Intro. [Recording date: April 20th, 2021.]
Russ Roberts: Today is April 20th, 2021, and my guest is economist Bruce Meyer with the McCormick Foundation, Professor of Public Policy at the Harris School at the University of Chicago. He was last here on EconTalk, talking about the middle-class poverty and inequality in October 2011.
I want to thank Plantronics for providing today's guest with a Blackwire 5220 headset.
Bruce, welcome back to EconTalk.
Bruce Meyer: Pleasure to be here.
Russ Roberts: Our subject for today is poverty and, in particular, we're going to start off talking about what is sometimes called extreme poverty, drawing on a recent paper you've written with Derek Wu, Victoria Mooers, and Carla Medalia in the Journal of Labor Economics. The title of that paper is "The Use and Misuse of Income Data and Extreme Poverty in the United States." Extreme poverty is usually defined as what?
Bruce Meyer: So, the most common definition of extreme poverty is those who are living on less than $2 per person, per day. Others have used other definitions--less than $4 a day. And, others have accounted for taxes and in-kind benefits. The most standard definition really doesn't.
Russ Roberts: All right, so we're going to talk later about a distinction between what people earn--in income, say--in earnings, in income, in kind--that is, food rather than dollars.
But, I want to start about going back to a 2011 and then a 2013 study by a sociologist Kathryn Edin and Luke Shaefer, that got a lot of attention. And I want to read a couple of quotes. This came on my radar screen, I started hearing about how the United States, actually has something of a third-world country aspect to it. And this was part of a general argument that 'Oh, sure: The overall economy has done well. But, the people at the bottom aren't getting any of that. Only the rich are benefiting.' There's a whole bunch of different stories and so-called stylized facts. But, I want to share a couple of quotes, the kind of impact that these studies made.
The Edin and Shaefer study was the $2-a-day threshold you mentioned. There's another study I'm going to mention that mentions the $4-a-day threshold that you also mention, because that corrects for standard of living--excuse me, cost-of-living differences maybe between the United States and other countries and it's an attempt to make it comparable.
So, here's the quotes. The first one's from Slate Magazine Online; Jordan Weissmann wrote the article.
In a wildly influential 2013 study, two sociologists upended that assumption [about extreme poverty--Russ]: Kathryn Edin and Luke Shaefer showed that by 2011, there were 1.6 million U.S. households with children that for at least part of the year, had cash incomes that put them below the $2 per person mark. The number had risen from 636,000 in 1996--a 152.9% increase.
Edin and Shaefer later turned their paper into an acclaimed book, $2 a Day: Living on Almost Nothing in America.
Then, I'll just add, that book was reviewed the New York Times by William Julius Wilson, a very respected sociologist, who called it 'essential and a call to action.'
Then, Angus Deaton, Nobel Prize winner in economics, been a guest on the program, said,
According to the World Bank, 769 million people lived on less than $1.90 a day in 2013. Of these, 3.2 million live in the United States.
So, 3.2 million Americans are living on less than $2 a day. And then he goes on to write,
The Oxford economist, Robert Allen, recently estimated needs-based absolute poverty lines
that use the $4 a day measure. And then he wrote--Deaton writes--
When we compare absolute poverty in the United States with the absolute poverty in India or other poor countries, we should be using $4 to the United States, $1.90 in India.
Once we do this, there are 5.3 million Americans who are absolutely poor by global standards.
Are these numbers--when I heard these numbers, I was highly skeptical. But, I thought, 'Well, it's in the data.' Should we believe them?
Bruce Meyer: No, you shouldn't. And it's hard to know where to begin with just how misleading those numbers are.
The problem is, if you look at the very tail of the distribution, there's a good chance you're looking at outliers, often errors. And that's exactly what's going on here.
So, in the end, what we argue is that you really shouldn't be looking that low in the distribution because you're very likely to be looking at errors.
We take the survey data that these authors, in fact, were using, and we link it to tax and government program data at the individual level. And we then look to see what income is recorded in tax records and government payment records from social insurance and welfare programs. And we see that a tiny fraction of these individuals can't be ruled out as having much higher income--only a small fraction.
So, we start out reproducing the kinds of numbers that Edin and Shaefer and Angus Deaton reported that you described, Russ. And, you get numbers, something like 3% of people are below $2 a day when you just take the numbers at face value from the survey.
But, when you incorporate administrative data and you use the survey data more appropriately, you can see that the vast majority of these individuals really have much higher incomes. And, that's confirmed by looking at other indicators of well-being like the quality of housing those individuals are living in, the appliance ownership, the difficulty paying bills. You see that many of the people that were previously classified as below $2 or below $4 a day, in fact, have characteristics in terms of their housing and ability to pay their bills that make them look more like middle-class.
