Out with the Old (Sort of) and In with the New: A New Federal Poverty Measure
[This is the fifth in a series of six articles summarizing the half-century history of the U.S. poverty threshold and the dire need for an updated poverty measure.]
As fears about the economy became reality, the call for modernizing how the nation measures poverty took on new urgency. The President’s FY 2011 budget, for example, included a proposal for creating a new poverty measure.
Based on this new sense of urgency as well as the many previous proposals and discussions, in March the U.S. Census Bureau announced that it will be developing an alternative way to measure poverty. The Supplemental Poverty Measure will be released in the fall of 2011, at the same time that the official income and poverty measures for 2010 are released. This new measure will be broadly based on NAS’s1995 recommendations, but updated by the research done on this issue for the past 15 years. The precise formula has yet to be determined, but in general it is expected that the measure will:
- Define “family unit” to include all related individuals who live at the same address in order to reflect today’s family structure;
- Use the most recent five years of available data to increase the stability of the poverty thresholds;
- Include in-kind benefits to meet help meet food, clothing, shelter, and utility needs as income, and deduct basic expenses such as work expenses, taxes, child care, out-of-pocket expenses, child support and commuting costs;
- Be updated annually and the measure itself continuously improved based on the latest research; and
- Include some form of geographic adjustments that present a more realistic relationship between cost of living and what it takes to meet basic needs.
Based on alternative poverty measure figures previously used by the Census Bureau experimentally, it is clear that the new measure will put poverty rates much higher than the official rate. Although it’s impossible to predict precisely what the new supplemental rate will reveal, other alternative measures’ figures would predict the following:
- Overall poverty is expected to increase from 13.2 percent, or 39.8 million people, to 15.8 percent, or 47.4 million, mostly due to rising expenses from medical care and other factors.
- About 18.7 percent of Americans 65 and older, or nearly 7.1 million, will be considered poor compared to 9.7 percent, or 3.7 million, under the traditional measure, due to out-of-pocket expenses from rising Medicare premiums, deductibles, and a coverage gap in the prescription drug benefit.
- About 14.3 percent of people 18 to 64, or 27 million, will be in poverty, compared to 11.7 percent under the traditional measure, many of which will be low-income, working people with transportation and child-care costs.
- Child poverty should be lower, at about 17.9 percent, or roughly 13.3 million, compared to 19 percent under the traditional measure, since single mothers and their children’s non-cash aid, such as food stamps, will be counted as income.
- And the Northeast and West will have bigger jumps in poverty, due largely to cities with higher costs of living such as New York, Boston, Los Angeles, and San Francisco.
Importantly, this new poverty measure will not replace the official poverty rate, but will instead be published alongside the traditional figure as a "supplement" for federal agencies and state governments. The point of the new measure is to provide a more realistic view of poverty including both the necessary expenses of modern day living as well as the anti-poverty programs currently being used. Issuing a supplemental measure, however, will not change eligibility for any governmental benefits or, in and of itself, cost the government one penny in additional poverty program expenditures. While some may argue that this new measure should immediately become the official measure, such a change shouldn’t be rushed into because the impact of the new measure must first be assessed.
The next and final blog in this series explores what effects, if any, this new supplemental measure will have on current benefit programs and current programs attempting to ameliorate poverty.
