Many Millions Above the Poverty Line Lack Basic Economic Security

November 24, 2014

Blogger Matt Bruenig has declared war on the notion that poor people are “a small, especially degenerate class.” I don’t think this view is as common as he implies, thought it’s hardly as marginal as one would wish.

I mentioned his campaign, however, because the salvo I’ve linked to focuses on the arbitrariness of the federal poverty line. Look, he says, at the 53 million people hovering just above it, according to the Census Bureau’s latest Supplemental Poverty report. That’s 4 million more than fall below it.

And look at the gradual upward slope of the income distribution from way below the poverty line up to 300% of it. We see no “especially large gap” that would justify putting poor people into one bucket and everyone else into another.

Besides, he reminds us, people cycle in and out of official poverty. During 2009-11, for example, 31.6% of the population lived in poverty for at least two months, but only 3.5% were poor for the entire three-year period.

It’s nevertheless hard to imagine doing away with a line of some sort or other — at least, so long as we have programs that set eligibility and/or benefit levels based on income.

At the same time, a line, wherever we set it, will be a crude measure of what should most concern us — material hardship. Do people have the wherewithal for food, shelter, heat during the winter, etc. For what they need to pay in order to work, e.g., transportation, perhaps child care?

As I wrote awhile ago, Molly Scott at the Urban Institute showed that a single mother working part time at the minimum wage could actually be better off than a single mother working 60 hours a week at the same wage. Public benefit help explain this, but so do work-related costs.

Yet having just the resources to get by day to day without material hardship seems a low bar to set in a country with as much wealth as ours. Wider Opportunities for Women proposes that we look instead at how much a family much have to be economically secure.

WOW has a very complex database — the BEST (Basic Economic Security Tables) Index. It’s made up of many hundreds of monthly budgets for different family configurations, with and without employment-based benefits, and each reflecting costs in diverse geographic locations.

The budgets include not only basic needs and work-related expenses, but some savings for retirement and for emergencies — enough to get along for nine weeks without earnings because that was the average time jobless workers remained unemployed when the index was created.

The budgets are strictly “no frills,” in the words of WOW’s Vice President for Policies and Programs. In other words, they don’t allow for entertainment, vacations or even electronics, except a phone. They do, however, include optional, below the line savings for higher education and home ownership.

Using the BEST Index, WOW finds that 44% of Americans didn’t have enough income for economic security two years ago. Children in the household raised the rate to nearly 50%.

Economic insecurity was much more common than this for single parents with children — 77% without enough income. The rate for single-mother families was an even higher 81% — more than two and a half times their high poverty rate.

These are national figures. Economic security requires far more income in some places than others, of course. Consider, for example, Scott’s single mother and her two elementary school-age children living in the District of Columbia.

She and her kids would have cleared the poverty threshold in 2012 if she earned $18,500 a year. But she’d have had to make well over four times as much — at least $79,932 — for her family to be economically secure.

“At least” because this formidable sum assumes she was eligible for unemployment insurance, e.g., not a contract worker, and that her employer provided both a health insurance and a retirement plan. Without these employed-related benefits, she’d have had to make $85,992.

In both cases, the biggest ticket items for her child care, taxes and rent. Child care was the second biggest, even though her children needed it only during after-school hours — nearly $1,300 a month. And the rent, as WOW computes it, is quite low for the District — $1,259 a month.

I’m not sure what we should make of all this. I suppose we could begin, as Professor Stephen Pimpare suggests, by recognizing the “widespread economic fragility” of households in our country — and the weakness of the safety net many are likely to need.

But there are other, more specific policy lessons in the enormous gap between what it takes to be officially not-poor and what it takes to have enough for health, safety and work-related costs, plus a modest stash to draw on so as not to fall into poverty.

Far too many lessons for this post. But the sobering figures surely support a wide range of proposals — and confirm objections to others that our recent “Republican wave” seems likely to toss onto our Congressional and state legislative agendas.



New Reasons New Census Figures Won’t Give Us a True Read on Poverty in America

September 6, 2012

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.”

Safety Net Fraying For Poorest Families

July 8, 2009

A new report from the Center on Budget and Policy Priorities presents a half-full, half-empty picture of our nation’s safety net programs.

On the half-full side, the report finds that, in 2005, the safety net, as a whole:

  • Reduced the number of Americans living in poverty by 44%–or nearly 31 million.
  • Increased the average disposable income of those who remained poor from 29% to 64% of the poverty line.
  • Lifted 76% of very poor children–7.3 million–to above half the poverty line.

But this safety net includes programs that aren’t for low-income people only–notably, Social Security, unemployment insurance and the child tax credit.

Looking only at means-tested benefits, i.e., those we ordinary think of as parts of the safety net, CBPP finds that, in 2005, they lifted 14 million Americans above the poverty line.

The half-empty side is that safety net programs have become much less effective at shielding children from deep poverty, i.e., living in households with incomes below half the poverty line. For example, in 1995:

  • Aid to Families with Dependent Children lifted 76% of children above half the poverty line. The 2005 figure for TANF, which replaced AFDC, was just 21%.
  • Food stamps lifted 61% of children above half the poverty line. By 2005, the figure had dropped to 42%.

If the means-tested benefits had been as effective as they were in 1995, 1.2 million fewer children–more than half the total–wouldn’t have been below half the poverty line.

And half the poverty line is poor indeed. In 2005, it was just $10,698 for a family of four, according to the measure CBPP used. (This measure adopts changes to the official poverty measure that were recommended by the National Academy of Sciences and are, once again, pending in Congress.)

The single largest factor in fraying the safety net was the replacement of AFDC with TANF, combined with state-level TANF rules and practices that have significantly reduced participation rates. In the early 1990s, about 80% of families eligible for cash assistance through AFDC were receiving it. In 2005, TANF cash assistance was going to just 40%.

Meanwhile, parts of the safety net for childless adults were eliminated or cut back. At the federal level, the same law that established TANF barred out-of-work childless adults from receiving food stamps for more than three months in any 36-month period. By then, state-level general assistance programs, which were once their last resort, had all but disappeared.

Much has happened since 2005. The unemployment rate in June of that year was 5%. It’s now at 9.5%. Twenty-nine states and the District of Columbia have slashed key safety net programs, and the budget-balancing isn’t over.

The economic recovery package includes a number of measures that boost safety net supports, but they’ll expire by the end of 2010–at least a year (probably more) before the unemployment rate turns around. So the first order of business is to extend these measures–or, better yet, strengthen and make them permanent.

But even when the recession ends, we’re still going to have a safety net that fails to protect the poorest families. So the programs that comprise it should be revisited. The Food Research and Action Center has ideas for food stamps and other nutrition assistance. TANF is due for reauthorization next year and is clearly another prime candidate.

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.