Russ Roberts: So, let's first get a feel for these magnitudes--because it's not like, 'Well, yeah the number is actually a little smaller.' It's actually a lot smaller.
So, I noticed in the first article that I quoted, the author is very careful to say that cash incomes put these people below the $2 per person mark. Now, it could be that those cash incomes are not measured accurately. But, your first point is simply that cash income isn't the only thing that determines whether people live poorly. You care about what their consumption level is and that can be augmented by government welfare programs such as food stamps.
I'm going to push back on that claim, but for now let's stick with that claim--that we should include food stamps and health care and other in-kind transfers from the government. When we just do that--because there's also people lie about how much income they have or they misremember. But, when we just add in the in-kind transfers--food stamps and health care and other types of benefits--how much does that affect the measure of extreme poverty that we start with?
So, we started with--you said 3%? Three percent of the American people? That's a very large number. That says that roughly 10 million Americans are living in extreme poverty, less than $2 a day. How much does that change when you just add in the food stamps and the other in-kind benefits?
Bruce Meyer: So, it goes down by more than half once you account for in-kind benefits. We only account for SNAP [Supplemental Nutrition Assistance Program] and housing benefits; we don't account for health insurance. If you accounted for Medicaid and Medicare, that would reduce the number quite a bit. But, we don't do that in our analysis.
It turns out that whatever you account for first tends to matter more. So, you could account for in-kind benefits like food stamps and housing, which in truth are what most--those two together constitute most of what low-income people spend their money on. So, it makes a lot of sense to account for those two if they're provided by the government.
But, if you instead just corrected money income first, using the administrative data, you still would cut the number by more than half, just bringing in the administrative data on cash income first.
Russ Roberts: Explain what you mean by administrative data. So, these people in extreme poverty, there's a survey of households that these numbers are based on. They go around they ask people how much money did you earn last year? How much money did you earn in the last x weeks or whatever it is? And people report a number. You're saying you correct that number? If so, how do you do it?
Bruce Meyer: So, people don't like to respond to surveys; and survey response rates have been going down dramatically over time. What is more problematic for what I'm doing is that when people respond to the survey, they're often not willing to talk about things like their income. Income turns out to be more sensitive in surveys than people's sex lives. They're more willing to talk about sex than their income.
So, you have this problem that just using the survey reports will give you very misleading information. And, it's not because people necessarily are trying to hide something, or they're lying. I think of it as the interviewer and the respondent are both very busy and they just skip over things.
So, we find that even pensions--half of pensions aren't reported in these main surveys that the census produces, that we're talking about and we're using here.
Russ Roberts: How do you know that? How do you know that half? Explain how you would correct for that.
Bruce Meyer: Sure. For the past 15 years, I've been working with census data where you link the individual census records that have been anonymized but a code has been attached to them, so that you can then link them to tax records and program records from SNAP and housing programs and Social Security and Medicaid and Medicare; veterans' benefits, welfare, cash welfare benefits, as well. We link these tax records and government records to the individual survey records. And we can see that about half the people that receive a pension according to the tax records that appears on a tax form called the 1099-R--that you might or might not be familiar with: That form indicates who received a pension. And if you go and look and see in the survey record whether or not those individuals, in fact, reported pension income, you see about half of them didn't.
Russ Roberts: So, that's what you mean when you say you use the administrator data. These other source of information, you can correct the census data or other surveys that have come up with these measures of poverty. Is that right?
Bruce Meyer: Exactly. And we have to link these data sources in a protected environment, where all of the records have been anonymized, so we don't see names or addresses. And, we've gone through training to make sure that we do not disclose anything that we see in the data that could potentially reveal an individual's information.
Russ Roberts: So, you mentioned two things that make a difference. One is: people don't report all their income, either out of privacy, forgetfulness, whatever. So, that's one measure. The second thing is you do want to care if you're trying to measure the standard of living that people have, whether they have access to things other than cash. So, food stamps, housing benefits, health benefits, you could argue. You didn't include those but you could argue, but you didn't include that.
Russ Roberts: Is there anything else big that we want to correct for that you have information about?
Bruce Meyer: Yes. A lot of people have substantial assets. You might think, 'Well, the poor don't have substantial assets.' But, our point is that these individuals are being misclassified as poor. They're not, in fact, poor.
So, we do exclude people with substantial assets that they could draw upon so that their standard of living would not be below the $2 or $4 a day level. In fact, the individuals that have high assets that we say are not poor, when you look at their housing and the appliances they own, they look like middle-class families. They don't look at all like poor families. Their standard of living is way above that of the poverty line. It looks more like the standard of someone a little bit above average income.
