How's That Welfare State Working Out For You

Note: Lots of updates at the bottom

We have all heard that the US is backward vs. our much more enlightened bretheren in Europe on income inequality.  The general argument is that US is somehow a worse place because out income inequality is higher than in most European countries.

My reaction has always been, so what?  Why should I care about how well I am doing vs. the richest folks.  Shouldn't I care more how I am doing on an absolute scale?  And in fact, on an absolute scale, our poor are doing better than everyone else's poor, and better than many nation's middle classes.  I thought this analysis of poverty was interesting:  It is the number of people (per million) in a county living on less than $11 per day  (lower number and rank is better)

Per Capita Population Under $11 per Day

Poverty1

So, nations of Europe, how is that welfare state working out for you?  Socialist paradise Norway is 20 times worse!  How long will your poor be happy being told that, well, yes, the poor in the US are better off than you are, but you should feel better, because our rich in Europe are doing much worse than the rich in the US.

PS- Stats from NationMaster.com, a database of country by country statistics of all sorts.  Cool site, which also has a state by state counterpart.

Update:  Now that I have had time to poke around, I cannot find this data in the sources quoted, so it must be considered potentially suspect.  The sources quoted actually try to make the point that US lags Europe in fighting poverty, so the conclusion of the chart above is not even consistent with the sources.  (my guess is the data comes from the Luxemburg Income Study). However, it is interesting that this source material makes the same mistake I am trying to correct for here:  That is, it defines poverty as a percentage of the median income in the particular country, rather than an absolute value, such that a country can have poor who are better off but still fail on the metric.  You can see that here, where US has high poverty as on a "percent of median income" definition, but since we have the highest incomes in the world, it effectively gives the US the highest poverty bar to clear.

Here is what I am looking for:  Ideally, I would like to find a comparison of the median income say of the bottom quintile of each country, compared in absolute dollars on a PPP basis across countries.  I would like to see the number both before and after government transfer payments.  Europe, in their welfare economies, do better on poverty metrics when government transfer payments are included (and I am almost sure the chart above is before government transfer payments).  However, I would argue that for the long term health of the economy, you would like to see how the poor are doing before these payments.  Ultimately, and I will borrow a bit of environmentalist language here, this is going to be the most sustainable economy, where the poor gain wealth on their own, not from the welfare system.  In fact, the welfare state, and this was my original point, actually suppresses self-earned income of much of the poor by eliminating the incentive to work.  That is why I still think the chart at the top may be correct.

Update #2:  One other difference between the US and European nations is that we are much more open on immigration (yes, it may be illegal, but we pretty much still allow it).  These immigrants, legal or not, are counted in our economic and poverty stats.  If we assume there are about 15 million mostly poor illegal immigrants, plus millions of other quasi-legal immigrants, plus millions more who got amnesty in the 1980's, these immigrants add at least a fast five percentage points to any poverty metric the US is measured on. 

I have been surfing tonight, and it seems there are a ton of studies showing that US poverty is growing for some reason.  Duh.  Tens of millions of absolutely poor people, mainly from south of the border, have come to the US over the last several decades.  It is no secret all these immigrants are poor -- that is why they are coming here, to find something better for themselves.  Of course we have had a surge in poverty - we have been importing it like crazy!  I happen to be pro-immigration, but I am fed up with these studies that try to pin the blame on growing poverty in the US on government transfer payment policy.  It's the immigration, stupid!  Several studies particularly lament the fact that childhood poverty is rising in the US.  Can anyone think of a way this might be correlated to tens of millions of strongly Catholic Mexican immigrants, each and every one committed to large families?

  • j

    "Per capita Population"??? That metric doesn't even make sense. Also purchasing power is relative, btw. So unless you adjust those $11 using a relative scaling factor, you may be comparing apples to oranges. The adusted average income per capita for Norway is over $10K more than in the US, which means the average Norwegian is doing much better than the average American.

    However, I think the question comes down to: Which country would you rather be living on $11 a day? At least with $11 a day in Norway you still get free college, free health care, and depending on your earning bracket and/or if you are student you get free housing. So those $11 go much further than in the USA where you still have to pay for your tuition, health care, and housing.

    Coupled with the fact that as stated above, the average Norwegian makes over $10K more a year than the average American, I am guessing that them Norwegians like their welfare state just fine.

  • bob

    Have I missed something? If the USA has 300 million people then according to this there are 12 people who make less than $11 per day. Compared to Norway who has 4.6 million, that means that there are only 4 people who are that poor. Wow that must mean that hardly anyone is that poor.

