America’s Poor: Why a New Measure Shows More People are Living in Poverty Than we Thought

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In this week’s magazine story on poverty in the U.S., I briefly mention that the way we typically count the poor is far from ideal. The official U.S. poverty line dates back to the 1960s, when Mollie Orshansky, an economist at the Social Security Administration, came up with a measure based on how much money a family had to spend on food in order to eat nutritiously.  Over the past 40+ years, a lot has changed with how families make ends meet—as well as with social scientists’ ability to measure it— and since the mid-1990s, the National Academy of Sciences has been recommending that the U.S. update how it measures poverty.

The Obama Administration is now doing just that. Earlier this month, the Census Bureau released its new “supplemental poverty measure,” which takes into account not just cash income, but also expenses in major categories like child and medical care, as well as income from tax breaks and non-cash benefits like food stamps. The new measure also adjusts for the fact that it’s more expensive to live in certain parts of the country than in others—a family in rural Ohio can get by on a lot less than can a family in San Francisco. The goal is to better understand both who is poor and the success or failure of anti-poverty efforts. The effects of many major programs—such as the earned-income tax credit—aren’t picked up in the traditional way of measuring poverty.

This Census Bureau report shows how the poverty picture changes under the new measure.

The headline finding is that overall poverty increases by 0.8 percentage points (a big reason it’s been tough to get an Administration to do this before now), but what’s more interesting to look at is how the distribution of poverty changes. Under the new measure, poverty decreases among children, but increases among adults, especially the elderly. Poverty increases among whites, Hispanics, and especially Asians, but decreases among blacks. Urban poverty goes up and rural poverty goes down. The proportion of poor homeowners increases, while the proportion of poor renters decreases. Poverty in the western U.S. jumps, and budges up in the Northeast; it drops in the South and Midwest.

This new measure is supplementing, not replacing, the official poverty line. That’s important for two reasons. First, countless government agencies and nonprofits use the official poverty line to determine program eligibility—a switch would seriously rejigger who gets what. Second, there is a huge philosophical shift baked into the new measure, one that the U.S. may or may not be ready to make for good.

That philosophical shift is that poverty is a relative—not an absolute—phenomenon. The traditional Orshansky poverty line assumes that families need a set amount of money to meet their material needs. The new supplemental measure, by contrast, assumes that people need at least what Americans in the 33rd percentile of expenditures already spend on essential goods (i.e., food, clothing, shelter, and utilities). While much of the developed world uses relative measures of poverty, there is a big issue with doing so: everyone could become materially better off and yet the poverty rate wouldn’t change if the relative distribution stays the same.

This seems like a major sticking point, although, fascinatingly, it actually does a much better job of reflecting how people think about poverty, as this journal article by economist and acting deputy Commerce Secretary Rebecca Blank points out. Since the 1950s, the polling firm Gallup has been asking Americans how much money a family of four needs to get by in their local community. As living standards have risen, so have the estimates. For decades, people’s answers have come out to about half of what an average family earns. In other words, as people generally become better off over time, the popular notion of what constitutes poverty keeps up. No matter how much money people have overall, those who make less than half of the average are seen as not having enough.

This is a guest post by former TIME staff writer Barbara Kiviat. Kiviat has a story in this week’s TIME magazine on poverty.