Russ Roberts: But that's somewhat subjective--right?--about what's adequate or what assets are substantial. So, the question I would have is the following. Some of the other folks are claiming 10 million people are in extreme poverty.
Russ Roberts: What's your best estimate of what that number actually is, based on the work you've done?
Bruce Meyer: Well, I, in the end, don't think the number that we come up with is what you should rely on. In that, I think of it as probably an overestimate. So, we come up with a couple hundred thousand individuals; but we're using incomplete administrative data. So, we aren't accounting for people that are receiving unemployment insurance, or a TANF [Temporary Assistance for Needy Families], or--
Russ Roberts: Which is a welfare program--
Bruce Meyer: Which is a cash welfare program.
And, we are not accounting for people who are receiving Workers' Compensation, which is a $40 billion program for those who are injured or ill on the job. And, we haven't taken account, in this version of the paper, for people that have capital gains. Now, you may say, again, 'The poor don't have capital gains.' But in a way, that's our point. A lot of the people that have substantial assets, some of it often we don't see in the survey, will then have capital gains on tax records. And, when we use those, we again, see that a large share of the people who--in another project, we see a large share of the people who looked like they were at the very bottom, in fact, aren't.
Russ Roberts: So, you've confirmed my bias: that there is no one in America more or less living in extreme poverty.
However, you would also, I think, concede that you don't have much data on homeless people. They tend not to answer surveys. They don't get surveyed by the census reliably. So, it could be that the actual number is not, say, a few hundred thousand, but closer to a million maybe, and conceivably--right?--possibly; we don't know. But, your number is an under-count in that sense, correct?
Bruce Meyer: Yes. We should have a separate conversation about the homeless at some point because this project caused us to do a whole line of research on the homeless. Who, as you point out, Russ, generally are not surveyed in the main census surveys. They are included in the decennial census. So, we take data from the 2010 census and we then are able to closely look at the homeless population in follow-up work to this paper that we're discussing. Many people who heard us describe this research said, 'Well, what about the homeless?' And, the Edin and Shaefer work and the Deaton work starts from surveys that don't generally include the homeless.
Russ Roberts: Correct.
Bruce Meyer: And, we started from those same surveys, but we wanted to do a more comprehensive examination of this issue. So, we then examined the homeless population, using other census surveys. The Decennial Census from 2010 and the survey called the American Community Survey [ACS] that surveys the homeless.
Russ Roberts: At least tries to, yeah.
Bruce Meyer: At least tries to. None of these surveys do a super-good job of serving the homeless: it's a very hard population to track down. But, I think maybe we can talk about this work at another time.
But, I think we are able to get a pretty good picture of the situation of the homeless. And the best estimates of the homeless population in the United States at a point in time is a little over half a million. That's from the HUD [Housing and Urban Development] Point-In-Time count. The Decennial Census gets a slightly lower number but in the same ballpark.
Russ Roberts: There's a lot to say about that--like you say, let's put that out for another time. You could argue that the presence of 500,000 or more even homeless people United States is an indictment of the American economy. I think it reflects other problems that are not based on the economy.
I want to put that to the side. I want to talk about just this work that we're talking about now on the non-homeless--people who are typically surveyed annually. What kind of reaction did you get? You're arguing that: it's not 10 million; it's actually closer to, say, 200,000; and it might be zero. That's a big difference. Do people go, 'You're wrong, or did they say, 'I guess we overestimated it?' What was the reaction?
Bruce Meyer: There was a variety of different reactions. There were some people that said, 'Well, that these surveys have to be right. They're Census Bureau surveys; people have been using them for decades. And, to that we respond, 'Well, people are misusing them. You shouldn't trust the very bottom of the distribution, because it's very easy for someone to not report one category of income that may be their main or their only source.' And if they do that, they're going to look like they're almost living on nothing--which is essentially what Deaton and Edin and Shaefer have done here.
And, the other reaction we get is, 'Well,' leaving aside the homeless that we've already covered briefly, 'if you're paying rent, you have to have more than $2 a day. If you're a single individual, you can't rent a place for $60 a month. You can't find a place for a family of three for $200 a month. So, it just doesn't make any sense.' And we've had that reaction, too.
Russ Roberts: Explain that. I don't understand that. What doesn't make any sense?
Bruce Meyer: That people could be getting by on less than $2 a day because, leaving aside the homeless, people are paying rent. And so, you can't find a place to rent generally for less than $2 per person per day.
Russ Roberts: So, those people are agreeing with you?
Bruce Meyer: Yes, those people are agreeing.
Russ Roberts: Right.
So, that's part of the problem I have with these claims is that, unlike many actual Third-World countries, so-called Third-World--we'll call them poor: countries with large numbers of poor people--there aren't large numbers of people in America living in shanties, hovels, huts. Open to the elements the way, tragically people do, in the poorest countries in the world.
