Refining the Poverty Line

By Michelle Chen Sep 01, 2009

One reason the government has spent nearly half a century fighting, and losing, the war on poverty, is that it doesn’t know where to draw the battle line. The Center for American Progress recently analyzed the inadequacy of the official poverty line as a gauge for who is really poor in America. Among the biggest problems:

• The thresholds are low…. The poverty line represented nearly 50 percent of median income for a family of four in the early 1960s, but now represents only about 28 percent of median income. So the level at which a family is considered poor has fallen further and further outside the mainstream.
• The thresholds are essentially arbitrary because they simply represent a number calculated more than 40 years ago and then adjusted for inflation, and they no longer represent anything in relation to family incomes or costs.
• The resource-counting rules both understate and overstate resources. They fail to reflect the effects of policies such as refundable tax credits, near-cash benefits such as Supplemental Nutrition Assistance Program (formerly food stamps) or subsidized housing assistance. At the same time, they also do not consider the impact for family budgets of tax liabilities, work expenses, or health care costs.
• The rules make no adjustment for geographical variation despite the large variations in costs across areas and regions of the country.

A 2005 policy brief by the Economic Policy Institute revealed that as a guidepost for evaluating economic well-being, both the minimum wage and the poverty line miss the mark by a wide shot. For example:

• The range of basic family budgets for a two-parent, two-child family is $31,080 (rural Nebraska) to $64,656 (Boston, Massachusetts). The median family budget of $39,984 is well above the $19,157 poverty threshold for this size family.
• Over three times more working families fall below the basic family budget levels as fall below the official poverty line.
• Of the six family types examined, over 14 million people (28%) live in families with incomes below the basic family budget thresholds.

Today, under the weight of foreclosures, volatile gas and food prices, and heavy unemployment, people are increasingly at risk of falling into the ranks of the offically poor, yet the threshold itself no longer demarcates any meaningful measure of wealth. A family with employer-provided health care will likely have a radically different sense of economic security compared to a household without insurance. A single working mom who can’t afford day care for her childfaces a hardships that can’t be measured on paper. The National Academy of Sciences has proposed a reformed (though still criticized) measure of poverty based on how much families spend on basic necessities like food and rent, geographic differences in the cost of living, and a more careful accounting of government subsidies like child tax credits. New York City is now exploring how to use a more flexible measure of poverty in designing social programs. As the country prepares for the 2010 census, Rep. Jim McDermott (D-WA) and Sen. Chris Dodd (D-CT) have proposed legislation that would apply a more comprehensive poverty framework on a national level. The Measuring American Poverty Act would also buffer federal programs from shifts in poverty measures by ensuring that funding streams would not automatically fluctuate with the poverty rate. All those measures would provide a clearer picture of the poor. Yet it’s likely that a refined poverty line would still not fully account for the color line. Housing and educational segregation, racial health disparities, differences in immigration status, and the vast wealth gap between people of color and whites—measured in terms of equity, not just income—all pose structural barriers that make poverty exponentially harder to overcome, and in turn narrows the policy debate about economic justice. To the extent that racial inequality has become a proxy for socioeconomic stratification, the lines that people refuse to see are always the hardest to define. Image: Beyond Bread