New Proposed Poverty Line Definition Would Increase Number in Poverty By 3 Million To 49.7 Million in 2012 or 16 % of Americans — Videos

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Defining Poverty

U.S. poverty rate highest since 1993

Poverty in the United States – Wiki Article

US poverty rate near 20-year high

Background Articles and Videos

LBJ’S War on Poverty and Reagan’s Retort pt1



The number of poor people in America is 3 million higher than the official count, encompassing 1 in 6 residents due to out-of-pocket medical costs and work-related expenses, according to a revised census measure released Wednesday.

The new measure is aimed at providing a fuller picture of poverty, but does not replace the official government numbers. Put in place two years ago by the Obama administration, it generally is considered more reliable by social scientists because it factors in living expenses as well as the effects of government aid, such as food stamps and tax credits.

Administration officials have declined to say whether the new measure eventually could replace the official poverty formula, which is used to allocate federal dollars to states and localities and to determine eligibility for safety-net programs such as Medicaid.

Congress would have to agree to adopt the new measure, which generally would result in a higher poverty rate from year to year and thus higher government payouts for aid programs.

Based on the revised formula, the number of poor people in 2012 was 49.7 million, or 16 percent. That exceeds the record 46.5 million, or 15 percent, that was officially reported in September.

The latest numbers come as more working-age adults picked up low-wage jobs in the slowly improving economy but still struggled to pay living expenses. Americans 65 and older had the largest increases in poverty under the revised formula, from 9.1 percent to 14.8 percent, because of medical expenses such as Medicare premiums, deductibles and other costs not accounted for in the official rate.

There also were increases for Hispanics and Asian-Americans, partly due to lower participation among immigrants and non-English speakers in government aid programs such as housing aid and food stamps.

African-Americans and children, helped by government benefits, had declines in poverty compared with the official rate.

“This is a real incongruity, when 1 in 6 people face economic insecurity here in the richest country in the world,” said Joseph Stiglitz, a Columbia University economist and former chairman of the White House Council of Economic Advisers who has argued for more government action to alleviate income inequality.

“When so many citizens are worse off year after year, with food insecurity and health care insecurity, there’s no way you can say that’s a successful economy.”

Last week, more than 47 million Americans who receive food stamps saw their benefits go down, while Congress began negotiations on further cuts of up to $4 billion annually to the program.

Among states, California had the highest share of poor people, hurt in part by high housing costs and large numbers of immigrants, followed by the District of Columbia, Nevada and Florida. Under the official poverty rate, more rural states were more likely to be at the top of list, led by Mississippi, Louisiana and New Mexico.

Some other findings:

-Food stamps helped lift about 5 million people above the poverty line. Without such aid, the overall poverty rate would increase from 16 percent to 17.6 percent.

-Working-age adults ages 18-64 saw an increase in poverty from 13.7 percent based on the official calculation to 15.5 percent, due mostly to commuting and child care costs.

-Child poverty declined from 22.3 percent to 18 percent under the new measure. Under both measures, children still remained the age group most likely to be living in poverty.

-By race, Hispanics and Asians saw higher rates of poverty, 27.8 percent and 16.7 percent respectively, compared with rates of 25.8 percent and 11.8 percent under the official formula. In contrast, African-Americans saw a modest decrease, from 27.3 percent to 25.8 percent based on the revised numbers. Among non-Hispanic whites, poverty rose from 9.8 percent to 10.7 percent.

“The primary reason that poverty remains so high is that the benefits of a growing economy are no longer being shared by all workers as they were in the quarter-century following the end of World War II,” said Sheldon Danziger, a University of Michigan economist.

“Given current economic conditions, poverty will not be substantially reduced unless government does more to help the working poor.”

Economists long have criticized the official poverty rate as inadequate. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have declined to a much smaller share, more like one-seventh.

In reaction to some of the criticism, the Obama administration in 2010 asked the Census Bureau to develop a new poverty measure, based partly on recommendations made by the National Academy of Sciences. The goal is to help lawmakers better gauge the effectiveness of anti-poverty programs.

For instance, the new measure finds that if it weren’t for Social Security payments, the poverty rate would rise to 54.7 percent for people 65 and older and 24.5 percent for all age groups.