And, most people in America have access to lots--not most people: an enormous proportion of Americans--have access to what you, as you point out, are usually but at least considered middle-class appliances. And it wasn't that long ago that people, even in America, and in other developed countries, didn't have access to running water: they might have an outdoor bathroom. They wouldn't have air conditioning, for sure.
But those things have pretty much become ubiquitous, widespread in America--indoor plumbing, access to appliances, washers and dryers. And, even among people who are measured as poor, their consumption level is fairly robust.
So, this claim that actually there are people living in the same situation as the poorest people in the world right here in America, seem to me to be greatly exaggerated. And, you're saying it was.
Bruce Meyer: So, you mentioned, it was greatly exaggerated by these studies. And, the studies were, in fact, very misleading in saying that there were these large numbers of people actually living on less than $2 a day or $4 a day.
And, you point out that what it means to be poor is very different in the United States today than it was in the United States 30 or 50 years ago or in less developed countries.
One of my favorite ways to show that is to look at various housing characteristics. And, how you don't have to go very far back in time for the bottom 20% to have the housing characteristics that the middle 20% used to have.
So, for example, now, if you look at those with incomes in the bottom 20% of the distribution--which isn't that different from the poor population, officially, which in 2010 was 15%: a lot of our data is from 2010 and it's more recently--the poverty rate is around 11% or 12%.
But, if you look at this bottom 20%, 90% have air conditioning, either central or a room unit. And, the middle class, or the middle 20%, had 90% about seven years ago.
If you want to look at the size of people's apartments or homes, you have to go back about 30 years to when the middle class--the middle 20%--had that size of an apartment in terms of number of rooms--
Russ Roberts: That the bottom 20% have in 2010--
Bruce Meyer: That the bottom 20% have now, in actually, 2019. So, that's based on 2019 American Housing Survey Data.
Russ Roberts: Well, let's talk for a minute about Consumption versus Income, because I think it's really--some situations, some questions, one is appropriate, and others a different measure is appropriate.
If we wanted to say, 'How badly do the bottom 20% live in the United States versus poorer countries?' consumption would be the relevant measure. Issues like access to air conditioning--which is not unimportant. I just saw a chart that the number of people who die in heat waves has been falling steadily around the world, especially in the poorest countries. It's a wonderful thing, that it's gotten--fewer people are dying. So, air conditioning is not just a luxury: it can be a lifesaver in certain settings, for older people, especially.
But when you just look at--people will say, 'A country as rich as the United States but have people this poor is an injustice.'
So, if you want to answer that question, you want to look at consumption.
But, a second question would be: 'How is the economy doing? Is it creating opportunities for the least-skilled people to join the economy and to rise?' That would be another thing you would care about--not just their level of poverty at a point in time, but how well they can do going forward.
And, in that situation, you might not want to look at food stamps as a measure of the performance of the economy. That's a government program. You might want to just look at income--in which case, correcting for food stamps does give a cheerier picture, maybe, than we should have when we think about the overall effectiveness of the economy.
Bruce Meyer: Well, I'm a strong believer that we want to account for what the government has done to reduce poverty over time. And, the main things that the government has done are increased in-kind benefits like food stamps or SNAP [Supplemental Nutrition Assistance Program], housing benefits, health insurance through Medicaid, and also through tax credits--the Earned Income Tax Credit [EITC] and the Child Tax Credit.
The standard measures--the ones that Edin and Shaefer sometimes refer to and the official poverty measure--don't account for any of those: things that we've done to reduce poverty over time by providing supplements to people's cash income, through the Earned Income Tax Credit and Child Tax Credit--and supported their ability to pay for housing and food through SNAP and housing benefits.
So, I can see[?concede?] that if you're looking at ability to pay for other things, the fact that you have SNAP and housing benefits don't really answer that question. But, food and housing are just so basic and they constitute a majority of what people spend their money on, even middle class people. So, I want, in most cases, to account for those benefits provided by the government.
Russ Roberts: Well, I understand the argument, but I'm thinking about a different question, I think.
So, let's take somebody who is earning the minimum wage in a place where there's no state minimum wage. So, they're earning about--and, say they're working full time, which is often maybe not the case. But, let's say they're earning say roughly $15,000 a year. And they might be married with a child or they might be single. That $15,000 a lot of people would say, 'Well, you can't live on $15,000 in most major American cities. There's something wrong with an economy that can't provide a reasonable standard of living for a person who works full-time. Therefore,' will say--people would argue, 'we need to raise the minimum wage,' or, 'we need to give them food stamps or other programs that would augment that.'
