A Better Poverty Measure

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How was the traditional federal poverty measure calculated?

As West Wing fans will recall, the official US government measure of poverty is based on a very crude estimate. In the 1960s, the average family spend one third of its income on food. So the way the poverty line works is that it calculates an “emergency food” budget for a family, and then triples the resulting number.

Modern-day families, of course, spend much less on food but substantially more on housing, health care, and child care so there’s a need for an updated metric to better account for household spending. What’s more, there’s considerable place-to-place variation in prices, especially in the price of housing. What you can get for $25,000 in Montana is quite different from what you can get for $25,000 in Connecticut. Last, the poverty line metric doesn’t take into account the value of public assistance. Consequently, spending money on anti-poverty programs by definition doesn’t lift a family out of poverty. This is highly misleading, as obviously the whole point of giving a family SNAP or an Earned Income Tax Credit is that these benefits raise their living standard.

Of course, actually changing the official poverty line would be very politically contentious because it would change a lot of programmatic funding streams. But as an excellent first step, the Census Bureau announced this week that it plans to develop a supplemental poverty metric to at least better help us understand what’s going on. CAP is supporting this initiative. Melissa Boteach, director of our anti-poverty program, explains:

Small change, but change I can believe in.