Refundable tax credits such as the earned income tax credit helped lift 9 million people above the poverty line. Without the credits, child poverty would rise from 18 percent to 24.7 percent.

In recent years, New York City as well California, Virginia and Wisconsin have sought to put in place a more accurate poverty measure. They were prompted in part by local officials such as New York Mayor Michael Bloomberg who have argued that the official measure does not take into account urban costs of living and that larger cities may get less federal money as a result.

Associated Press writer Mary Clare Jalonick contributed to this report.

15% of Americans living in poverty

Years after the Great Recession ended, 46.5 million Americans are still living in poverty, according to a Census Bureau report released Tuesday.

Meanwhile, median household income fell slightly to $51,017 a year in 2012, down from $51,100 in 2011 — a change the Census Bureau does not consider statistically significant.

Poverty in the United States

Poverty is a state of privation, or a lack of the usual or socially acceptable amount of money or material possessions.[1] The most common measure of poverty in the U.S. is the “poverty threshold” set by the U.S. government. This measure recognizes poverty as a lack of those goods and services commonly taken for granted by members of mainstream society.[2] The official threshold is adjusted for inflation using the consumer price index. The government’s definition of poverty is based on total income received. For example, the poverty level for 2012 was set at $23,050 (total yearly income) for a family of four.[3] Most Americans (58.5%) will spend at least one year below the poverty line at some point between ages 25 and 75.[4] Poverty rates are persistently higher in rural and inner city parts of the country as compared to suburban areas.[5][6]

In November 2012 the U.S. Census Bureau said more than 16% of the population lived in poverty in the United States, including almost 20% of American children,[7] up from 14.3% (approximately 43.6 million) in 2009 and to its highest level since 1993. In 2008, 13.2% (39.8 million) Americans lived in poverty.[8] California has a poverty rate of 23.5%, the highest of any state in the country.[9]

In 2011 extreme poverty in the United States, meaning households living on less than $2 per day before government benefits, was double 1996 levels at 1.5 million households, including 2.8 million children.[10] This would be roughly 1.2% of the US population in 2011, presuming a mean household size of 2.55 people. In 2011, child poverty reached record high levels, with 16.7 million children living in food insecure households, about 35% more than 2007 levels.[11] In 2009 the number of people who were in poverty was approaching 1960s levels that led to the national War on Poverty.[12]

There were about 643,000 sheltered and unsheltered homeless people nationwide in January 2009. Almost two-thirds stayed in an emergency shelter or transitional housing program and the other third were living on the street, in an abandoned building, or another place not meant for human habitation. About 1.56 million people, or about 0.5% of the U.S. population, used an emergency shelter or a transitional housing program between October 1, 2008 and September 30, 2009.[13]Around 44% of homeless people are employed.[14]

Two official measures of poverty

Number in Poverty and Poverty Rate: 1959 to 2011. United States.

Poverty Rates by Age 1959 to 2011. United States.

There are two basic versions of the federal poverty measure: the poverty thresholds (which are the primary version) and the poverty guidelines. The Census Bureau issues the poverty thresholds, which are generally used for statistical purposes—for example, to estimate the number of people in poverty nationwide each year and classify them by type of residence, race, and other social, economic, and demographic characteristics. The Department of Health and Human Services issues the poverty guidelines for administrative purposes—for instance, to determine whether a person or family is eligible for assistance through various federal programs.[15]

Since the 1960s, the United States government has defined poverty in absolute terms. When the Johnsonadministration declared “war on poverty” in 1964, it chose an absolute measure. The “absolute poverty line” is the threshold below which families or individuals are considered to be lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health.

The “Orshansky Poverty Thresholds” form the basis for the current measure of poverty in the U.S. Mollie Orshansky was an economist working for the Social Security Administration (SSA). Her work appeared at an opportune moment. Orshansky’s article was published later in the same year that Johnson declared war on poverty. Since her measure was absolute (i.e., did not depend on other events), it made it possible to objectively answer whether the U.S. government was “winning” this war. The newly formed United States Office of Economic Opportunity adopted the lower of the Orshansky poverty thresholds for statistical, planning, and budgetary purposes in May 1965.

