Melissa K. Smith

Almost since its inception in 1969, the federal poverty measure has been critiqued as being an inadequate measure of true poverty. The official measure was developed in the early 1960s by Mollie Orshansky and was based on a 1955 survey on household food consumption. Though it has been adjusted for inflation each year, no substantial change has been made to how the government measures poverty. 

In the early ‘90s, the National Academy of Sciences established a panel to examine how to improve the measure of poverty.  These critiques have led to unofficial alternative measures being calculated over the years, but this year marks the first time that the Census Bureau has itself published an official Supplemental Poverty Measure.  This new measure tries to account for much of the criticism of the original by:

• Developing thresholds that take into account the dollar amount spent on the basics – food, clothing, shelter, utilities, and other similar expenses
• Adjusting for geographic differences in housing costs
• Including family resources other than just income – such as in-kind benefits like nutritional and utility assistance, and subsidized housing
• Excluding expenses such as income tax, social security payroll tax, child support, and work-related expenses, like transportation and childcare, as well as the cost of medical care, health insurance premiums and out-of-pocket medical expenses.

The Supplemental Poverty Measure thus reports a higher monetary threshold under which people would be considered to be living in poverty.  In 2010, the official poverty threshold for a family of four (two children, two adults) was $22,113.  The Supplement Measure would set the threshold at $24,343 and result in another 2.5 million people considered to be living in poverty. 

A Supplemental Poverty Measure not only gives a more realistic view of who is living in poverty, but it also gives us a chance to see if programs aimed at helping low-income people  actually work. One of the most interesting results was the affirmation of the effectiveness of the Earned Income Tax Credit. When the EITC was removed from the calculation of family resources, the poverty rate jumped from 16 percent to 18 percent!  Food assistance, the school lunch program, housing subsidies and WIC also helped keep families out of poverty. The effect of these programs is especially important for kids.

Real differences come out when looking at the demographics of those in poverty under the Supplemental Measure — poverty increased for seniors 65 years and older, Asians, homeowners with a mortgage, persons with private health coverage and those living in urban and suburban areas. Yet poverty dropped for children under 18, African Americans, renters, people in rural areas and persons with public, not private health insurance. Differences were also seen in regional poverty. While poverty increased under the Supplemental Poverty Measure in the Northeast and the West, it decreased in the Midwest and South.

Most of these results are not surprising. When variations in geographical housing costs are taken into consideration, it is expected that urban and suburban poverty would rise while rural poverty would decrease. This also explains the changes noted in regional poverty. The increase in seniors living in poverty is a result of including out-of-pocket medical expenses, the decrease in poverty among children is likely due to government assistance programs targeted at helping those in poverty and increased costs in private health insurance can account for the differences in poverty by health coverage. 

Though the Supplemental Poverty Measure is a step in the right direction, it is still inadequate at giving a picture of all of those who are struggling. The Supplemental Measure shows a growth of 70 percent in the number of people with incomes between 100 percent and 200 percent of the poverty level, as compared to the official poverty thresholds.  At 200 percent of the Supplemental Poverty Threshold, a family of four would still only have an annual income of $48,686. 

It is important to note that poverty thresholds are used for statistical purposes only and the Supplemental Poverty Measure will have no effect on the Poverty Guidelines, which are used to determine income eligibility for programs such as food assistance, the Children’s Health Insurance Program and home energy assistance. State-level data is not available.

– Melissa K. Smith

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Categories: Blog: Factually Speaking, Census, Health Care, Human Services, Tax Policy | Tags: Census, food assistance, poverty, vulnerable families