This week, the Census Bureau issued its annual release of data on poverty, household income and health insurance coverage, reporting that 15 percent of Americans lived below their respective poverty lines in 2013.
Despite our ostensible economic recovery, our nation’s poverty rate has barely budged over the last four years. The proportion of Americans living in poverty in 2013 is nearly the same as it has been since 2010, and every year in between.
The causes of this hardship are well understood—unemployment remains high, our recovery has been led by the growth of low-wage jobs with no benefits, real median wages have declined since the 1960s, and the cost of living continues to rise. What should be equally well-known, however, are the issues with how our federal government defines and measures poverty. For many, this explanation of the poverty guidelines’ flaws is old news, but the annual release of these national figures provide us an important opportunity to count its issues again, so here goes…
The income thresholds, against which we compare households’ incomes to determine whether they are defined as poor, are still defined as three times the cost of a family’s food expenses – a definition based on a methodology that used a survey of household expenditures from the 1950s. Despite the fact that families devote a much greater share of their budgets to housing, health care and education today than they did 50 years ago, we still assume they spend a third of their budgets on food. This is obviously a faulty assumption, and leads us to rely on income levels that are way too low. According to the federal poverty thresholds, a family of four needs an annual income of $24,000 to not be classified as poor. In much of the country, that is not even enough for housing, let alone groceries, utilities, health care, transportation, and child care.
Very importantly, the measure does not account for differences in living costs: the federal poverty thresholds are the same in rural Montana as they are in San Francisco. And the measure’s strict definition of family as individuals related by blood or marriage overlooks other household arrangements, including cohabitating couples and families with foster children.
Still worse, the Census Bureau’s official poverty measure does not capture the impact of critical anti-poverty programs. Non-cash transfer payments like SNAP or housing vouchers are not counted as income in the Census’s measure, and so are not used to determine whether households are poor. Critical tax-based assistance policies like the EITC are also ignored.
Fortunately, the Census’s new poverty measure gives these programs the credit they deserve. The new Supplemental Poverty Measure (SPM) accounts for the income gains that households experience thanks to various safety net programs. It also accounts for the true costs of many other living and work-related expenses (beyond food and housing) by deducting the cost of these expenses from total household income. A household is defined as poor if the remaining income is less than the cost of housing, food and clothing for a household in their community.
Last year, Columbia University researchers produced a comprehensive study of poverty rates, which found that safety net programs reduced the country’s poverty rate from 26 to 16 percent over the last half century. The Center on Budget and Policy Priorities reached a similar conclusion: their research found that the poverty rate would have been twice as high in 2012 if not for our safety net programs. Columbia’s research also confirms the importance of expanding the definition of income to include the cost of basic expenses. Accounting for the cost of all basic expenses, without considering the value of safety net programs, today’s poverty rate would be 29 percent.
The Census’s new SPM is not the only other income adequacy measure out there. A measure produced by Wider Opportunities for Women (full disclosure: where I used to work), for example, details the true cost of all living expenses for over four hundred different family types in every county across the country. WOW’s measure suggests that families need three to six times the poverty thresholds for basic economic security, which is defined as the ability to meet all of a household’s basic expenses and save for the future. It should be no surprise that, by WOW’s research, nearly half of all Americans lack this security.
That 30 or 50 percent of Americans live in poverty, struggle to make ends meet, or experience economic insecurity – however one prefers to describe their income – suggests a constitutively different policy challenge than what the headline Census Bureau figure released today suggests. Surely, policymakers need to better address the needs of those 15 percent of Americans our traditional poverty measure designates as poor. An improved measurement of poverty, however, and attendant changes in how we talk and think about it that speak to the realities of families living paycheck to paycheck but not officially in poverty, might help both policymakers and the public reconsider how we confront issues of job quality, unemployment, income inequality, and funding for and access to income support programs.