The Bureau of the Budget (now the Office of Management and Budget) adopted Orshansky’s definition for statistical use in all Executive departments. The measure gave a range of income cutoffs, or thresholds, adjusted for factors such as family size, sex of the family head, number of children under 18 years old, and farm or non-farm residence. The economy food plan (the least costly of four nutritionally adequate food plans designed by the Department of Agriculture) was at the core of this definition of poverty.[16]

The Department of Agriculture found that families of three or more persons spent about one third of their after-tax income on food. For these families, poverty thresholds were set at three times the cost of the economy food plan. Different procedures were used for calculating poverty thresholds for two-person households and persons living alone. Annual updates of the SSA poverty thresholds were based on price changes in the economy food plan.

Two changes were made to the poverty definition in 1969. Thresholds for non-farm families were tied to annual changes in the Consumer Price Index rather than changes in the cost of the economy food plan. Farm thresholds were raised from 70 to 85% of the non-farm levels.

In 1981, further changes were made to the poverty definition. Separate thresholds for “farm” and “female-householder” families were eliminated. The largest family size category became “nine persons or more.”[16]

Apart from these changes, the U.S. government’s approach to measuring poverty has remained static for the past forty years.

Recent poverty rate and guidelines

United States Department of Health and Human Services (HHS) figures for poverty in 2013[17]
Persons in
Family Unit
48 Contiguous States
and D.C.
Alaska Hawaii
1 $11,490 $14,350 $13,230
2 $15,510 $19,380 $17,850
3 $19,530 $24,410 $22,470
4 $23,550 $29,440 $27,090
5 $27,570 $34,470 $31,710
6 $31,590 $39,500 $36,330
7 $35,610 $44,530 $40,950
8 $39,630 $49,560 $45,570
Each additional
person adds
$4,020 $5,030 $4,620

The poverty guideline figures are not the figures the Census Bureau uses to calculate the number of poor persons. The figures that the Census Bureau uses are the poverty thresholds. The Census Bureau provides an explanation of the difference between poverty thresholds and guidelines.[18] The Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty.[16] The 2010 figure for a family of 4 with no children under 18 years of age is $22,541, while the figure for a family of 4 with 2 children under 18 is $22,162.[19] For comparison, the 2011 HHS poverty guideline for a family of 4 is $22,350.

Numbers in other countries

The official number of poor in the United States in 2008 is about 39.1 million people, greater in number but not percentage than the officially poor in Indonesia, which has a far lower Human Development Index and the next largest population after the United States.[20][21] The poverty level in the United States, with 15% (46.2 million people in poverty, of a total of 308.5 million) is comparable to the one in France, where 14% of the population live with less than 880 euros per month.[22][23]

Number of poor are hard to compare across countries. Absolute income may be used but does not reflect the actual number of poor, which depend on relative income and cost of living in each country. Among developed countries, each country then has its own definition and threshold of what it means to be poor, but this is not adjusted for cost of living and social benefits. For instance, despite the fact that France and US have about the same threshold in terms of dollars amount for poverty, cost of living benefits differ, with universal health care and highly subsidized post-secondary education existing in France. In general, it might be better to use the Human Poverty Index (HPI), Human Development Index (HDI) or other global measure to compare quality of living in different countries.

Relative measures of poverty

Another way of looking at poverty is in relative terms. “Relative poverty” can be defined as having significantly less access to income and wealth than other members of society.Therefore, the relative poverty rate is a measure of income inequality. When the standard of living among those in more financially advantageous positions rises while that of those considered poor stagnates, the relative poverty rate will reflect such growing income inequality and increase. Conversely, the relative poverty rate can decrease, with low income people coming to have less wealth and income if wealthier people’s wealth is reduced by a larger percentage than theirs. In 1959, a family at the poverty line had an income that was 42.64% of the median income.[citation needed] If the poverty line in 1999 was less than 42.64% of the median income, then relative poverty would have increased.

