New Census Bureau Numbers for Poor People In the U.S.

November 22, 2009

Awhile back, I led off a posting by asking how many poor people there are in the U.S. The answer was nobody knows because the official poverty measure is so flawed.

Back in 1995, the National Academy of Sciences produced recommendations for an alternative measure that would take account of actual living costs, geographic differences and the impacts of public benefits. Experts generally agree that such a measure would be a big improvement over what we’ve got.

The Census Bureau has issued alternative poverty estimates based on the NAS recommendations. So do we now know how many poor people there are in the U.S.? No. But we’ve got at least six sets of figures that generally point in the same direction.

All four detailed sets base living costs on the Consumer Expenditure Survey–a two-part program that collects information on what Americans buy and how much they pay.

Two of these sets adjust poverty thresholds for geographic differences. One also subtracts Medicaid out-of-pocket expenses from income. The other includes Medicaid out-of-pockets in the poverty thresholds.

Looking at the first set, what we find is that, in 2008:

  • There were 47.4 million poor people in the U.S., as compared to 39.8 million under the official poverty measure.
  • The poverty rate was 15.8%, rather than the official 13.2%.
  • The child poverty rate was 17.9%, rather than the official 19%. The drop here probably reflects the impacts of food stamps and other non-cash benefits.
  • The poverty rate among seniors wasn’t lower than for any other age group, as the official measure indicates, but higher–18.7%. Rising health care costs are probably the culprit here.
  • While the poverty rate for blacks was unchanged at 24.7%, poverty rates for all other race/ethnicity groups were higher than the official rates, topped by Hispanics at 29%.

The second set puts most of these figures higher.

  • Instead of 47.4 million poor people, we get 50.8 million–16.9% of the population.
  • The child poverty rate goes up to 19.8%, rather than down.
  • Poverty rates for all race/ethnicity groups go up, with the Hispanic rate reaching 31.8%.
  • However, the poverty rate for seniors goes down a bit, to 18.1%.

I wish I knew enough to know which set of figures gives us the more accurate picture.

What’s clear enough is that there were many more poor people in the country than the original Census report indicated–unless you accept the view that the Bureau’s NAS formula is seriously flawed. Here again, I wish I knew more, but the aggressively anti-government source makes me suspicious.

If the formula’s not so bad, then the Bureau’s poverty thresholds are too low. Using the NAS recommendations, the 2008 threshold for a family of two adults and two children would increase from $21,834 to $29,654.

Here’s where the need to know comes up against fiscal politics.

As I’ve written before, bills have again been introduced in the Congress to establish a new poverty measure based generally on the NAS recommendations. They would not replace the current measure as the standard for calculating federal benefits. But the alternative measure would almost certainly show that many poor people are denied benefits because they don’t fall below the official poverty line–or whatever multiplier is used for the program.

Are members of Congress ready to deal with that? What about the Obama administration, which could adopt the alternative measure on its own?

The Census Bureau said it expedited release of the NAS-based poverty estimates because both wanted to see a broader range of numbers. Now they’ve got them. Let’s see what they do.


How Many Poor People Are There in the U.S.?

March 15, 2009

Since I wrote this posting, the Census Bureau has issued two new official estimates of the number of poor people in the U.S. You can find my summary of the latest here. It has also issued two sets of alternative estimates. You can find my summary of the first set here and a discussion of the second set here.

According to the latest U.S. Census Bureau figures, the answer is about 37.3 million. But if we want to know how many people lack the resources needed for a decent standard of living, then the answer is nobody knows.

Economists, service providers, advocates and many policymakers have known for years that the current poverty measure is outdated–in fact, was flawed from the get-go.

It was developed in 1963, based on a 1955 survey. The survey found that the average family of three or more spent a third of its after-tax income on food. So the basic poverty threshold became three times the cost of the U.S. Department of Agriculture’s Economy Food Plan–a bare subsistence food budget.

This threshold was then spun off into specific thresholds for different family sizes. And certain adjustments were made based on factors related to food purchases. That’s basically what the thresholds are today.

If your income is at or below the relevant threshold, you’re counted as poor. If it’s over, you’re not.  Whether you’re supporting children not living with you doesn’t matter. Nor does it matter whether you have resources other than cash income. Whether you live in New York City or Biloxi, Mississippi doesn’t matter either.

The poverty thresholds are annually updated to reflect rising costs of living as indicated by the Consumer Price Index. But no adjustment has been made for major changes in consumer spending patterns that have significantly reduced the percent of household budgets spent on food.

And the thresholds still takes no account of geographic differences in cost of living. Studies by Wider Opportunities for Women indicate how big those differences can be. For example, in 2005, self-sufficiency for a D.C. adult with two young children required an annual income of $53,634 per year. The same family in Wheeling, West Virginia could have been self-sufficient with $24,321.

In 2005, the poverty threshold for that family of three was $15,735–less than 30% of the D.C. family’s minimal costs of self-sufficiency. And it’s the threshold that determines eligibility for assistance under more than 30 federal programs and some state programs as well.

Last December, the Brookings Institution issued a report recommending a poverty measure based on recommendations in a 1955 report issued by the National Academy of Sciences. It’s quite complex, but then so is the issue.

Basically, the measure would use current data on actual expenditures for a set of basic necessities and resources available to obtain them, after deductions for additional necessary expenditures. Adjustments would then be made for family composition, as well as size, and for geographic differences.

In 2008, legislation was introduced to establish a poverty measure based on the NAS/Brookings approach. It may–and should–be reintroduced in the new Congress.

As the Brookings authors say, it will be politically challenging to put a new measure in place. But we can’t provide needed assistance to poor people unless we can accurately identify them. And we can’t assess current policies and programs unless we know, over time, how many poor people there are.