  • Jussi Hämäläinen

    I hate to say it, but this a statistically illiterate posting by the Coyote.Even in Norway, the chances of actually finding a person earning just 11 bucks a day are less than one in a million.In other words,effectively zero.You should put up the whole income curve; focusing on the far end tells us nothing about the real world.In any of these countries, working more than an hour a day earns you more than 11 bucks, even in the shittiest jobs.

  • http://www.goesping.org/ Ed Heil

    Nationmaster.com has it wrong. The numbers it uses as absolute totals seem to already be percentages. (if Nationmaster.com was right, there would only be 72 people living in absolute poverty in Mali -- http://www.nationmaster.com/graph/eco_pop_und_1_a_day-economy-population-under-1-day#source - compare that to the numbers here http://library.thinkquest.org/05aug/00282/over_world.htm#africa). Much more likely, it's 72 percent of the population.

    So the Nationmaster.com graph is comparing (% in poverty ) / population, when it thinks it's comparing (absolute # in poverty) / population.

    If that is correct and Nationmaster.com is using percentages as if they were absolute totals, then the relevant graph is this one --

    http://www.nationmaster.com/graph/eco_pop_und_11_a_day-economy-population-under-11-day

    and it puts the U.S. near the unfortunate top and socialist Norway near the coveted bottom.

    Looks like that welfare state actually is working out for them pretty well, at least by this measure.

  • Nick

    Whether the US is high or low in relation to poverty, to me, is not important. Social mobility is what strikes me as critical in a free society. I'd much rather live in a society where freedom and opportunity coexist with minimal government intervention.

  • Jody

    Ed - you're wrong and nation master is right, or at least if Nationmaster's absolute totals are correct as you suggest they are, then their percentages are correct.

    Norway has about 4.5 million people. Your absolute graph says 4.3 million people in Norway live on less than $11/day. That's 93-94% or 0.936 million out of every million less than $11/day as shown in coyote's screen capture. The US with 13.6 million living below $11/day translates into about 4.6% (13.6/300).

    So yes, there are more people in poverty in the US than in Norway, but as a percentage of the population the US is much less than Norway.

  • Jussi Hämäläinen

    Ed and Jody, you are both wrong!

    Jody,That latter graph that Ed linked to with totals doesn't refer to millions of people,it's the total number.Not 4,3 million, just 4.3 people!Norway is a rich country,you know.

    Ed,the samples here are so small as to be statistically insignificant.The researchers did not go to Norway and find 4,3 poor people, it's an extrapolation based on the estimated curve of income distribution.All of the data here is well within margin of error and thus meaningless.

    In other words,the data here tells us nothing.

  • dearieme

    "Social mobility is what strikes me as critical in a free society." But it's surely a mere assumption that mobility is highest in the USA: does it stand up to scrutiny?

  • http://www.goesping.org/ Ed Heil

    Jody, nothing you said in your comment accurately reflects anything I meant to say, so let me try again.

    I strongly suspect that this graph --
    http://www.nationmaster.com/graph/eco_pop_und_11_a_day-economy-population-under-11-day

    gives the *percentages* under $11 a day, not the *absolute numbers* as it appears to.

    The graph linked to above in the article would then be "the percentage in poverty divided by the population," which is a meaningless number.

    I base this on the fact that similar graphs nationmaster provides for "under $1/2/4 a day" make sense only if they are interpreted the way I suggest.

    If my guess is true, then the graph this article links to is irrelevant and misleading.

  • http://www.belligerati.net OneEyedMan

    "the average Norwegian makes over $10K more a year than the average American"
    This was a surprise to me so I tried to validate this fact.

    This is what I found instead (source Wikipedia):
    PPP per capita
    Luxembourg 69,800
    Norway 42,364
    United States 41,399
    Some national per capita income levels

  • http://www.goesping.org/ Ed Heil

    Sweet! I found the original research this graph is based on.

    http://scholar.google.com/scholar?hl=en&lr=&safe=off&client=firefox-a&cluster=12351373352853024822

    The numbers given *are* percentages of the population living in "poverty" where "poverty" is defined "using the official US poverty line". Yes, Australia has 17.6% poverty by that measurement, the U.S. has 13.6% of its population in poverty, and Luxembourg 0.3% of its population in poverty by that measure.

    The paper in question does not mention a "$11 per day" figure but it is the source cited by nationmaster.com and its numbers (percentages) are the figures given by nationmaster.com.

    Case closed.

  • dearieme

    I say, I say, I say, what has Sweden got that Norway hasn't?

    Good neighbours.

    (Popular Norwegian joke)

  • Jody

    I'll take Ed's original source citation as the definitive word as well...