseline wage levels are low. Even with a $15 minimum wage, if you only get 20 hours per week that's only 15K per year, before any taxes (would likely be below the federal tax bracket, but there are others). The EITC can be, in absolute dollars per household terms, but it scales with both not-being-as-poor (earning more = bigger EITC) and household size.
But this sort of statistic points out to me why class warfare politics aren't salient on their own, without: because the American standard of living, even for the very poor, is high enough that people who are poor just adopt coping mechanisms (some of which are commonly referred to as the psychology of being poor, or "how I learned to stop worrying and that people who are poor blow their tax money on iphones and new cars") - instead of rebelling against the oligarchic overlords. Salt in some Fox News and right wing lies-masquerading-as-populism and, well...
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Sorry, my mistake. This is households throughout. I've corrected the post.
I feel like this is totally disconnected. Stop before you get yourself into trouble, KD.
Disconnected from what?
Just as judging the "wealth" of Millenials on adjusted income- instead of actually looking at what they can afford- is misleading, so is this.
The only meaningful question is: what must the poorest do without?
If we were serious about a ‘war on poverty’, we would fund an ‘intelligence agency’ at levels like the Defense Intelligence Agency, to gather really good community-based data. I agree that what’s important is disposable income after necessities, which could be positive or negative.
This reminds me of when folks would argue that compensation for workers was quite generous because they'd include healthcare premiums paid by the employer, nevermind that in the US that's sort of like throwing good money after bad because the price for healthcare is so much higher than it should be.
In the 1990s I had a job that was fun but underpaid, some years my "raise" would get swallowed up by increases in health care premiums. I really should have left the place sooner than I did.
At this level, I think there is a real mixture of populations, with really different profiles.
On key population in the bottom 10% is the "dual-eligible" population--the elderly poor (eligible for both Medicare and Medicaid.) The CDC numbers are 12.3 million dual-eligibles, and the average household size is small--this population is probably close to half the bottom decile.
I think the "consumption" of the whole bottom decile may seem higher than it is for anyone under 65 in the bottom decile, because of the very high costs of the elderly poor in nursing homes.
Good point. The elderly should be treated separately for these analyses. They need to shed assets years prior to needing a nursing home, i.e. transfer assets to their kids, to be eligible for Medicaid. Otherwise, nursing home care will eat through all their assets. Note, not all states help with nursing homes for the elderly--or their payout is such that nursing home will not accept it.
What is the minimum cost of living, i.e. what is the disposable income for each group?
What to people need? Food, shelter and ???
1. access to healthcare
2. smart phones--needed for 2-factor authentication, public transit (cash still accepted--but no change given!), etc.
3. broadband. Sure, the library computers might be available to help apply for aid, do taxes, etc. Gov't has moved online--so people need to too.
4. Transit. Which increasing means a phone and....
5. credit card (or debit?).
The Care and Feeding of Humans.
Don't mix up deciles and quintiles! The Clinton McCully number is the lowest quintile (20%), not decile (10%).
good catch....
The CBO data is also quintiles...only the BLS data is in deciles
When you have estimates this disparate and give no actual grounds for picking one over another, there is no reason to assume that the average is the "real" number. Just admit that you don't have enough data to decide. Maybe somebody working on a longer timescale than Kevin's could explain why there is so much difference and what the best guess is.
Good point--but does pose the quandary of how to make decisions with imperfect information. And even with the data present, you have to evaluate its usefulness. The initial reaction does tend to be the Goldilocks approach--that one's to hard, that one's to soft, this one is just right...
In this case, as Citizen99 points out, the some of the data is in quintiles, some deciles....so....
Looks like a classic labor shortage to me. Low end is being forced higher but squeezing established incomes.