Working Paper: NBER ID: w26532
Authors: Richard V. Burkhauser; Kevin Corinth; James Elwell; Jeff Larrimore
Abstract: We evaluate progress in President Johnson's War on Poverty relative to the 20 percent baseline poverty rate he established for 1963. No existing poverty measure fully captures poverty reductions based on these standards. We fill this gap by developing an absolute Full-income Poverty Measure (FPM) whose thresholds are established to obtain this same 20 percent official poverty rate in 1963 while using a fuller measure of income and updating thresholds each year only for inflation. While the official poverty rate fell from 19.5 percent in 1963 to 10.5 percent in 2019, our absolute FPM rate fell from 19.5 to 1.6 percent. This reflects increases in full income throughout the distribution, with real median income more than doubling between 1963 and 2019, together with the expansion of government transfers and tax benefits not fully captured by the official measure. It is also broadly consistent with the expectations of President Johnson and his Council of Economic Advisers, including Robert Lampman who predicted in 1971 that poverty based on these absolute standards would be eliminated by 1980. However, we also show that reductions in relative poverty since 1963 have been far more modest, falling from 19.5 to 16.0 percent in 2019.
Keywords: poverty; income measure; government transfers; tax benefits; economic growth
JEL Codes: D31; H24; I32; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Absolute Full-Income Poverty Measure (FPM) (I32) | Reduction in poverty from 19.5% in 1963 to 16% in 2019 (I32) |
| Expansion of government transfers and tax benefits (H29) | Reduction in poverty (I32) |
| Real median income growth (O49) | Reduction in poverty (I32) |
| Absolute Full-Income Poverty Measure (FPM) (I32) | More accurate reflection of poverty trends (I32) |
| PCE index adjustment (C43) | More accurate poverty measurement (I32) |