Politics

Bernie’s Poverty Delusion: America’s Poor Are Richer Than Europe’s Middle Class

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Guy Bentley Research Associate, Reason Foundation
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During the first Democratic presidential debate, Sen. [crscore]Bernard Sanders[/crscore] claimed the U.S. “has the highest rate of childhood poverty of any major country.” But according to economist Ryan McMaken, Sanders is just plain wrong.

Data from the U.N. agency UNICEF, shows that the US has a lower child poverty rate than other first-world countries, such as Spain and Israel. But Sanders is incorrect on a more fundamental level when claiming Europeans are better off than Americans thanks to a host of social programs and entitlements.

Most international organizations define poverty as earning below 60 percent of the country’s median income. “So, if you’re in Portugal, and your household earns under 60 percent of the median income in Portugal, you are poor. If you are in the US and you earn under 60 percent of the US median income, then you are also poor,” McMaken explains in a recent post on the Mises Institute blog.

The key detail to note is that median incomes and what they can buy vary greatly between different countries. McMaken graphed the median income of countries belonging to the Organization for Economic Cooperation and Development, adjusting for purchasing power. McMaken’s graph also takes into account taxes, benefits paid to households.

Median Household Incomes Compared

Median Household Incomes Compared (Credit: Mises Institute)

The graph shows that there are only three OECD countries that have a higher median income than the US – Switzerland, Norway and Luxembourg. Not even Bernie Sander’s much love Denmark can beat America for median household income.

America doesn’t just come out highly on median incomes, however. Even poor Americans earn more than the median income in many OECD countries. On McMaken’s second graph, the green bar represents the level of income at which Americans are classified as poor.

Poverty level in the US vs median income level of other countries

US Poverty Level Vs Median Income Levels (Credit: Mises Institute)

The graph shows that a poor person in the US is better off than a middle-class person in no less than 10 other OECD countries. Furthermore, the level of income that would classify you as poor in America is within touching distance of the median income for some of the richest countries in the world like the U.K., Japan and Italy.

“Social benefits included, Americans have higher incomes at both the median level and at the poverty level, when compared to most other countries,” says McMaken.

Because the OECD’s poverty measures are relative, it looks like there are more poor people in America than other advanced countries. But when looking at the figures in terms of how much money people earn and what they can buy with their money, the U.S. trumps most of its developed peers.

“In other words, even if the poverty rate in Greece were zero percent, all those non-poor median Greek households would be poorer than a US household at the poverty line,” McMaken adds.

Rather than being a measure of how poor Americans are in dollars and cents, the poverty stats used by most global organizations are a much more accurate reflection of inequality than they are of living standards.

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