Earlier this month the Census Bureau released a new way of measuring poverty: the Supplemental Poverty Measure (SPM). This measure revealed higher rates of poverty nationally for most groups, but a lower rate for children.
The Census Bureau also released an analysis of those with incomes slightly above the poverty line which illustrates that 51 million people are not considered poor, but are nonetheless struggling to make ends meet. Among this group, referred to as the “near poor,” 20 percent are kept from slipping below the poverty line by government programs like housing subsidies and school lunch programs. The new data reveal the importance of such programs, which are keeping millions of Americans out of poverty.The Census Bureau stresses that the SPM is an “experimental poverty measure” and it will not replace the official poverty measure. The official poverty measure was developed in 1960 and implemented in 1969 after a few minor changes. Criticisms have arisen about the official poverty measure, which was developed based on the estimation that families of 3 or more spend one third of their after tax income on food. This calculation was conducted only once in 1963 and has been updated only by using the Consumer Price Index. Therefore, the federal poverty thresholds do not account for significant factors, such as expenditures on child care and transportation, the rising costs of out-of-pocket medical expenses, and differences in prices among geographic regions. Moreover, the official measure does not consider government policies like Supplemental Nutritional Assistance (SNAP), Earned Income Tax Credit (EITC), school lunch, and housing subsidies that help the near poor to stay out of poverty.
The SPM, on the other hand, does address many of those factors. The thresholds are based not just on food expenditures, but also clothing, shelter, and utilities. Household size includes not only all related individuals living at the same address, but also co-residents like foster children. Geographic adjustments are made to recognize the fluctuation in prices based on region. Furthermore, family income is calculated by adding tax subsidies as well as cash and in-kind benefits that families use to cover food, clothing, shelter, and utilities expenses. Taxes, work-related expenses, and out-of-pocket medical expenses are subtracted from this total.
According to The Research Supplemental Poverty Measure: 2010, including the EITC in the calculation of family resources results in significantly lower poverty rates. Without EITC the poverty rate for all people would be 18 percent rather than 16 percent. Other benefits like SNAP, housing subsidies, school lunch, and energy assistance also result in lower poverty rates. Conversely, when subtracting child support payments, income and payroll taxes, work-related expenses and medical out-of-pocket expenses results in higher poverty rates. These data illustrate the positive effects of government assistance programs, and show that more individuals would be considered poor without them.
Most groups showed an increase in poverty rates using the SPM, but some groups, including children had a lower rate. The reduction in the rate of poverty measured among families with children can be attributed primarily to the fact that the SPM takes into account programs like the EITC.
Closer to home, the Institute for Research on Poverty at UW-Madison has developed the Wisconsin Poverty Measure, which uses parameters set out by the SPM for a more comprehensive method to measure poverty in our state. They released a report in the spring based on 2009 data. You can read about their report in a May 4th blog post by the Wisconsin Budget Project.
A follow-up WCCF blog post will take a closer look at the near poor and how they are helped by current programs, but may be adversely affected by proposed policy changes relating to programs for low-wage workers and the unemployed.
Julie Davidson
