New formula to give fresh look at U.S. poverty

By Amy Goldstein
Washington Post Staff Writer
Wednesday, March 3, 2010; A02



The Obama administration Tuesday embraced an alternative way of defining what it means to be poor, stepping gingerly into a long-running debate over whether to revise the method that has been used to measure poverty for decades.

Under a "Supplemental Poverty Measure" announced by the Commerce Department, the government is augmenting, but not replacing, the formula that determines how many people are considered to be in poverty, taking into account a wider range of expenses and income to try to create a truer portrait of which Americans are financially fragile.

The old definition, developed in the mid-1960s using data from a decade earlier, was based on the cost of food and a family's cash income. The new one, acknowledging that food has become a smaller share of poor families' costs, will also consider expenses such as housing, utilities, child care and medical treatment. In gauging people's resources, the new method will include financial help from housing and food subsidies, in addition to money from jobs and cash assistance programs.

The way poverty is defined is at once arcane and politically volatile, because the number of people who are considered poor has broad implications for the nation's economic self-image and the way billions of federal dollars are distributed for Medicaid, welfare, food stamps and other aid programs.

While they are adopting a second formula, administration officials are largely sidestepping that political minefield by deciding to retain the old one as the basis for the official federal poverty line -- the threshold underlying eligibility rules for assistance programs.

Instead, the second formula "provides us a different angle on who is in economic need," said Rebecca M. Blank, Commerce's undersecretary for economic affairs, who had advocated for more than a decade before joining the administration for a different way of thinking about who is poor. The formula is to be used by the government for the first time next year in an annual Census Bureau report that includes the poverty rate.

The rate will be calculated by both methods.

"It's been hard to make progress this far," said Arloc Sherman, a senior researcher at the left-leaning Center on Budget and Policy Priorities, one of the constituencies across the ideological spectrum that have griped for years that the poverty definition was out of date.

The alternative definition is derived largely from a recommendation on how to measure poverty that the National Academy of Sciences issued 15 years ago. Blank, whose responsibilities include the Census Bureau, was part of the academy panel that made the recommendation.

She said in an interview that federal officials have not tried yet to calculate whether the new definition will increase or decrease the number of Americans who qualify as poor.

Two years, ago, New York City became the nation's first jurisdiction to adopt its own way of measuring poverty, also based on the academy's work.

A report issued Tuesday by New York's Center for Economic Opportunity shows that its new approach produces a higher poverty rate.

For 2008, the report found, the city's poverty rate was 22 percent under the new formula, compared with slightly less than 18 percent using the official federal definition.

When you don't like something, change how you define it!

SEMANTICS!

I am for this. Maybe it will finally create some upward mobility as companies realize that you can't support your family very well on 35k/year.

I just don't see how doing this is going to help curb spending, quite to the contrary, I'd immagine the poverty level will be set somewhere around $40,000, adding tons of new spending and being the spring board to a ton of new programs.

I think the effect on spending, assistance levels, etc. is irrelevant, no matter which way it goes. If the current formula does a lousy job of reflecting actual standards of living, then it should be changed. The goal should be to get the most accurate information/understanding possible, regardless of the political fallout.

I think the effect on spending, assistance levels, etc. is irrelevant, no matter which way it goes. If the current formula does a lousy job of reflecting actual standards of living, then it should be changed. The goal should be to get the most accurate information/understanding possible, regardless of the political fallout.

I'm sympathetic to that concern, Rynar, but what you're suggesting still seems like manipulating the facts to suit one's policy goals. It's just not honest governance. Much better to acknowledge the facts, change the formula, and then argue for amending the laws that use the poverty stat to calculate funding.

All of which are great arguments for amending the relevant laws, not for pretending the current poverty level stat is a reasonable reflection of reality*.

*Note: I express no opinion about whether or not the current stat is reasonable. I'm just saying that if it's not, then we shouldn't pretend otherwise.

I am for this. Maybe it will finally create some upward mobility as companies realize that you can't support your family very well on 35k/year.

Well, if it starts to cost $50 for a loaf of bread, I'll need to be in the poverty zone too.

How, when their resources are farther cut into by the taxes nessecary to cover the new programs? If anything it will lead to more joblessness, and a lowering of wages.

I am operating under the assumption that employers will feel pressured to raise wages. It is naive and wishful thinking yes, but I'm still going to believe.

This is an issue with the labor pool being approximately twice the percentage of the population as it used to be.

Not to take anything away from Women's Suffrage, as I fully support (obviously) the idea that a woman should be able to work and make a living without relying on a man, it used to be there was only one "breadwinner" per family. So Ward Cleaver was bringing home his salary to support the entire family. Trouble is, when all the June Cleavers entered the workforce, the labor pool doubled. Neither parent stayed home, and wages, like everything else, are a matter of supply vs. demand. So what that means now, is if you have a near-average income, you need two people working to make ends meet. (This was the ultimately source of the insane inflation rates over the few decades where women started seriously entering the workforce.)

If people had maintained the "One person goes to work, the other stays home to be homemaker/child-raiser" standard (and I don't care if it's the man or the woman in either of those roles), then average income would be double what it is now. (or more likely, the cost of living would be half of what it is now.)

Employers really can't really do much about this. For every dollar they raise the average wage of their employees, they have to recoup an extra dollar per employee somewhere else. This can be from cutting expenses, or raising prices. No matter how it's done, this is either neutral to the laborforce, or on inflationary force on the cost of living.

All of which are great arguments for amending the relevant laws, not for pretending the current poverty level stat is a reasonable reflection of reality*.

*Note: I express no opinion about whether or not the current stat is reasonable. I'm just saying that if it's not, then we shouldn't pretend otherwise.

In order to not cripple the budget of various state and federal programs, you must simultaneously change how eligibility for those programs and the way the poverty metric is determined. This would most certainly require federal law, not administrative order.

However, that doesn't change the fact that with current laws written the way they tend to be, changing the derivation of the numbers is a dangerous thing to do on its own.