The Levels and Trends in Deep and Extreme Poverty in the U.S., 1993-2016

Recently, there has been tremendous interest in deep and extreme poverty in the U.S. We advance beyond prior research by using higher-quality data, improving measurement, and following leading standards in international income research. We estimate deep (measured as less than 20% of medians) and extreme (measured as less than 10% of medians) poverty in the U.S. from 1993-2016. Using the Current Population Survey, we match the income definition of the Luxembourg Income Study and adjust for underreporting using Urban Institute’s TRIM3 model. In 2016, we estimate 5.2 to 7.2 million Americans (1.6-2.2%) were deeply poor and 2.6 to 3.7 million (.8-1.2%) were extremely poor. While deep and extreme poverty fluctuated over time, including declines from 1993-1995 and 2007-2010, we find significant increases from lows in 1995 to peaks in 2016 in both deep (increases of 48-93%) and extreme poverty (increases of 54-111%). We even find significant increases with thresholds anchored at 1993 medians. Adding homelessness, deep poverty would be 7-8% higher and extreme poverty would be 19-23% higher in 2016, which suggests our estimates are probably lower-bounds. The rise of deep/extreme poverty is concentrated among childless households. Among households with children, the expansion of SNAP benefits has led to declines in deep/extreme poverty. Ultimately, we demonstrate that estimates of deep/extreme poverty depend critically on the quality of income measurement.

Whither the Concept of Income?

Since the 1970s, the decision-usefulness has taken center stage and our attention has been concentrated on valuation of assets and liabilities instead of income measurement. The concept of income, once considered the gravitational center of accounting has lost its primacy and become a byproduct of the balance sheet derived from the measurement of assets and liabilities. However, we have not been equipped with robust conceptual foundation supporting theoretically reasoned accounting measurement. It is not only theoretically but also practically important to renew our seemingly waned interest in the concept of income because ongoing reforms of accounting standards cannot be successfully implemented without a sound understanding of the concept of income.