Undercounting the Poor

June 13th, 2013

The U.S.’s New, but Only Marginally Improved, Poverty Measure – Published on Dollars and Sense, by JEANNETTE WICKS-LIM, May/June 2013.

In 1995, a blue-ribbon panel of poverty experts selected by the National Academy of the Sciences NAS told us that the “current U.S. measure of poverty is demonstrably flawed judged by today’s knowledge; it needs to be replaced.” Critics have long pointed out shortcomings including the failure to adequately account for the effects of “safety net” programs and insensitivity to differences in the cost of living between different places.  

The Census Bureau, the federal agency charged with publishing the official poverty numbers, has yet to replace the poverty line. However, in the last couple years it has published an alternative, the Supplemental Poverty Measure (SPM). The SPM is the product of over two decades of work to fix problems in the federal poverty line FPL … //

… What’s in a Number?: … //

… Different Poverty Lines for Cost-of-Living Differences: … //

… Updating Today’s Living Costs:

Obviously, household expenses have changed a lot over the last half-century. The original formula used to construct the official poverty line used a straightforward rule-of-thumb calculation: minimal food expenses time three. It’s been well-documented since then that food makes up a much smaller proportion of households’ budgets, something closer to one-fifth, as new living expenses have been added (e.g., childcare, as women entered the paid workforce in droves) and the costs of other expenses ballooned (e.g., transportation and medical care).

The new poverty measure takes these other critical expenses into account by doing the following. First, the SPM income threshold tallies up necessary spending on food, clothing, shelter and utilities. The other necessary expenses like work-related child care and medical bills are deducted from a household’s resources to meet the SPM income threshold. A household is then called poor if its resources fall below the threshold.

These non-discretionary expenses clearly take a real bite out of family budgets. For example, the “costs of working” cause the SPM poverty rate to rise to nearly doubles that of the official poverty rate among full-time year-round workers from less than 3% to over 5%. Bringing the Social Safety Net into Focus

Today’s largest national anti-poverty programs operate in the blind spot of the official poverty line. These include programs like Supplemental Nutrition Assistance Program (SNAP) and the Earned Income Tax credit (EITC). The supplemental measure does us a major service by showing in no uncertain terms how our current social safety net protects people from economic destitution. The reason for this is that the official poverty measure only counts cash income and pre-tax cash benefits (e.g., Social Security, Unemployment Insurance, and Temporary Assistance to Needy Families (TANF)) towards a household’s resources to get over the poverty line. The supplemental poverty measure, on the other hand, adds to a household’s resources near-cash government subsidies—programs that help families cover their expenditures on food (e.g. SNAP and the National School Lunch program), shelter (housing assistance from HUD) and utilities (Low Income Home Energy Assistance Program (LIHEAP))—as well as after-tax income subsidies (e.g., EITC). This update is long overdue since the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (a.k.a., the Welfare Reform Act) largely replaced the traditional cash assistance program AFDC with after-tax and in-kind assistance.

Here are some figures for 2011 that illustrate the impact of each of twelve different economic assistance programs. Social Security, refundable tax credits (largely EITC but also the Child Tax Credit (CTC)), and SNAP benefits do the most to reduce poverty. In the absence of Social Security, the supplemental poverty rate would be 8.3 percentage points higher, shooting up from 16.1% to over 23.8%. Without refundable tax credits, the supplemental poverty rate would rise 2.8 percentage points, up to nearly 19%, with much of the difference being in child poverty. Finally, SNAP benefits prevent poverty across households from rising 1.5 percentage points. The SPM gives us the statistical ruler by which to measure the impact of the major anti-poverty programs of the day. This is crucial information for current political feuds about falling over fiscal cliffs and hitting debt ceilings.

A Meager Supplement: … //

… Now What?

The Census Bureau’s supplemental measure doesn’t do what the underemployment rate did for the unemployment rate—that is, fill in the gap between the headline number and how many of us are actually falling through the cracks.

The poverty line does a poor job of telling us how many Americans are struggling to meet their basic needs. For those of us who fall into the “not poor” category but get struck with panic from time to time that we may not be able to make ends meet—with one bad medical emergency, one unexpected car repair, one unforeseen cutback in work hours—it makes us wonder, if we’re not poor or even near poor, why are we struggling so much? The official statistics betray this experience. The fact is that so many Americans are struggling because many more of us are poor or near-poor than the official statistics lead us to believe.

The official poverty line has only been changed—supplemented, that is—once since its establishment in 1963. What can we do to turn this potentially once-in-a-century reform into something more meaningful? One possibility: we should simply rename the supplemental poverty rates as the severe poverty rate. Households with economic resources below 150% of the new poverty line then can be counted as “poor.” By doing so, politicians and government officials would start to recognize what Americans have been struggling with: one-third of us are poor.
(full text and sources).

(JEANNETTE WICKS-LIM is an assistant research professor at the Political Economy Research Institute at the University of Massachusetts-Amherst).

Links:

on Air with Russia Today RT;

Live Streams with Al Jazeera English on YouTube;

Poverty in the United States on en.wikipedia, inclusive See also and it’s External Links;

Greek gov’t announces immediate shutdown of public broadcaster ERT, strong reactions, on XinhuanetEnglishNews, June 12, 2013;

Video about the Bilderberg, 10.49 min, on InfoWars.com, by David Icke, June 10, 2013;

Family Affair: Kennedy, Obama and Evolving Trans-Atlantic Ties, on Spiegel Online International, by SPIEGEL Staff, June 11, 2013 (10 Photo in the Gallery): Barack Obama’s upcoming visit to Berlin has many fondly reminiscing of John F. Kennedy’s momentous trip there 50 years ago. Though Germans still revere both presidents, the trans-Atlantic relationship has changed considerably since then. To Europe’s detriment …;

French prosecutor calls charges against Strauss-Kahn to be dropped, on XinhuanetEnglishNews, June 12, 2013;

Syria’s Fake Sectarian War: Published on Worker’s Action, by Shamus Cooke, June 7, 2013.

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