The Blurry Poverty Line

By David K. Shipler

Now that the Census Bureau has offered a more realistic way of calculating poverty, the outdated method should be discarded instead of retained as the “Official Poverty Measure” used to determine eligibility for government benefits. It was designed in the 1960s, when the average family spent about one-third of its budget on food, a proportion that has fallen to one-seventh as housing and other costs have soared. So it makes no sense to take the price tag of a minimum food basket and multiply it by three. But that will continue to happen unless Congress and the administration act—a hard act to perform with federal and state governments in fiscal straits.


The revised method uses food, shelter, utilities, and clothing costs as the basis for determining the poverty line. But what is most useful about the approach is not its tally of the poor—49 million (16 percent) under the new calculation compared with 46.6. million (15.2 percent) under the old. It is, instead, the ability to drill down into the complex of government programs to assess how much they help, and into families’ everyday expenses to see how much they hurt. This is accomplished by examining both sides of the household ledger: income and spending.

While the “official” method treats the country as if it were homogeneous, the new calculation—called the Supplemental Poverty Measure—includes regional adjustments to such expenses as housing, whose costs vary markedly from place to place. In-kind government benefits (food stamps, etc.) that are not considered in the official calculation of household income are part of the “supplemental” method. In this way, the Census Bureau has built on two decades of study by experts to develop a sophisticated tool for policymakers, if they will use it.

We learn, for example, that without the Earned Income Tax Credit, the overall poverty rate would jump to 18 from 16 percent, and for children to 22.4 from 18.2 percent. Without housing subsidies, 0.9 percent more of the general population, and 1.3 percent more children, would reside below the poverty line. Eliminating food stamps would raise the overall poverty rate to 17.7 percent. But a much smaller difference—just 0.1 percent—is made by WIC, the nutrition program for women, infants, and children.

Expenditures such as transportation and child care for working parents, and out-of-pocket medical payments, are omitted from the official measure but included in the supplemental, with illuminating results. It turns out that the costs associated with having a job raise the poverty rate by 1.5 percent, and medical expenses raise it by 3.3 percent.

These and other findings point to the leverage over poverty that could be exercised by changes to benefits and expenses. The number of poor would be reduced significantly by expanding government medical insurance, such as Medicaid and the State Child Health Insurance Program. Poverty would be eased by broader access to subsidized child care and by sufficient mass transit to reduce the necessity of owning a car to get to work. More generous housing subsidies would have a major impact, especially since housing is typically the largest item in the family budget, soaking up cash that could otherwise be spent on food. Child malnutrition is higher among low-income families who do not have housing subsidies.

The new data also confirm what specialists have long believed: that the Earned Income Tax Credit has a direct, efficient effect on poverty, since it puts cash straight into the hands of low-wage workers. It also has the rarest of attributes: bipartisan appeal in Washington.

Only someone who has a job and files a tax return is eligible, which is why Republicans have traditionally supported it. The payment from the IRS is more than just a tax refund. It can exceed taxes withheld from a paycheck, and can add up to several thousand dollars if a person has a low enough income and at least two children. “When I get my taxes” has become a familiar line in poor neighborhoods. Obama’s stimulus package raised the payments, but only temporarily, leaving millions likely to fall again below the poverty line as the funding wanes.

The “poverty line” is artificial, whether it is the “official” $22,113 in annual income for a family of four or the new $24,343 calculated by the “supplemental” method. The line is imaginary. It defines no true boundary or threshold. It tells something about the material conditions of American families, but it does not mark a dramatic difference between misery and well-being.

Impoverished families struggling to move up and over the poverty line find that it’s more complicated than showing a passport and crossing a frontier. It’s more like walking through a minefield, and even those who get to the other side discover how little their living standards have changed.

Fulltime work is still hard to come by, wages are still inadequate, housing is still expensive, and the unquantifiable ingredients of powerlessness and stress and uncertainty remain. In territory that stretches some distance above the poverty line, there is still not enough to cushion a family from a reversal or a mistake. There is little to stop the chain reaction of problems that can cascade from a minor car breakdown to a day missed from work, to a lost job, to rent unpaid, to eviction, and on and on.

These are not terrible fantasies. They are real experiences. It will take compassionate perception for both voters and officials to read the human stories behind the new numbers and act accordingly.