And that is not--it's true that there aren't so many poor people in the United States when you include those things. But, it's also true that the economy itself, the productivity of our citizens working in the mainstream economy, aren't taken care of by that alone. They need help. That would be a relevant thing to know.
Bruce Meyer: If you look at how many people are employed at low wages, that, in part, depends on what benefits are available for those who don't work.
If you focus on, say, single mothers, we've seen a huge increase in their employment. The employment of those single mothers with little education was about 45% in the early 1990s, and it went up to 75% by the end of the 1990s, with the changes in welfare, which supported work by making Medicaid more available for single mothers and their children. The Earned Income Tax Credit [EITC] was greatly expanded so that the person that you mentioned that was earning $15,000: if they had one child, they would get about another $5,000 more from the Earned Income Tax Credit. And they could get up to almost $7,000 from it, depending on how many kids they had. And they would also get money from the Child Tax Credit, so that their after-tax income would actually be considerably higher than the $15,000.
So, we've seen big increases in employment of those that we incentivized and supported to work with welfare reform, through EITC, Child Tax Credit, Medicaid, additional child care funds that were made available with welfare reform.
And, the debate on what's happened to wages at the bottom: In recent years, wages have been doing quite well at the very bottom, in the last few years. And there was a period in the 1980s and 1990s where they were doing pretty well, in the 2000s. So, it's not an area that I'm prepared to give you the best statistics on.
Russ Roberts: Bruce, you're just too cautious. I talk to you, I read your work, and I read the other side. And, I can see[?concede?] that I'm sympathetic to your outlook. But, I find it difficult and I'm curious--this isn't a question about emotional response. I read it over and over again a certain narrative. The narrative is: The rich get all the gains; nobody else is getting ahead; the rest of us are just treading water. The number of extremely poor people, not just is large but it's growing. No one except the rich share in the benefits.
The whole system--if that's true, by the way, we should have a revolution. And, there are people who are angry about their situation or the situation of others. But, I find that those books and essays and pieces are relentlessly cherry-picked. They've taken the worst-case scenario.
I'm going to pick on, just for take an example because I think it's important. I don't know if I've mentioned it before, the work of Raj Chetty and his co-authors. They're very careful. They conclude, after doing an immense amount of complex statistical analysis, that young people in 1980 have only a 50%--born, I think, in 1980--have only a 50% chance of getting ahead of their parents--which means that 50% will do worse than their parents--as opposed to, say, people who were born in 1950. Suggesting that somehow the system has become dysfunctional and only the richest people benefit from it.
Now, they provide a lot of data. And when you look at their data--and they have an Appendix where they talk about how sensitive that conclusion is to various results--akin to what you've done with other people's work. And when you look at their data in their Appendix, they say, 'Well, actually if you change this assumption and that assumption, it's not 50% are going to do better than their parents: It's 70%.' Well, 50% and 70% are really different.
There are other assumptions you can make, too, by the way. Whether you've measured inflation accurately is one thing they've partly corrected for; but you don't know if it's accurate.
But, basically, the bottom line is sensitivity of their actual results are incredibly sensitive to the assumptions they've made.
And similarly, people who have claimed that America has extreme poverty--there's an enormous range of assumptions that you have to make to get to that result. But, they've only looked at the ones that they get the most pessimistic and depressing result. Those are the ones get waved around, those the ones that the media talks about.
And I get--I'm getting worked up right now because it bothers me that scholars take the worst-case scenario and don't remind their readers that it could be more complicated.
Now, again, to be fair to Raj Chetty, he does tell you, at least, that in the Appendix, and he does mention it in the body of the paper.
But, what the New York Times reports on and relentlessly reminds their readers of is that, 'No, only half the American people are going to get ahead of their parents and the other American Dream is dead.'
Now, I don't know whether the American Dream is dead. I think it's a really complicated question. And I don't want to look at my situation or my children or my neighborhood. I understand that the world is a complicated place.
But, to think that somehow, by taking the worst-case numbers and making the most pessimistic assumptions that you can possibly make, and not reminding people that, for example, 'This is a snapshot and not the same people over time.' Or we're not reminding people that, 'Oh, well, this is--at some point during the year they were poor but not, of course, for the whole year,'--that just strikes me as not very scholarly. I get a little frustrated. Maybe you hear that.
You seem a lot calmer than I am. Are you okay?
Bruce Meyer: I find some of the evidence frustrating. I think the evidence on the extent to which people no longer are able to earn more, live at a higher standard of living than their parents, is overstated.