In the European Union and for the OECD, “relative poverty” is defined as an income below 60% of the national median equalized disposable income after social transfers for a comparable household. In Germany, for example, the official relative poverty line for a single adult person in 2003 was 938 euros per month (11,256 euros/year, $12,382 PPP. West Germany 974 euros/month, 11,688 euros/year, $12,857 PPP). For a family of four with two children below 14 years the poverty line was 1969.8 euros per month ($2,167 PPP) or 23,640 euros ($26,004 PPP) per year. According to Eurostat the percentage of people in Germany living at risk of poverty (relative poverty) in 2004 was 16% (official national rate 13.5% in 2003). Additional definitions for poverty in Germany are “poverty” (50% median) and “strict poverty” (40% median, national rate 1.9% in 2003). Generally the percentage for “relative poverty” is much higher than the quota for “strict poverty”. The U.S concept is best comparable to “strict poverty”. By European standards the official (relative) poverty rate in the United States would be significantly higher than it is by the U.S. measure. A research paper from the OECD calculates the relative poverty rate for the United States at 16% for 50% median of disposable income and nearly 24% for 60% of median disposable income[24] (OECD average: 11% for 50% median, 16% for 60% median).

Some critics argue that relying on income disparity to determine who is impoverished can be misleading. The Bureau of Labor Statistics data suggests that consumer spending varies much less than income. In 2008, the “poorest” one fifth of Americans households spent on average $12,955 per person for goods and services (other than taxes), the second quintile spent $14,168, the third $16,255, the fourth $19,695, while the “richest” fifth spent $26,644. The disparity of expenditures is much less than the disparity of income.[25][neutrality is disputed]

Income distribution and relative poverty

Although the relative approach theoretically differs largely from the Orshansky definition, crucial variables of both poverty definitions are more similar than often thought. First, the so-called standardization of income in both approaches is very similar. To make incomes comparable among households of different sizes, equivalence scales are used to standardize household income to the level of a single person household. In Europe, the modified OECD equivalence scale is used, which takes the combined value of 1 for the head of household, 0.5 for each additional household member older than 14 years and 0.3 for children. When compared to the US Census poverty lines, which is based on a defined basket of goods, for the most prevalent household types both standardization methods show to be very similar.

Furthermore, the poverty threshold in Western-European countries is not always higher than the Orshansky threshold for a single person family. The actual Orchinsky poverty line for single person households in the US ($9645 in 2004) is very comparable to the relative poverty line in many Western-European countries (Belgium 2004: €9315), while price levels are also similar.[citation needed] The reason why relative poverty measurement causes high poverty levels in the US, as demonstrated by Förster,[24] is caused by distributional effects rather than real differences in well-being among EU-countries and the US.

The median household income is much higher in the US than in Europe due to the wealth of the middle classes in the US, from which the poverty line is derived. Although the paradigm of relative poverty is most valuable, this comparison of poverty lines show that the higher prevalence of relative poverty levels in the US are not an indicator of a more severe poverty problem but an indicator of larger inequalities between rich middle classes and the low-income households. It is therefore not correct to state that the US income distribution is characterized by a large proportion of households in poverty; it is characterized by relatively large income inequality but also high levels of prosperity of the middle classes.[neutrality is disputed] The 2007 poverty threshold for a three member family is 17,070.

Poverty and demographics

In addition to family status, race/ethnicity and age also correlate with high poverty rates in the United States. Although data regarding race and poverty are more extensively published and cross tabulated the family status correlation is by far the strongest.

Poverty and family status

Homeless children in the United States.[26] The number of homeless children reached record highs in 2011,[27] 2012,[28]and 2013[29] at about three times their number in 1983.[28]

According to the US Census, in 2007 5.8% of all people in married families lived in poverty,[30] as did 26.6% of all persons in single parent households[30] and 19.1% of all persons living alone.[30] More than 75% of all poor households are headed by women (2012).[31]

By race/ethnicity and family status, based on data from 2007[edit]

Camden, New Jersey is one of the poorest cities in the United States.

Among married couple families: 5.8% lived in poverty.[30] This number varied by race and ethnicity as follows:
5.4% of all white persons (which includes white Hispanics),[32]
9.7% of all black persons (which includes black Hispanics),[33] and
14.9% of all Hispanic persons (of any race)[34] living in poverty.

Among single parent (male or female) families: 26.6% lived in poverty.[30] This number varied by race and ethnicity as follows”
22.5% of all white persons (which includes white Hispanics),[32]
44.0% of all black persons (which includes black Hispanics),[33] and
33.4% of all Hispanic persons (of any race)[34] living in poverty.

