On November 7th the Census Bureau released a poverty measure it deems more accurate than the current metric, which has not been changed since its creation in the mid-1960s. To question the current measure’s accuracy is to recognize the fact that as our lives change over time, what it means to be poor constantly changes in response. For example having a cell phone or a computer is a necessity today, whereas ten or twenty years ago it would have been just a luxury. Also in the 1960s, families typically spent a third of their income on food, while today food costs families less than one seventh of their income. The poverty measure in use today reflects the reality of a semi-agrarian society and has not been modified to consider the advances and changes in our lives since the 1960s.
To understand exactly what this means, let’s take a look at how the measure is calculated. Generally, poverty measures are income adequacy approaches. This means they define a level of income (also known as the poverty line) that is adequate for survival, separating the poor from the non-poor. The poverty rate is calculated by first comparing people’s incomes to the poverty line and then finding the percentage of the population whose annual incomes fall below it. The incomes of those in question are calculated as a sum of pre-tax cash. This includes wages, salaries, earnings from self-employment, and some cash transfers from government programs (such as unemployment insurance). This is a problem because since the 1960s, an increasing amount of government programs have come in the form of tax credits (such as the Earned Income Tax Credit) and in-kind benefits (such as food stamps). Because these resources are not explicitly cash, they are not included as a source of income.
Some other major flaws with this poverty measure include the fact that it ignores differences in the cost of living across the nation, assuming that a person making $25,000 in New York City faces the same prices as someone making $25,000 in Syracuse. It also assumes that the standard of living that defined poverty in the mid-1960s is still appropriate, despite our nation’s advances in standard of living since then.
The new measure reflects modern day needs for clothing, shelter, and utilities, as well as food (the only need reflected in the old measure). When calculating the incomes of those in question, this measure recognizes non-discretionary spending needs that reduce available income, which are accounted for as deductions to income. These expenses include commuting costs, childcare, and out of pocket medical expenses. The new measure is designed to be updated every year by the change in spending in these areas, more accurately accounting for growth in living standards. It is also designed to reflect geographical differences in costs of living.
What do these changes show about poverty today? The new measure shows an increase in the number of those in poverty by over two million people nationally, with higher rates in the Northeast and the West. There was a higher number of Hispanics in poverty, while the numbers among African Americans decreased. Poverty rose among the elderly (from nine percent to 16 percent) because out-of-pocket medical expenses were so high and dropped among children (from 22 percent to 18 percent), partially because children tend to benefit more from programs like food stamps.
This new measure is just a start in better understanding our nation’s growing poverty. It highlights the need for a re-evaluation of what it means to be poor today. In New York State today, 18 percent of the population earn below the poverty line as defined by the current poverty measure, with the new poverty measure this percentage will likely be different. Most importantly, the new research shows that without important government programs like food stamps, more Americans would live in poverty. Nationally and locally, it is crucial to adequately fund programs that help people stay in their homes, allow them to work, keep them from sliding into poverty , and lift them out of poverty. Join our Who Cares? I Do. campaign as we fight to protect human services programs that are vital in the fight against poverty.
Contributed by Neha Kallianpurkar of the Human Services Council