I am not a sufficient expert on those numbers that I want to wade into them. But, I'm happy to wade into the numbers about poverty. And, I will admit, I am troubled that the 50% number that you cited for the share of people that can expect to be better off than their parents is still highlighted on the Opportunity Insights website--even though I think it's misleading because it doesn't account for family size and doesn't account for some other factors like the under-reporting of income in the CPS [Current Population Survey] that's used for those analyses which would make the number more accurate and higher for the share of people that can expect to be better off than their parents today.
So, I think that there is a tendency in the profession to be uncomfortable reporting good news. That, you seem more serious if you're reporting bad news.
So, people who report good news are taken to be Pollyannas and ignoring the bad things that are going on around them. But, I think there is a lot of things that have improved over time. And, we need to report things accurately and indicate what has improved and what hasn't. And, the material wellbeing of those at the bottom has dramatically improved over time. And that's indicated by looking at consumption. It's indicated by looking at income that's corrected for under-reporting. It's indicated by looking at the quality of housing people are living in, which is a very clear and objective measure of how well-off people are.
Russ Roberts: Just to make a strange footnote to that observation about housing: I'm often influenced by Alain Bertaud and his book on urban planning and our conversation on EconTalk. I'm very sympathetic to the idea that our housing in some settings is too large. The government mandates a minimum apartment size--they've actually punished the poor. So, I wish actually we had more freedom for the poorest people, the youngest people, to choose smaller apartments than they actually have now.
Russ Roberts: But, putting that to the side, I want to take your point about Pollyannas to heart because I think it's important. I would never want to say, 'Well, everything's fine, actually. This is ridiculous, all these negative stories.' I think there are a lot of things that are disturbing.
And in particular, I do think there is a significant number of people who struggle to find meaningful work in America because they are poorly prepared for the modern workforce. They got a lousy education, they don't have the intangible skills that many of us learn from friends and family that are useful in the workplace. And as a result, they're unlikely to escape the bottom 20% or at least less likely than I wish they were, given their handicaps. Whether that's racism, or whether it's just a lousy school, or whether that's due to racism isn't really to me relevant. What's relevant is they're not prepared and they are punished for it by the fact that they struggle to find productive work.
And, I'd like to see us think about that more broadly, rather than these questions of that 'Oh, we're like a third-world country. The whole thing needs to be torn up.' I think the whole thing works pretty amazingly well for most people but we shouldn't ignore the people it doesn't work well for. And we have to try to help them.
Bruce Meyer: I agree with you.
And, this relates to current trends and current discussions on Universal Basic Income [UBI]. I think Universal Basic Income would be a mistake: that, we want to encourage people to work, to get an education, to find meaningful things to do; and not support people who are not working and discourage them from working. And, we want a system that targets those who really are deprived and can't work and disadvantaged--those who are disabled, have a lot of young kids and can't work; those who are elderly. We want a system that targets those who are really needy because a Universal Basic Income would be inadequate for those who are really needy, and would discourage work and be too costly for those who don't need the support because they can't work.
So, I think the approach that we're headed towards, which is providing assistance through the tax system rather than through individuals, social workers, caseworkers that can find education for those who need it, or training, and find childcare for those who need it to be able to work. That's a much better system than just writing checks for everyone. Because, you want to figure out how people can be engaged with society: They could be working or doing something else productive, not just living off of checks mailed to them.
Russ Roberts: Yeah, I don't want to--you mention meaningful work. I think that's the essential thing, is: meaningful work. It's not so much productive. I don't really care that everybody "contribute" to, say, GDP [Gross Domestic Product], which is sometimes the way I think it gets parodied. It's sort of, 'No, everybody needs to contribute.' I think we all need to contribute as human beings, to each other. There are many ways we do that, some of them with your work, some not through work. But, for many people work is one way they find meaning in life.
I want to try to give the benefit of the doubt to the people who support the Universal Basic Income. I think some of them would argue, if they were here, that, 'Well, the system just doesn't provide a decent enough standard of living for so many people.'
And, I think part of what your work is about--and other people courageously trying to look at how sensitive various results are to various assumptions--is, what you're saying is 'Well, let's see how big the problem actually is.'
You know, it's funny how artificial intelligence [AI] was going to put all of us out of work a few years ago. I'm surprised--I'm working still. I think you are, too. There was going to be MOOCs [Massive Open Online Courses] and only about seven people would have to teach economics. Those things--that's Massive Online Courses--those things haven't happened so much yet. Maybe they will. You know: 'Driverless cars are going to put taxi drivers and truck drivers out of work, could be millions of people who have nothing to earn income from. So, we've got to have this basic bottom line.'
And I think, I say again, I think what your work is saying is: I want to see how big a problem it is before we uproot a very complicated system that has effects that you probably don't fully understand.
Bruce Meyer: So, I think that that's exactly right: that we need to have a system that encourages people to find meaningful things to do.