Among individuals living alone: 19.1% lived in poverty.[30] This number varied by race and ethnicity as follows:
18% of white persons (which includes white Hispanics)[35]
27.9% of black persons (which includes black Hispanics)[34] and
27% of Hispanic persons (of any race)[36] living in poverty

Poverty and race/ethnicity

The US Census declared that in 2010 15.1% of the general population lived in poverty:[37]
9.9% of all non-Hispanic white persons
12.1% of all Asian persons
26.6% of all Hispanic persons (of any race)
27.4% of all black persons.

About half of those living in poverty are non-Hispanic white (19.6 million in 2010),[37] but poverty rates are much higher for blacks and Hispanics. Non-Hispanic white children comprised 57% of all poor rural children.[38]

In FY 2009, black families comprised 33.3% of TANF families, non-Hispanic white families comprised 31.2%, and 28.8% were Hispanic.[39]

Poverty and age

The US Census declared that in 2010 15.1% of the general population lived in poverty:
22% of all people under age 18
13.7% of all people 19–64, and
9% of all people ages 65 and older[37]

The Organization for Economic Co-operation and Development (OECD) uses a different measure for poverty and declared in 2008 that child poverty in the US is 20% and poverty among the elderly is 23%.[40] The non-profit advocacy group Feeding America has released a study (May 2009) based on 2005–2007 data from the U.S. Census Bureau and theAgriculture Department, which claims that 3.5 million children under the age of 5 are at risk of hunger in the United States. The study claims that in 11 states, Louisiana, which has the highest rate, followed by North Carolina, Ohio, Kentucky, Texas, New Mexico, Kansas, South Carolina, Tennessee, Idaho and Arkansas, more than 20 percent of children under 5 are allegedly at risk of going hungry. (Receiving fewer than 1,800 calories per day) The study was paid by ConAgra Foods, a large food company.[41]

Child poverty

In 2013, child poverty reached record high levels in the U.S., with 16.7 million children living in food insecure households. 47 million Americans depend on food banks, more than 30% above 2007 levels. Households headed by single mothers are most likely to be affected. Worst affected are the District of Columbia, Oregon, Arizona, New Mexico and Florida, while North Dakota, New Hampshire, Virginia, Minnesota and Massachusetts are the least affected.[11]

Poverty and education

Poverty affects individual access to quality education. The U.S. education system is funded by local communities; therefore the quality of materials and teachers is reflective of the affluence of community. Low income communities are not able to afford the quality education that high income communities are. Another important aspect of education in low income communities is the apathy of both students and teachers. To some the children of the poor or ignorant are seen as mere copies of their parents fated to live out the same poor or ignorant life. The effect of such a perception can be teachers that will not put forth the effort to teach and students that are opposed to learning; in both cases the idea is that the poor student is incapable.[42] Females in poverty are also likely to become pregnant at a young age, and with fewer resources to care for a child, young women often drop out of school.[43] Due to these and other reasons the quality of education between the classes is not equal.[44]

Food security

Eighty-nine percent of the American households were food secure throughout the entire year of 2002, meaning that they had access, at all times, to enough food for an active, healthy life for all of the household members. The remaining households were food insecure at least some time during that year. The prevalence of food insecurity rose from 10.7% in 2001 to 11.1% in 2002, and the prevalence of food insecurity with hunger rose from 3.3% to 3.5%.[45]

In 2007, 88.9% of American households were food secure throughout the entire year. [46] The number of American households that were food secure throughout the entire year dropped to 85.4% in 2008.[47] The prevalence of food insecurity has been essentially unchanged since 2008.[48]

Factors in poverty

There are numerous factors related to poverty in the United States.

