From PBS- Who Counts as Poor in America?

MAKING SENSE -- January 8, 2014 at 1:24 PM ET

Who counts as poor in America?

By: Simone Pathe

 
The official poverty rate is 15 percent, but that excludes many Americans. Photo by Joe Raedle/Getty Images.

Homeless people without shelter from this week's frigid temperatures. Medicaid patients living out their days in a nursing home. Orphaned kids raised in foster homes. Or Dasani, the "invisible child" profiled in the New York Times five-day spread. Who among them counts as poor?
Fifty years ago, President Lyndon Johnson announced a legislative agenda to wage "unconditional war on poverty in America." But how do we know what poverty is in America?
Dip below the so-called "poverty line," and you're in poverty. Sit at or above it, and you're not. Also known as the "poverty threshold," this is the official cutoff the Census Bureau establishes for statistical tabulations of who is poor.

For example, a family with two adults and two children under 18 whose total income is $22,811 is not poor. If the same family makes $22,810, everyone in the household is poor (based on 2011 threshold data).

Today, 15 percent -- or 46.5 million Americans -- are officially poor.
Debate over the War on Poverty's success hinges on interpretations of the poverty rate. Liberals argue that the poverty rate would be much higher if it weren't for the government benefits enshrined in Johnson's agenda. Conservatives point out that a 4 percentage point drop from 19 percent poverty 50 years ago is pretty paltry, while the rate has actually increased from 1973 when it was 11 percent.
Politics aside, it's almost universally recognized that the official poverty measure (OPM) doesn't paint a complete picture of poverty in America.

For starters, the OPM is dated. The calculation on which the poverty level is based is the brainchild of one woman, but she never set out to develop a general poverty measure. In 1963, Social Security Administration statistician Mollie Orshansky was calculating a subsistence budget for poor families that grew out of her interest in determining the incidence of childhood poverty, an experience with which she was personally familiar.

Orshansky's subsistence level was set at three times the 1963 U.S. Department of Agriculture's economy food budget (based on the assumption that families spent one-third of their income on food). That figure was tailored to the size and composition of different families.

Meanwhile, the Johnson administration had been hunting for a good poverty metric. In 1965, the Office of Economic Opportunity, the lead agency of the War on Poverty, adopted Orshanksy's lower threshold to set eligibility standards for federal programs, and adjusted for inflation, that's the same metric we use today as the poverty cutoff.

The poverty measurement leaves out many people. Unrelated kids under 15 living together (like in a foster home) don't count as poor. Nor do people who live in institutional group quarters (college dorms, nursing homes or military barracks). And in perhaps the cruelest irony, people without "conventional housing (and who are not in shelters)" (i.e., the homeless) aren't part of the official poor.
But those groups aside, poor is poor, right? You either make enough money or you don't. Actually, the incomes of officially poor people are much more fluid than the "poverty line" would have us believe. OPM counts pre-tax income only. It excludes non-cash benefits and government transfers, like food stamps and the Earned Income Tax Credit, which increase the resources poor people have at their disposal.

The Census Bureau recognizes that the poverty thresholds are not intended to be "a complete description of what people and families need to live." And as we know from our own coverage of what constitutes a living wage across the country, the bare minimum it takes to survive -- or the Self Sufficiency Standard -- varies geographically. The official poverty measurement doesn't account for the difference between stretching $28,000 in Seattle and New York City.

It's in New York City that an alternative poverty measurement -- one that accounts for the city's high cost of living and quantifies the cost of housing, medical and child care, has gained the most traction. Pioneered by former Mayor Michael Bloomberg's poverty researcher Mark Levitan, the measurement includes non-cash benefits of the sort the official poverty measurement excludes in the income thresholds.

At the national level, the inadequacies of the current measurement have been on Congress' radar since at least 1990, when it appropriated money for a National Academy of Sciences study to assess what was needed for a better measure.
The result is the Census Bureau's Supplemental Poverty Measure (SPM) -- or as The Atlantic's Jordan Weissman dubs it, "the statistic you should really be paying attention to."
Like Levitan's alternative, the SPM includes a higher income threshold for poverty and it counts non-cash benefits like food stamps, housing subsidies and the EITC as income. But it also accounts for higher expenses extracted from that income. And it adjusts those expenses for geography. The net effect is a 16 percent poverty rate (or 50 million poor Americans).
But that's only a percentage point higher than the official poverty rate of 15 percent.
Since the Census Bureau only started releasing the SPM in 2010, it's been difficult to put this supplemental measure in historical context. Until now. Using Census Bureau data, Columbia University researchers created SPM estimates stretching back to the 1960s to show that if poverty were measured the way the SPM is today, the poverty rate would have actually declined since the 1960s more than the official figure suggests.

Stepping back to Johnson's era, in 1967, the OPM puts the poverty rate at 14 percent. Again, hardly a far cry from today's 15 percent. The SPM for 1967, however, puts the poverty rate at 26 percent. The 10 percentage point drop in the supplemental poverty rate from the '60s to today is a much more significant improvement, defenders of anti-poverty programs argue, underscoring the effect of government benefits.

With all its inadequacies, the OPM -- exclusive of after-tax and government income and unadjusted for today's consumption patterns -- is still the metric of record.
As this winter's debate over extending unemployment benefits reminds us, shaking up who gets what in this country is a touchy subject. "There's lots of political concern," said David Grusky, director of Stanford's Center on Poverty and Inequality, "that a change in measurement might precipitate a change in delivery of benefits and allocations." In other words, the threat of that kind of political logjam has been enough to sustain the status quo.

(On the right, critics of the Census Bureau's new measure think it's flawed because it relativizes deprivation in relation to the living standards of the average American.)

So the supplemental measure exists as a helpful statistic, but it cannot be used to determine eligibility for government programs or to set policy. The reason the SPM was acceptable in the political sphere, Grusky added, was because it's "a descriptive tool" only.

Columbia University's Jane Waldfogel, who helped create the historical record for the supplemental measurement, predicts more states will adopt the alternative measure as a supplement. But she cautions that using the SPM to determine eligibility may prove more complex than using today's more universal thresholds. There's simply more data, and more geographic variance, in the SPM. Still, she added, "we'll get there. We'll get there eventually with a measure like this."

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This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions.

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