Next week, the Census Bureau will issue the first of its annual reports. Economists surveyed by the Associated Press predict that the poverty rate will rise again.
Two recent blog posts tell us that whatever the Bureau reports next week — or later, when it issues the results of its more detailed American Community Survey and its supplemental poverty measure — will understate the number of poor people in America.
Another Problem With the Poverty Thresholds
The poverty rate we generally read about is based on a set of thresholds the Census Bureau uses.
The thresholds matter not only because they’re our main source of poverty data, but because they’re the basis for the federal poverty guidelines. They thus ultimately determine eligibility for a wide range of safety net programs.
It’s common knowledge that the thresholds are a crude, out-dated poverty measure — three times what the cheapest U.S. Department of Agriculture food plan cost a family of four in the mid-1960s, adjusted annually for inflation.
Blogger Evan Soltas — a super-wonkish undergraduate, even by Princeton standards — adds a new wrinkle. The inflation adjustments themselves, he says, cause the Census Bureau to under-count the poor.
The Bureau uses the CPI-U (Consumer Price Index for All Urban Consumers) to adjust its thresholds. The CPI-U reflects the cost of a market basket of goods and services commonly purchased by people who live in metropolitan areas.
But, says Soltas, the market basket of goods and services purchased by people in the bottom fifth of the income scale is different. And its costs have risen significantly more than the CPI-U.
The cumulative difference since 1967 is a 12% understatement of living costs for the poor. Hence an under-count built on top of the under-count resulting from a drop in food costs as a percent of total household budgets.
Any safety net program that indexes to the CPI-U has thus effectively cut benefits by the same 12%, Soltas says. I assume this includes all the programs that use the poverty guidelines.
More than 30 federal programs do. Some state programs also. Seems we’ve got a big problem then — different from the big problems we already knew.
A Problem With the Supplemental Measure Too?
The Census Bureau’s supplemental poverty measure takes an altogether different approach to the thresholds, basing them on the 33rd percentile of what households with two children spend on four basic needs — food, clothing, shelter and utilities — plus a multiplier to accommodate the rest.
It also factors in some other “nondiscretionary expenses,” on the one hand, and major federal benefits that don’t come to recipients as cold cash, e.g., tax credits, food stamps.
The results are commonly viewed as a big improvement over the official Census figures. Shawn Fremstad at the Center for Economic and Policy Research says not necessarily.
In 2010, the child poverty rate was 4.3% lower under the SPM than the official measure.
Conversely, the senior poverty rate was 6.9% higher — mainly because the SPM takes account of out-of-pocket health care expenses.
But look, says Fremstad, at USDA’s food insecurity rate — the “most established measure” we have of “direct deprivation.”
According to Fremstad, the 2010 food insecurity rate for children was 20.2% — closer to the official poverty rate than the SPM rate. An even smaller difference between the food insecurity and official poverty rates for seniors.
Fremstad thinks the SPM rate for seniors is about right. The child poverty rate isn’t because it fails to capture the unique costs of meeting children’s “basic needs for care and healthy development.”
No one, I think, could argue with that. Whether the food insecurity rate Fremstad cites reflects “direct deprivation” experienced by children is another matter.
We know a family can be food insecure even if it always has the resources to buy enough food to keep children from going hungry. Adults will skip or scrimp on meals first, as the USDA data clearly show.
Fremstad is comparing the child poverty rates with the food insecurity rate for households with children. The food insecurity rate specifically for children is just under half that.
So it’s not food that most officially poor children are missing, though we’ve disturbing reports of children showing up at school hungry.
It’s those other investments in their healthy development — the parental attention, high-quality child care and other resource-based influences that account for wide income disparities in school readiness among kindergarteners and subsequent academic performance.
Hard to imagine the Census Bureau could measure these. But Fremstad seems to think it should try. Because it will otherwise “continue to define deprivation down for America’s children.”