The "$140,000 poverty line" is very silly

People love to say that the American middle class is poor. But it's not.

Photo by Tom Rumble on Unsplash

Every year or so, there’s a new crop of articles about how you need to make $350k a year to live in New York City, or $150k is lower middle class, or you need $300k to be middle class, or why people making $400k are barely scraping by. This article is always roundly ridiculed on social media, and a few days later someone writes a post going through the numbers and debunking the whole thing. And then everyone posts the famous tweet:

There’s just something very annoying about publications that cater to upper-class audiences trying to reassure those audiences that they’re actually struggling.

In a recent post on his Substack — followed by a shorter version in The Free Press — asset manager Mike Green made a similar claim, but got much more positive attention for it. Instead of claiming that a family that makes $400,000 is middle class, he claimed that a family making less than $140,000 is poor. This is from the Free Press version:

I realized that [the U.S. official poverty line]—created more than 60 years ago, with good intentions—was a lie…“The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.”…[W]hen you understand that number, you will understand the rage of Americans who have been told that their lives have been getting better when they are barely able to stay afloat…

[E]verything changed between 1963 and 2024. Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling…A second income became mandatory…But a second income meant childcare became mandatory…two cars became mandatory…In 2024, food-at-home is no longer 33 percent of household spending. For most families, it’s 5 to 7 percent. Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent.

If you keep [the original] logic [of the poverty threshold]—if you maintain [the] principle that poverty could be defined by the inverse of food’s budget share—but update the food share to reflect today’s reality, the multiplier is no longer three.

It becomes 16. Which means…the threshold for a family of four—the official poverty line in 2024—wouldn’t be $31,200. If the crisis threshold—the floor below which families cannot function—is honestly updated to current spending patterns, it lands at close to $140,000.

And just to double-check this number, Green does a quick calculation of what a family of four would need in order to afford the necessities of modern life, and comes up with a similar number:

I wanted to see what would happen if I ignored the official stats and simply calculated the cost of existing. I built a basic needs budget for a family of four (two earners, two kids). No vacations, no Netflix, no luxury. Just the “participation tickets” required to hold a job and raise kids in 2024. Using conservative data for a family in New Jersey:

Childcare: $32,773

Housing: $23,267

Food: $14,717

Transportation: $14,828

Healthcare: $10,567

Other essentials: $21,857

Required net income: $118,009

Add federal, state, and FICA taxes of roughly $18,500, and you arrive at a required gross income of $136,500.

Wow! Two different methodologies, but the same conclusion: the cost of merely participating in the modern economy, for a family of four, is around $140,000. If your family makes less than that, you must be poor.

This post made the rounds like wildfire, and was generally well-received. It turns out that there’s a much bigger market for the idea that $140,000 is poor than there is for the idea that $400,000 is middle-class.

But despite its popularity, Green’s claim is wrong. Not just slightly wrong or technically wrong, but just totally off-base and out of touch with reality. In fact, it’s so wrong that I’m willing to call it “very silly”. I know Mike Green, and I count him as a friend, but we all write silly things once in a while,¹ and when we do, we deserve to be called out on it.

Why is the $140,000 poverty line silly? Well, there are two main reasons. First, Mike actually just gets a lot of his numbers wrong when he makes his calculations. And second, the way Mike is defining “poverty” doesn’t make any sense.

I’ll go through both of those points, but first, let’s step back a second and talk about why the claim that $140,000 should immediately strike you as highly suspicious.

The whole thing doesn’t pass the smell test

In economic policy debates, it’s important to be able to sniff out claims that aren’t going to hold up. I’m not saying that “extraordinary claims require extraordinary evidence”, as Carl Sagan said. I’m saying that when you see a claim that sounds way off, there often isn’t any good evidence for it at all.

If Mike is right, most Americans are poor people. The majority of American families make less than $140k a year. Median family income for a family of 4 in the United States is $125,700. That means that the majority of 4-person families make less than that. So if Mike Green is right, that means that more than half of American families are poor — or at least, more than half of 4-person families.

