Better Poverty Measure, Worse Poverty Rate, But Not for Everybody

As in the past, the Census Bureau’s Supplemental Poverty Measure yields a higher poverty rate than the official measure that was the basis for the reports the Bureau issued last month. According to the just-released SPM report, the rate last year was 15.5%, rather than 14.5%.*

This means that about 2.9 million more people — roughly 48.7 million in all — were living in poverty. At the same time, 1.3% fewer people lived in deep poverty, i.e., at or below 50% of the income threshold that determines who’s counted as poor.

These differences as well as the many others reflect the fact that the SPM is constructed differently from the official measure. There’s a brief explanation of how it’s built in the last section below.

Other Shifts in Poverty Rates

We see shifts up and down for state-level rates. For example, the rate for the District of Columbia rises from 19.9% to 22.4%. Rates fall in 26 states and rise in 13. (These reflect three-year averages to compensate for the relatively small sample sizes.)

As in the past, rates also shift for major race/ethnicity groups. Most of the shifts are relatively small. An exception here for Asians, whose poverty rate was 5.9% higher, and for blacks, whose deep poverty rate was 4.6% lower.

The most marked shifts are again for the young and the old.

  • The child poverty rate drops from 20.4% to 16.4%, reducing the number of poor children by about 2.9 million.
  • The deep poverty rate for children is less than half the official rate — 4.4%, as compared to 9.3%.
  • By contrast, the poverty rate for people 65 and older rises from 9.5% to 14.6%.
  • And the deep poverty rate for seniors ticks up from 2.7% to 4.8%.

Poverty Rates Without Key Federal Benefits

The changes for seniors largely reflect the fact that the SPM factors in medical out-of-pocket costs. But the SPM report also tells us that the senior poverty rate would have been 52.6% without Social Security payments. In other words, Social Security protected about 23.4 million seniors from poverty last year — more than three and a half times as many as were poor.

This is only one of the policy-relevant figures the SPM report provides in a section that shows how poverty rates would change if some particular benefit weren’t counted as income. Some examples Census has helpfully translated into raw numbers:

  • The refundable Earned Income Tax Credit and Child Tax Credit lifted 8.8 million people out of poverty.
  • But for SNAP (food stamp) benefits, about 4.8 million more people would have fallen below the poverty threshold.
  • Unemployment insurance benefits lifted 2 million people over the threshold.

So we see that the much-maligned safety net programs work. But we also see that policy choices have impaired the impacts some of the biggies formerly had.

For example, SNAP benefits lifted about 5 million people out of poverty in 2012, before the across-the-board cuts became effective. We’ve yet to see the effects of the further, targeted whack at benefits that’s part of the new Farm Bill.

The anti-poverty impacts of UI benefits shrunk further — a trend dating back to 2010, according to the Center on Budget and Policy Priorities. The number of people the benefits lifted out of poverty last year was nearly half a million fewer than in 2012.

And that was before Congress let the Emergency Unemployment Compensation program die at the end of last year. The new UI figure almost surely reflects reductions it made when it last renewed the program, however.

SPM 101

As I’ve explained before, the SPM is a more complex — and generally viewed as better — poverty measure than the one that’s used for official purposes, e.g., as the basis for the federal poverty guidelines that help determine eligibility for many safety net and other means-tested programs.

The Bureau begins by setting initial thresholds based on what the roughly 33rd percentile of households with two children spend on four basic needs — food, shelter, clothing and utilities.

It then bumps the amount up a bit to account for some other needs, e.g., household supplies, transportation that’s not work-related. It also makes some housing cost adjustments based on differences between major geographic areas and whether households rent or own — and in the latter case, with or without a mortgage.

Next, it deducts for certain other necessary expenses, e.g., work-related expenses, out-of-pocket costs for health care. And, as income, it adds the value of some non-cash benefits that households can use for the four basic needs. It also, for the same reason, folds in the refundable tax credits.

The report I link to at the beginning of this post provides a fuller — and considerably more wonkish — explanation.

* This is the same rate the Census Bureau reported last month. However, most of the official rates in the SPM report differ somewhat because the Bureau has included children under 15 who are unrelated to anyone they’re living with, e.g., foster children. The official measure doesn’t include them as part of a family unit.

I’m using the adjusted rates so we can have apples-to-apples comparisons. But the rates reported last month are those that should be used for other purposes.

UPDATE: The Center on Budget and Policy Priorities reports that the refundable tax credits lifted 9.4 million people out of poverty. This figure, it says, is based on its analysis of the SPM data. I don’t know why it’s higher than the Census Bureau figure I linked to.

3 Responses to Better Poverty Measure, Worse Poverty Rate, But Not for Everybody

  1. I was wondering what the poverty rate in DC area is for people with disabilities.

  2. Kathryn Baer says:

    The SPM report doesn’t include details for states (or the District). However, the American Community Survey, which I blogged on last month, does. According to the ACS, the poverty rate for D.C. residents with a disability was 33.9% last year. The rate for the metro area was 15.9%. Both rates are roughly twice the rates for people without a disability.

    Thanks for asking, Diane. I learned something I didn’t know before.

  3. […] post on the Census Bureau’s Supplemental Poverty Measure report prompted a fine question: What is […]

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