These two sentences in David Henderson’s excellent essay today at Tech Central Station caught my eye especially:
A section of the Census report titled "Dynamics of Economic Well-Being"
reports that if one used just a two-year period to measure poverty [rather than a single year], the
stated poverty rate would be lower. What this means is that for many
poor people, poverty is short-term.
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I find this odd.
Don't some measures of poverty count someone if they entered into poverty during that year?
Wouldn't 2 years mean they would count more people?
I suppose a 2-year average income window would indeed lower poverty rates. Wouldn't it also lower things on the highest end?
What would be really interesting is if someone who signs a book deal and gets a $5,000,000 advance (yes, that is an extremely high advance for a writer, so what?) in one year, and then receives zero royalties in the next year, and receives a single $10,000 speaking fee in that second year and the next year too.
Income in year 1: $5,000,000. Top 1%.
Income in year 2: $10,000. Bottom decile.
Income in year 3: $10,000. Bottom decile.
Just a thought. Perhaps we should indeed average out individual incomes over two or more years to avoid such misreadings of what is really happening. Then we can see how many truly poor people we really have, and to what extent the top 1% is a result of an exceptional year instead of recurring income from stock options or other bonuses.