  • According to the American Enterprise Institute, research has shown that income and intelligence are related. Charles Murray compared the earnings of 733 full sibling pairs with differing intelligence quotients (IQ’s). He referred to the sample as utopian in that the sampled pairs were raised in families with virtually no illegitimacy, divorce or poverty. The average earnings of sampled individuals with an IQ of under 75 was $11,000, compared to $16,000 for those with an IQ between 75 and 90, $23,000 for those with an IQ between 90 and 110, $27,000 for those with an IQ between 110 and 125, and $38,000 for those with an IQ above 125.[49]
  • Income has a high correlation with educational levels. In 2007, the median earnings of household headed by individuals with less than a 9th grade education was $20,805 while households headed by high school graduates earned $40,456, households headed holders of bachelor’s degree earned $77,605, and families headed by individuals with professional degrees earned $100,000.[50]
  • In many cases poverty is caused by job loss. In 2007, the poverty rate was 21.5% for individuals who were unemployed, but only 2.5% for individuals who were employed full-time.[50]
  • In 1991, 8.3% of children in two-parent families were likely to live in poverty; 19.6% of children lived with father in single parent family; and 47.1% in single parent family headed by mother.[51]
  • Income levels vary with age. For example, the median 2009 income for households headed by individuals age 15–24 was only $30,750, but increased to $50,188 for household headed by individuals age 25–34 and $61,083 for household headed by individuals 35–44.[52] Although the reasons are unclear, work experience and additional education may be factors.
  • Income levels vary along racial/ethnic lines: 21% of all children in the United States live in poverty, about 46% of black children and 40% of Latino children live in poverty.[53] The poverty rate is 9.9% for black married couples and only 30% of black children are born to married couples (see Marriage below). Citing the Pew Research Center,The Economistreports that in 2007,11% of black women aged 30–44 without a high school diploma had a working spouse.[54][copyright violation?] The poverty rate for native born and naturalized whites is identical (9.6%). On the other hand, the poverty rate for naturalized blacks is 11.8% compared to 25.1% for native born blacks suggesting race alone does not explain income disparity. Not all minorities have low incomes. Asian families have higher incomes than all other ethnic groups. For example, the 2005 median income of Asian families was $68,957 compared to the median income of white families of $59,124.[55] Asians, however, report discrimination occurrences more frequently than blacks. Specifically, 31% of Asians reported employment discrimination compared to 26% of blacks in 2005.[56]
  • The relationship between tax rates and poverty is disputed. A study comparing high tax Scandinavian countries with the U. S. suggests high tax rates are inversely correlated with poverty rates.[57] The poverty rate, however, is low in some low tax countries such as Switzerland. A comparison of poverty rates between states reveals that some low tax states have low poverty rates. For example, New Hampshire has the lowest poverty rate of any state in the U. S., and has very low taxes (46th among all states).It is true however that in those instances, both Switzerland and New Hampshire have a very high household income and other measures to levy or offset the lack of taxation. For example, Switzerland has Universal Healthcare and a free system of education for children as young as four years old.[58] New Hampshire has no state income tax or sales tax, but does have the nation’s highest property taxes.[59]
  • The Heritage Foundation speculates that illegal immigration increases job competition among low wage earners, both native and foreign born. Additionally many first generation immigrants, namely those without a high school diploma, are also living in poverty themselves.[60]

Concerns regarding accuracy

In recent years, there have been a number of concerns raised about the official U.S. poverty measure. In 1995, the National Research Council‘s Committee on National Statistics convened a panel on measuring poverty. The findings of the panel were that “the official poverty measure in the United States is flawed and does not adequately inform policy-makers or the public about who is poor and who is not poor.”

The panel was chaired by Robert Michael, former Dean of the Harris School of the University of Chicago. According to Michael, the official U.S. poverty measure “has not kept pace with far-reaching changes in society and the economy.” The panel proposed a model based on disposable income:

According to the panel’s recommended measure, income would include, in addition to money received, the value of non-cash benefits such as food stamps, school lunches and public housing that can be used to satisfy basic needs. The new measure also would subtract from gross income certain expenses that cannot be used for these basic needs, such as income taxes, child-support payments, medical costs, health-insurance premiums and work-related expenses, including child care.[61]

Understating poverty

Many sociologists and government officials have argued that poverty in the United States is understated, meaning that there are more households living in actual poverty than there are households below the poverty threshold.[62] A recent NPR report states that as much as 30% of Americans have trouble making ends meet and other advocates have made supporting claims that the rate of actual poverty in the US is far higher than that calculated by using the poverty threshold.[62] A study taken in 2012 estimated that roughly 38% of Americans live “paycheck to paycheck.”[63]

According to William H. Chafe, if one used a relative standard for measuring poverty (a standard that took into account the rising standards of living rather than an absolute dollar figure) then 18% of families was living in poverty in 1968, not 13% as officially estimated at that time.[64]

