Rent-Seeking in Poverty Statistics

It’s no secret that the Official Poverty Measure (OPM) reported by the Census Bureau is practically devoid of meaning. For one, its only measurement of income is pre-tax income. So, it completely ignores the effects of anti-poverty programs, since it doesn’t account for the effects of food stamps, of welfare, of even the Earned Income Tax Credit! If it doesn’t even reflect the measures taken by the government to combat poverty, then what even is its use! This useless tool, though, is the primary measure used by politicians in determining government benefit allocation.

So why haven’t politicians started using a better measure? Not for a lack of alternate measures, there are plenty. One explanation is rent-seeking. Changing the poverty measure results in winners and losers. A new poverty measure would mean a reallocation of benefits. So, if the new poverty measure reported a lower poverty rate for a certain group, then that group would get less benefits from the government. And so, that group would fight a change in the poverty measure. That group would rent seek. Since, as Mueller guesses, losers are (irrationally) more strongly motivated to fight against a policy change than winners are to fight for it, the losers dominate in their rent-seeking efforts.

However, taking a turn from typical rent-seeking groups, some of the biggest winners and losers are states and their state politicians. So, it’s likely that fewer resources would be spent rent-seeking since the federal politicians already have a pretty strong incentive to align with their home state’s interests, and thus don't need additional financial motivation. But, some states might be unaffected by a change in poverty measure, and so other states might put resources in fighting for the unaffected states’ federal representatives’ votes.

There are plenty of reasons outside of rent-seeking that the OPM still holds so much sway. For one, it's a partisan issue since with the OPM Republicans can claim that anti-poverty efforts aren't working and Democrats can claim we aren't doing enough. And, as previously discussed, this has a lot of elements of a politician-pursuing-votes issue. Still, rent-seeking is likely a fair part of it. And still, it's concerning that even something as supposedly impartial as government-reported statistics has a politics of its own.