When Mike says “poor”, he means that people can’t afford what he calls a “participation ticket” — a basket of basic necessities. He names the things in that basket: rent, health insurance, transportation (including two cars), “other necessities”, and child care. If he’s right, then more than half of American families lack one or more of the basic necessities of life.

Is that true? Well, we can check these necessities one by one. Let’s start with food. For caloric consumption, we can’t really find a median (most people don’t count calories so you can’t do surveys), but we can find an average. And average calories per person has gone way up over time:

The distribution of how much food people eat probably isn’t very skewed (there isn’t one guy eating a billion calories…I hope!), so this means the typical American is eating a lot of food. In fact, of all the countries on the planet, only Irish people eat more calories than Americans. As for food insecurity, America has a lower share than practically any other country on Earth, including Scandinavia:

That’s severe food insecurity; about 10% of married-couple households report some level of food insecurity. So almost all American parents are putting food on the table for their families.

How about shelter? About 14% of American children have living situations with more than one person per room, which is how we define “overcrowded”.

We can also look at floor space. For 4-person households, total floor space per capita was 524 square feet in 2020 (it’s much higher for smaller households). In 1960, average floor space per person across all households was only 435 square feet for newly built homes. The average for 4-person families across all homes would have been a lot smaller than that, since it includes all the older homes from previous years that were much smaller.

So we’ve definitely seen a very big increase in how much space American families have to live in, over time. Also, for what it’s worth, Americans have more living space than people in almost any other country. In sum, most Americans are doing fine in terms of shelter and living space.

How about health insurance? Here we have some very good news: The total percent of uninsured Americans has fallen to only 8%.

Source: CBPP

And in fact, the news gets better! According to the CDC, only 5.1% of American children were uninsured as of 2023. So at this point, almost all Americans in 4-person families are going to have health insurance.

(Thanks, Obama!)

What about transportation? Here’s a chart I found for the number of vehicles for 4-person households in 2022:

Source: Ottava via u/Milu_L

According to this data, more than 80% of America’s 4-person households have 2 or more cars. Presumably some fraction of those households have single breadwinners, and thus — by Mike Green’s reckoning — don’t necessarily need two cars, while a few live in places with good public transit. So most Americans do have adequate transportation.

As for child care, I don’t have good numbers on how many Americans have it (since it comes in many forms). But as Mike says, child care is something you get so that you can have both parents go work; ultimately, it’s not something you need in and of itself in order to live a good life. So we can omit it from this list.

The basic point here is that:

• Most Americans have plenty of food to eat

• Most Americans have a comfortable amount of living space

• Most Americans have health insurance

• Most Americans have sufficient transportation

By itself, that doesn’t prove that most Americans have all of these things. It’s possible that each family has to choose one or two of these to give up, and that they make different choices. So maybe you take the 10% of 4-person families who are food insecure at some point, add the 8% who lack health insurance, then add the 16% who have less than two cars, and add the 14% who have overcrowded living situations, and you get…48%! So it’s possible half of Americans lack at least one of the basic necessities of life…right?

Well, no, because there’s going to be lots of overlap between those groups. A lot of the people who don’t have enough to eat are going to be the same people who have only one car, a family member without health insurance, and a cramped living space. In reality, you can’t just add those percentages up — the percent of Americans who lack even one of the basic necessities Mike Green lists is going to be a lot less than half. It’s probably going to be closer to the 25.5% of Americans who live in “relative poverty” (below 60% of median income). That’s higher than the official poverty rate, but not even close to Mike Green’s number.

In other words, the whole idea that more than half of Americans are poor doesn’t fit with anything we know about the lifestyles that typical Americans actually live. That’s why our intuition should be sounding the alarm like crazy when we read a line like “the real poverty line is $140,000”. We’re not talking about aliens from Mars here. Most of us either are middle class, or know people who are, and they don’t lack the basic necessities of life. They aren’t missing their “participation tickets”.

So how did Mike get this so wrong? It turns out there are two reasons. First, he used some bad numbers to make his calculations — so even on his own terms, the $140,000 number is bad. But also, the way he goes about calculating the price of a “participation ticket” in the American economy just doesn’t make sense.

Green gets his own numbers completely wrong