So how many poor people are there in the U.S.? We have a new answer from the Census Bureau, which has just released a report based on its supplemental poverty measure.
According to the SPM, 49.1 million people in America were poor in 2010 — 16% of the population. That’s about 2.9 million — 0.9% — more than the Bureau reported based on the official poverty measure.
However, the Bureau’s earlier report doesn’t include unrelated individuals, i.e., people not living with relatives, who are under 15. Folding them in, as the SPM report does, nearly 2.5 million — 0.8% — more people were poor.
Poverty Rate Shifts
Some of the breakout figures are also markedly different from those based on the official measure.* For example:
- The child poverty rate drops from 22.5% to 18.2%, reducing the number of children in poverty by about 3.2 million.
- The poverty rate for seniors rises from 9% to 15.9%, increasing the number of poor people 65 and older by somewhat more than 2.7 million.
- The poverty rate for blacks drops from 27.5% to 25.4% — still far higher than the non-Hispanic white rate of 11.1%, but now 2.8% lower than the rate for Hispanics.
- The poverty rate for Asians rises from 12.1% to 16.7% — by far and away the largest percent change for any race/ethnicity group reported.
- The percent of people in extreme poverty, i.e., with incomes below 50% of the threshold, drops from 6.8% to 5.4%.
- For children, the extreme poverty rate is barely more than half what it is under the official measure — 5.3%, as compared to 10.4%.
- For seniors, however, the extreme poverty rate rises from 2.5% to 4.6%.
Both the gap in overall poverty rates and the shifts for specific groups reflect profound differences in the way the official measure and the SPM set the poverty threshold and also in the way they determine who’s above and who’s below it.
Brief overview here of something that’s really quite complicated.
The official poverty measure is three times the cost of what used to be the U.S. Department of Agriculture’s cheapest meal plan for a two-adult-two-child family, with adjustments for inflation since the measure was developed in the early 1960s.
The SPM instead sets the threshold at the 33rd percentile of what households with two children and any number of adults spend on food, clothing, shelter and utilities — far more realistic, since food no longer accounts for anything close to a third of basic living expenses.
The total for these is multiplied by 1.2 to accommodate other basic needs, e.g., household supplies, transportation for purposes other than work.
The SPM then makes adjustments for shelter costs based on whether households rent or own — and if own, with or without a mortgage.
These costs are also adjusted to account for differences among geographic areas — obviously needed, since housing costs far more in New York City than in, say, Mobile, Alabama.
Definition of Household
The SPM adopts a more flexible view of who should be counted as part of a household.
For the official measure, a household consists of all related individuals living at the same address. The SPM also includes unrelated individuals living there — foster children, for example. Also what the Bureau refers to as “cohabitors,” i.e., domestic partners, and their relatives.
The third big difference is the way income is calculated. For the official measure, only before-tax cash income counts — wages, of course, but also cash benefits from programs like unemployment insurance and Social Security.
For the SPM, “near-money federal benefits” for the four big expenditure categories also count. Tax credits are included here.
Also five in-kind benefits — food stamps, school lunches, supplementary nutrition assistance provided by WIC, housing subsidies and assistance funded under the Low Income Home Energy Assistance Program.
On the other hand, the SPM recognizes what the Bureau calls “nondiscretionary expenses” — payroll and income taxes, child care and certain other work-related expenses, child support payments and medical out-of-pocket expenditures.
These are all deducted from the expanded income calculated to arrive at the bottom line used to determine whether a household is above or below the poverty threshold.
Why the Nuts and Bolts Matter
Once we understand the SPM, the poverty rate shifts make sense. Or rather, we can make them make sense by applying what we know about discrete populations and the federal policies the measure takes account of.
This is what the SPM is supposed to help us — and policymakers — do. And though it’s still a work in progress — and subject to criticisms from both left and right — I think it does the job pretty well.
Surely a whole lot better than the official measure we’re still stuck with.
* All the comparisons below come from the SPM report. The official measure rates are, therefore, in some cases, different from those in the CPS report.