Is inequality worse for us than poverty? That’s what Richard Wilkinson and Kate Pickett argue, sometimes convincingly, in their book, The Spirit Level: Why Greater Equality Makes Societies Stronger.

Wilkinson and Pickett examine income inequality across 23 countries. (Income inequality is measured in many ways, but one typical measure is to compare the income of the richest 20% of the population to the income of the poorest 20% of the population.) In Japan, Finland, Norway, and Sweden, the richest 20% are about four times as rich as the poorest 20%. At the other end of the spectrum (i.e., the U.S. and Singapore), that is more than doubled, which is to say that the U.S. has very high inequality (only Singapore is worse).

Does it matter? Absolutely, say Wilkinson and Pickett. They tie inequality to many of our major social populations:

If you fail to avoid high inequality, you will need more prisons and more police. You will have to deal with higher rates of mental illness, drug abuse, and every other kind of problem.

Take the example of health and life expectancy. The United States spends more per person ($6,000) on healthcare than any other country. You’d think that would at least put us in the top half for life expectancy, wouldn’t you? But no. In fact, only 3 of the 23 countries have lower life expectancies than the U.S. (those would be Portugal, which spends about $1,800 per person; Denmark, which spends about $2,800 per person; and Ireland, which spends about $2,500 per person). Highest life expectancy goes to Japan, which spends about $2,200 per person. The same pattern holds for infant mortality and teen pregnancy (see chart).

Conclusion? The more equally wealth is distributed in a society, the better the health of that society. They examine social relations, mental health, drug use, life expectancy, violence and homicide rates, obesity, education, teen pregnancy rates, incarceration rates and social mobility. The pattern holds.

Not convinced? They also look at inequality within the United States, and compare many of these same social ills across states, and the same pattern obtains. The authors contend that if the United States could reduce its income inequality to the average of the four most equal countries (Japan, Norway, Sweden, Finland), we would see:

• The proportion of the population feeling they could trust others increase by 75%
• Rates of mental illness drop by two-thirds
• Rates of obesity drop by two-thirds
• Teen birth rates cut in half
• Prison populations reduced by 75%

Now that’s something worth striving for!

What IS poverty, anyway? Well that’s a stupid question, isn’t it? Everybody knows what poverty is—if you’re at or below poverty, you have a tough time making ends meet. It’s a government-defined threshold of income; if you’re below the poverty level, you can’t really meet all your basic needs.

If you’re a single person, that level in 2009 is $10,830. For a family of four it’s $22,050. Doesn’t seem like much, does it? According to the Cost of Living in Minnesota budget calculator, a no-frills basic needs budget for a single person in Minnesota is more like $25,000. For a family of four, $55,788. More than double the poverty level.

So who can live on $10,080 a year? Where did that magic figure come from? Well, the federal government sets the poverty level based on the costs of a no-frills food plan developed by the Dept. of Agriculture. One can quibble over whether the food plan is adequate. (Most, even the developer of the threshold, would quibble that it’s not. For those of you interested in the detail, here is a fascinating report.)

To calculate the poverty threshold, they take the cost of this basic food plan (updated every year to take inflation into account), and multiply it times three, and there’s your poverty threshold. It’s multiplied by three because food accounted for about one-third of the average budget of a household of three or more people when this formula was developed (1963-1964).

Fast forward to 2009. Consumption patterns have changed. Housing and healthcare costs have grown substantially and take up a much larger portion of the average household budget than they did 40 years ago. Transportation costs have grown with commutes, and two-wage-earner households require childcare.

As a result of these kinds of changes, today food is more like 15% of the basic household budget. So what does that mean?

Let’s take the single person. One-third of $10,830 is $3,610. If we take that as our food need (based on the economic USDA plan) and apply the updated pattern (food as 15% of budget), the “poverty threshold” goes up to $24,066 a year. For a family of four, it goes up to $49,000.

There are a lot of debates about the poverty threshold and how it’s measured, but pretty much everyone agrees that it vastly underestimates how much is required for a minimally adequate standard of living.