Census Bureau Reports 16.1% Poverty Rate

November 15, 2012

Another round of news on poverty in the U.S. — this time from the Census Bureau’s latest report on the results of analyses using its Supplemental Poverty Measure.

Once again, the national poverty rate is higher than the rate the Bureau earlier reported, using its official measure — 16.1%, as compared to 15.1%.

In other words, about 3 million more people — a total of nearly 49.7 million — were living in poverty last year.

On the other hand, the percent of people living in extreme poverty, i.e., below 50% of the applicable threshold, is 1.5% lower than the official measure shows.

We get a mixed picture for state-level poverty rates, for which the Bureau uses three-year averages. Some of the rates are higher than the official rate. Some lower.

The rate for the District of Columbia rises sharply — from 19% to 23.2%. This is higher than the rate for any state except California.

As I’ve written before, the official measure sets poverty thresholds at three times the annually adjusted costs of what used to be the U.S. Department of Agriculture’s cheapest food plan.

The SPM starts from the costs of basic living expenses, adjusted for differences among major geographic areas and also differences in living situations, e.g., renting versus owning.

To these, it adds some other “necessary expenses,” e.g., payroll taxes, health care co-pays and other out-of-pocket costs.

On the other side of the ledger, it takes account of not only cash income, but some “near-money” federal benefits like tax credits and also some in-kind benefits, e.g., food stamps, two forms of child nutrition assistance, housing subsidies.

And it uses actual household size, rather than counting only household members who are related to one another, as the official measure does.

These differences explain not only the difference between the overall SPM rate and the official rate, but shifts in rates for different age and race/ethnicity groups.

We see, for example, that:

  • The child poverty rate drops from 22.3% to 18.1%, reducing the number of children in poverty by about 3 million.
  • The poverty rate for seniors rises from 8.7% to 15.1%, increasing the number of poor people 65 and older by somewhat more than 2.6 million.
  • The poverty rate for blacks drops from 27.8% to 25.7% — still far higher than the non-Hispanic white rate of 11%, but now 2.3% lower than the rate for Hispanics.
  • The poverty rate for Asians rises from 12.3% to 16.9% — the largest percent change for any race/ethnicity group reported.
  • For children, the extreme poverty rate is less than half what it is under the official measure — 5.1%, as compared to 10.3%.
  • For seniors, however, the extreme poverty rate rises — from 2.3% to 4.3%.

This year’s report is unusually timely because it gives us a read on the anti-poverty effects of some benefits that are at immediate risk. It tells us that:

  • Food stamp benefits lifted more than 4.6 million people, including  about 2.1 million children, out of poverty last year.
  • Well over 8.6 million more people, including nearly 4.7 million children, would have fallen below the poverty threshold if their family’s disposable income hadn’t been boosted by refundable tax credits.
  • Unemployment insurance benefits kept nearly 3.4 million people out of poverty — mostly adults, but about 963,400 children too.
  • And Social Security — the single most effective anti-poverty program we’ve got — accounted for 25.6 million fewer poor people than there would have been without its benefits. Poverty rates for all age groups would have been higher. The rate for seniors would have soared to 54.1%.

So there are the benefits. Now here are the risks.

The farm bills now pending in Congress would cut food stamp benefits for at least half a million households — 1.3 million if the House version prevails. The House bill would also mean no more food stamps at all for as many as 3 million people.

As you’re well aware, the Bush-era tax cuts are expiring. We can be quite confident that most will be renewed.

But Congressional Republicans want to extend earlier versions of the refundable Earned Income Tax Credit and Child Tax Credit, not the expanded versions that have made a significant difference to low-income working families.

The federal program that funds unemployment insurance benefits for longer-term jobless workers will also soon expire. Some two million workers and their families may face the new year with no source of cash income.

Lead Republicans in Congress are about to sit at the bargaining table with their Democratic counterparts and White House officials to thrash out an alternative to the so-called fiscal cliff.

They say they’ll be amenable to increased revenues (not to be confused with higher tax rates for the wealthiest 2%).

But the deal must also include “real changes to the financial structure of entitlement programs” — apparently something along the lines of the recommendations in the plan produced by the co-chairs of the President’s fiscal commission, a.k.a. Bowles-Simpson.

These recommendations would cut Social Security retirement benefits in several different ways. With the average benefit now only $1,230 a month, we could see more seniors in poverty if the Democrats don’t hold firm to the position they’re taking now.

NOTE: A couple of the benefits impact figures reported by the Center on Budget and Policy Priorities are a bit higher than mine. This is also true for figures reported by the Center for American Progress. I’m at a loss to explain the discrepancies.


New Census Report Shows Higher Poverty Rate, Especially For Seniors

November 7, 2011

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.

Poverty Thresholds

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.

Income Calculation

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.