As far back as 1969, the Bureau of Labor Statistics put forward suggested budgets for families to live adequately on. 60% of working-class Americans lived below one of these budgets, which suggested that a far higher proportion of Americans lived in poverty than the official poverty line suggested. These findings were also used by observers on the left when questioning the long-established view that most Americans had attained an affluent standard of living in the two decades following the end of the Second World War.[65][66]

A neighborhood of poor white southerners,Chicago, 1974

Using a definition of relative poverty (reflecting disposable income below half the median of adjusted national income), it was estimated that, between 1979 and 1982, 17.1% of Americans lived in poverty, compared with 12.6% of the population of Canada, 12.2% of the population of Australia, 9.7% of the population of Britain, 5.6% of the population of West Germany, 5.3% of the population of Sweden, and 5.2% of the population of Norway.[67]

As noted above, the poverty thresholds used by the US government were originally developed during the Johnson administration’sWar on Poverty initiative in 1963–1964.[68][69] Mollie Orshansky, the government economist working at the Social Security Administration who developed the thresholds, based the threshold levels on the cost of purchasing what in the mid-1950s had been determined by the US Department of Agriculture to be the minimal nutritionally-adequate amount of food necessary to feed a family. Orshansky multiplied the cost of the food basket by a factor of three, under the assumption that the average family spent one third of its income on food.

While the poverty threshold is updated for inflation every year, the basket of food used to determine what constitutes being deprived of a socially acceptable minimum standard of living has not been updated since 1955. As a result, the current poverty line only takes into account food purchases that were common more than 50 years ago, updating their cost using the Consumer Price Index. When methods similar to Orshansky’s were used to update the food basket using prices for the year 2000 instead of from nearly a half century earlier, it was found that the poverty line should actually be 200% higher than the official level being used by the government in that year.[70]

Yet even that higher level could still be considered flawed, as it would be based almost entirely on food costs and on the assumption that families still spend a third of their income on food. In fact, Americans typically spent less than one tenth of their after-tax income on food in 2000.[71] For many families, the costs of housing, health insurance and medical care, transportation, and access to basic telecommunications take a much larger bite out of the family’s income today than a half century ago; yet, as noted above,[68][69] none of these costs are considered in determining the official poverty thresholds. According to John Schwarz, a political scientist at the University of Arizona:

The official poverty line today is essentially what it takes in today’s dollars, adjusted for inflation, to purchase the same poverty-line level of living that was appropriate to a half century ago, in 1955, for that year furnished the basic data for the formula for the very first poverty measure. Updated thereafter only for inflation, the poverty line lost all connection over time with current consumption patterns of the average family. Quite a few families then didn’t have their own private telephone, or a car, or even a mixer in their kitchen… The official poverty line has thus been allowed to fall substantially below a socially decent minimum, even though its intention was to measure such a minimum.

The issue of understating poverty is especially pressing in states with both a high cost of living and a high poverty rate such as California where the median home price in May 2006 was determined to be $564,430.[72] With half of all homes being priced above the half million dollar mark and prices in urban areas such as San Francisco, San Jose or Los Angeles being higher than the state average, it is almost impossible for not just the poor but also lower middle class worker to afford decent housing,[citation needed] and no possibility of home ownership. In the Monterey area, where the low-pay industry of agriculture is the largest sector in the economy and the majority of the population lacks a college education the median home price was determined to be $723,790, requiring an upper middle class income which only roughly 20% of all households in the county boast.[72][73]

Such fluctuations in local markets are, however, not considered in the Federal poverty threshold, and thus leave many who live in poverty-like conditions out of the total number of households classified as poor.

In 2011, the Census Bureau introduced a new supplementary poverty measure aimed at providing a more accurate picture of the true extent of poverty in the United States. According to this new measure, 16% of Americans lived in poverty in 2011, compared with 15.2% using the official figure. The new measure also estimated that nearly half of all Americans lived in poverty that year, defined as living within 200% of the federal poverty line.[74]

Duke University Professor of Public Policy and Economics Sandy Darity, Jr. says, “There is no exact way of measuring poverty. The measures are contingent on how we conceive of and define poverty. Efforts to develop more refined measures have been dominated by researchers who intentionally want to provide estimates that reduce the magnitude of poverty.”[75]

Overstating poverty

Youth play in Chicago’s Stateway Gardenshigh-rise housing project in 1973.