And, what we find in our research is that the current safety net already reaches a much larger fraction of people than official numbers indicate. And the poverty reduction of existing programs is much greater than officially advertised.
So, many fewer people are falling through the cracks than would be indicated if you just naively used what's reported in the surveys. Because, a large fraction of people getting SNAP, Unemployment Insurance, cash welfare, pensions, Social Security--SSI--don't report it, or it's not recorded in the survey because the interviewer went through things too quickly. So that, if you take these survey reports at face value, you'd think that people have much lower income, and many fewer people are receiving government benefits that are. And, you would conclude that we're missing many people with the safety net, that we, in fact, aren't.
Russ Roberts: Yeah: I do think we have to be careful. I don't want--when I think about these questions, I don't want to then say, 'So, everything's fine.' Again, I don't think everything's fine. I think there's a lot of things we could do to make the world better for the people at the bottom. I think we ought to spend our time very relentlessly focused on the parts that would actually help them and to help them help themselves. Rather than to just give them money, although I understand--
Russ Roberts: Yeah, go ahead.
Bruce Meyer: So, I should describe this big project that we're working on.
So, this paper that you are mainly interviewing me about is part of what we call the Comprehensive Income Dataset, or CID, Project, that looks at income by joining tax, program, and survey data. And, it also looks at who is missed by the safety net.
And, we are trying to figure out who, in fact, is left behind and what programs are, in fact, not reaching people that they should reach.
One thing that we do find is that there are about half a million people who are homeless at a point in time. And, those individuals--we can see by looking over time at their income- and program-receipt--they aren't having a bad day or a bad month or a bad year. We can see that they're having a bad lifetime in the data. So, that these individuals who are homeless, it's generally not a transitory, bad situation. It's that they've had low income for many years and will have low income for many years afterwards.
And, they also tend to be fairly connected to government programs.
So, we find that about 80% of the homeless who are in shelters are receiving food stamps, and about 70% of those who are unsheltered--who are on the street--are receiving SNAP. And, quite surprisingly to some--I think less surprising to others who are more familiar with the homeless population--about half of those who are homeless have some formal work that you can see on tax records in the year that they're homeless. So, they tend to be more connected to the labor market and more connected to government programs than you might think.
But, the standard of living and the deprivation of those who are homeless is fairly pronounced and long-term. And, we can see that quite clearly in the data that we've assembled.
Russ Roberts: I have always assumed that homeless people struggle to get government benefits because they don't have an address--literally. And then when they go--some don't want to deal with an office. They don't want to go be interviewed. They don't want to be asked to do anything. They want to be left alone. And, I've often said there's something beautiful about our country and that we leave them alone. There's something sad and tragic about the fact that we leave them alone. No one--we don't in many cities in America now we just let people live on the street. I'm not talking about the shelter, now. I'm talking about people who physically have no place other than the sidewalk, or wherever, or a park. There's something magnificent that we say, 'That's okay'; and there's something sad about the fact that no one says, 'This isn't really so great. Maybe you should come live with me.' Or, 'We should find a way for you to live differently.'
But, I think a lot of the homeless people, like, in that setting, are either unable to integrate themselves emotionally into what might be called normal life, or don't want to. Others, of course, are tragically unable to do things they might want to do.
But, I'm surprised that those folks who are out on the street can get SNAP, food stamps, or anything like that. Am I misunderstanding?
Bruce Meyer: No, you're not. I mean, the money can just be added to an electronic benefit card. They can get correspondence at a post office, at church, at a friend or family's house. A large share of the homeless--in fact, we find that about 75%, including those in shelters, those who are not--are receiving food stamps in the year they're homeless. So, there's--
Russ Roberts: That's amazing. Is that a relatively new phenomenon? The electronic card is--has to be, to some extent.
Bruce Meyer: That's fairly new. But, we look back before 2010--I think the earliest we look is like 2006 or 2007--and the numbers are pretty similar. So, there's some connection to government support. A large share receive Medicaid; a large share of the homeless do, as well. So, the most common benefits for them to receive are SNAP and Medicaid.
Russ Roberts: How confident are you that you have a decent access to: "the homeless?"
In other words, on any one night, there are people sleeping under bridges, sleeping in alleyways, sleeping on sidewalks. There's little tent cities last time I was in Seattle on exit ramps of the highway, the grassy area. There are people who set up tents there. How do we--do you think you've got a decent measure of that population, given that they're not attached to a physical place?
Bruce Meyer: I think it's really hard to study the homeless population.
I think we've done, I think, a better job than anyone has because we've had access to data at the Census Bureau that others--no one has accessed before.
