Does Provo, Utah, really have the seventh fastest growing poverty rate in the nation?
The truth is, I don’t know. But a new report from the Brookings Institution, which gives the city its seventh-place ranking and received considerable publicity this week, doesn’t bring any reliable clarity to the question.
It has to do with how we measure poverty in this country, which hasn’t changed since the mid-‘60s,
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and with how we measure wealth.
A new report for the Tax Foundation by economist Alan Cole explains why surveys like this are, for the most part, useless. They rely either on Census Bureau or IRS statistics. Those are useful for a number of purposes, but not for measuring poverty. “This is in part because of the lack of context,” he writes. You can’t measure a person’s wealth by the snapshot of one year. A construction worker, for instance, may earn more than a college student in a particular year, but that hardly tells the entire story. In a few years, the situation likely will be reversed.
NPR illustrated this in a story last year that featured a Fordham University student who was receiving $15,000 a year from his parents to cover college costs and had a job earning him another $8,000. It compared this to a single mother, living in the same area, who struggled to support her 17-year-old son on a $23,000-a-year job.
The government considered the college student to be below the poverty line, but not the single mother.
Maybe you’re a step ahead of me and can already see the problem with poverty in Provo.
Large student populations always skew the picture. That is true in any college town, but it is especially true in one with an institution as unique as BYU. Many students in Provo are married with children. Not only are their incomes temporarily low, their children qualify for the federal free lunch program. The Census says Provo’s poverty rate is about 20 percent higher than the rest of the state, and homeownership is 25 percent lower. No surprise there, if you think about it.
“To be sure, Brigham Young’s high population of college students might make Provo look especially poor,” a report on the study published by the Business Insider website said, but it noted that other university towns had lower poverty rates.
That’s a quick brushoff for a very real variable that the Tax Foundation would argue makes the Census data useless for the conclusions drawn.
It’s not the only problem. According to Cole, a great deal of income never shows up on tax returns nor is counted by the Census. This includes 401(k) values, IRAs, unrealized capital gains and appreciation on owner-occupied houses.
These are real sources of income and wealth. A home provides shelter and is a potential source of money. Even someone below retirement age can borrow against a 401(k). But the point is people are accumulating wealth in these instruments each year. They get counted, however, only when someone cashes in.
Also, unrealized private pension benefits equaled $18.9 trillion in 2013, the Cole report said. “None of that money has yet showed up on an individual tax return.”
Add to this the fact that a dollar is not worth the same in one part of the country as in another. According to the Tax Foundation, residents of Washington, D.C., pay about 25 percent more to live than the average American. Cole uses these figures to demonstrate how, contrary to conventional wisdom, people in Kansas actually have higher average incomes than people in New York, when adjusted for purchasing power.
All this is not to say Provo doesn’t have a problem with poverty. It may, indeed. It’s also not to say that Boise, Idaho might not really have the second fastest growing poverty rate, even though Business Insider calls it a “Midwest” city (it’s about an hour’s drive from Oregon).
It is to say that many researchers are, as Cole says, “cavalier about the limitations of income data, especially income as defined for tax purposes.”
This would be a minor concern, except that the figures and formulas are being used to divvy up government spending on anti-poverty programs.