Some critics assert that the official U.S. poverty definition is inconsistent with how it is defined by its own citizens and the rest of the world, because the U.S. government considers many citizens statistically impoverished despite their ability to sufficiently meet their basic needs. According to a 2011 paper by poverty expert Robert Rector, of the 43.6 million Americans deemed to be below the poverty level by the U.S. Census Bureau in 2009, the majority had adequate shelter, food, clothing and medical care. In addition, the paper stated that those assessed to be below the poverty line in 2011 have a much higher quality of living than those who were identified by the census 40 years ago as being in poverty.[76] Moreover, Swedish libertarian think tank Timbro points out that lower-income households in the U.S. tend to own more appliances and larger houses than many middle-income Western Europeans.[77]

The federal poverty line also excludes income other than cash income, especially welfare benefits. Thus, if food stamps and public housing were successfully raising the standard of living for poverty stricken individuals, then the poverty line figures would not shift since they do not consider the income equivalents of such entitlements.[78]

A 1993 study of low income single mothers titled Making Ends Meet, by Kathryn Edin, a sociologist at the University of Pennsylvania, showed that the mothers spent more than their reported incomes because they could not “make ends meet” without such expenditures. According to Edin, they made up the difference through contributions from family members, absent boyfriends, off-the-book jobs, and church charity.

According to Edin: “No one avoided the unnecessary expenditures, such as the occasional trip to the Dairy Queen, or a pair of stylish new sneakers for the son who might otherwise sell drugs to get them, or the Cable TV subscription for the kids home alone and you are afraid they will be out on the street if they are not watching TV.” However many mothers skipped meals or did odd jobs to cover those expenses. According to Edin, for “most welfare-reliant mothers food and shelter alone cost almost as much as these mothers received from the government. For more than one-third, food and housing costs exceeded their cash benefits, leaving no extra money for uncovered medical care, clothing, and other household expenses.” [79]

Fighting poverty[edit]

See also: War on poverty and Welfare’s effect on poverty

In the age of inequality, such anti-poverty policies are more important than ever, as higher inequality creates both more poverty along with steeper barriers to getting ahead, whether through the lack of early education, nutrition, adequate housing, and a host of other poverty-related conditions that dampen ones chances in life.

There have been many governmental and nongovernmental efforts to reduce poverty and its effects. These range in scope from neighborhood efforts to campaigns with a national focus. They target specific groups affected by poverty such as children, people who are autistic, immigrants, or people who are homeless. Efforts to alleviate poverty use a disparate set of methods, such as advocacy, education, social work, legislation, direct service or charity, and community organizing.

Recent debates have centered on the need for policies that focus on both “income poverty” and “asset poverty.”[81] Advocates for the approach argue that traditional governmental poverty policies focus solely on supplementing the income of the poor, through programs such as Aid to Families with Dependent Children (AFDC) and Food Stamps. According to the CFED 2012 Assets & Opportunity Scorecard, 27 percent of households – nearly double the percentage that are income poor – are living in “asset poverty.” These families do not have the savings or other assets to cover basic expenses (equivalent to what could be purchased with a poverty level income) for three months if a layoff or other emergency leads to loss of income. Since 2009, the number of asset poor families has increased by 21 percent from about one in five families to one in four families. In order to provide assistance to such asset poor families, Congress appropriated $24 million to administer the Assets for Independence Program under the supervision of the US Department for Health and Human Services. The program enables community-based nonprofits and government agencies to implement Individual Development Account or IDA programs, which are an asset-based development initiative. Every dollar accumulated in IDA savings is matched by federal and non-federal funds to enable households to add to their assets portfolio by buying their first home, acquiring a post-secondary education and starting or expanding a small business.[82]

Additionally, the Earned Income Tax Credit (EITC or EIC) is a credit for people who earn low-to-moderate incomes. This credit allows them to get money from the government if their total tax outlay is less than the total credit earned, meaning it is not just a reduction in total tax paid but can also bring new income to the household. The Earned Income Tax Credit is viewed as the largest poverty reduction program in the United States. There is an ongoing debate in the US about what is the most effective way to fight poverty, is it through the tax code with the EITC or through the minimum wage laws.

Janet Yellen on Economic Issues: Income and Poverty Report (1997)

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