And, the census makes great efforts to find people in shelters and interview them. It also interviews 200,000 people that are unsheltered homeless at soup kitchens, mobile food bands, and what are called targeted non-shelter outdoor locations--essentially encampments and smaller places where homeless individuals might be.
So, the numbers are not exactly the same as the numbers from other data collection methods, the HUD [Housing and Urban Development] Point-In-Time count.
But, they're not wildly different to make me think that our numbers are not a good indicator of the conditions of those who are homeless more broadly.
So, I agree that it's very hard to capture the circumstances of the homeless because they often are mobile. They're trying to hide. So, there are a population that is very difficult to get accurate information on.
But, I think what--I could describe to you in more detail in another interview--I think what we have is by far the best evidence on the circumstances of the homeless at a national level and on--for--a large fraction of those who are, in fact, homeless.
Russ Roberts: I look forward to that next conversation when you get some more data from that study and more findings from that study.
Russ Roberts: Let's close and just talk about two different narratives and get your take. So, my narrative--which I've sketched out earlier--my narrative is the U.S. economy allows a lot of people to thrive, both financially and in non-material ways. And in fact, I think you could argue that we have one of the most successful economies in history, if the goal is to create material well-being. I don't think that's the only thing we should care about, of course. Listeners know I care--I think that's a really bad idea to only focus on that. But, if that's what we're talking about, the U.S. economy over the last 75 years has delivered incredible improvement in overall standard living that is widely shared. That's my narrative.
I'm very worried about the people at the bottom. I'm very worried about the people who don't have access to decent education. I think that's a tragedy. And that's separate conversation about why that tragedy is.
But, I do think we have betrayed a number of poor children in America by not giving them much of a chance to thrive. And we've also betrayed them, I think, through various policy decisions, such as the minimum wage. Which I think makes it hard for them to get started. Reasonable people disagree about that; I totally understand that.
But, the other narrative--the other extreme narrative--is: The system is broken. And we can look at the Trump and Sanders success electorally, which shows that this is a major problem: That there are large numbers of people who feel left behind or betrayed by the current economic system.
Now, neither of those is probably correct. It's probably a mix of something in between. But, how do you see your work in addressing either of those? Or, is that unfair?
Bruce Meyer: I think it's unfair, in that I am more focused on whether we're doing a good job of satisfying the material needs of people and what their material circumstances are. And, I think that we are doing a better job of that than the official narrative indicates. Which leads me to say we need to focus more on the types of things that you're talking about: making sure people have an adequate or better education; and people are connected to work, and if they aren't able to get a job, to make sure that they have a place where they can get skills so that they can.
I think at this point we're doing a pretty good job of providing cash income and in-kind benefits to the vast majority of people who are low-income. We're certainly missing some, and there are some holes in the safety net, but they're not as big as I think some have argued. But, we need to do a better job of connecting people to education and training and work than we currently are.
Russ Roberts: But, when you conclude--and we'll end on this--when you conclude that the current system actually does a better job than people think--or than the survey data suggests or than the narrative suggests--providing material wellbeing for the people at the bottom, which is what you studied. God bless your purpose, I think it's a fantastic thing that you understand your limitations and you're honest about them. It's fabulous. That's what you understand.
The question it raises is: even for those people at the bottom, who the system's working pretty well for, it doesn't sound like you want to replace it with a more European-style welfare system. Instead of this patchwork of SNAP and TANF and SSI and EITC and all these acronyms. Why wouldn't you want a more streamlined system without all this administration and complexity like, say, many European countries have, that would just take care of people at the bottom?
Bruce Meyer: So, I think we could make the system more streamlined. But, we need to have humans involved in figuring out what is the best services- and cash-income, potentially support from the government for people depending on their circumstances? The idea that we can just give up on tailoring a package of support and services to people and just write them a check, I think is a fantasy that we--
Russ Roberts: Why? What's wrong with that?
Bruce Meyer: Because people are different. Some people need just some temporary assistance because their car broke down or they were evicted. Others need training. Others need childcare. People who are elderly or disabled need long-term cash support if they aren't going to be able to work.
So, we need to be able to tailor the benefits to people's needs, rather than try and just throw our hands up and say we're just going to give everyone cash and that's going to solve the problems. It's not going to solve the problems, because some people need drug treatment or mental health treatment. Or, need help with an abusive spouse. There are more complicated issues that just cash alone won't solve. And, you need to have social workers involved in the process.
And, sure, you could make the applications for these programs much simpler. They are way too complicated. You could streamline things. But, you need to have people involved to help others find productive things to do with their lives, not just cash a check.
Russ Roberts: My guest today has been Bruce Meyer. Bruce, thanks for being part of EconTalk.
Bruce Meyer: Thank you, Russ. It was a real pleasure.