The federal poverty line grossly underestimates actual U.S. poverty

By alternative measures, close to half the country could be defined as ‘economically insecure’ 

The new index, they argued, would give millions of citizens access to important government programs and services that they heretofore could not receive. However, the dilemma for the fictional Bartlett administration is that the new index would make it appear to the public that poverty had increased significantly under their watch.

During the summer of 2008, art would imitate life in New York as Michael Bloomberg implemented a more meticulous and sophisticated method to measure poverty throughout the city’s five boroughs. As such, the poverty rate in New York swelled to 23 percent overnight, and 400,000 New Yorkers joined the ranks of the poor.

This controversial strategy, seen as a forward-thinking move by many analysts, instigated a discussion across the nation about how America measures poverty today. The chief problem is that America measures poverty today the same way it was measured 50 years ago.

The poverty line was established in 1964 by government economist Mollie Orshansky, who simply evaluated the cost of feeding a family to develop the poverty threshold. Although this measure ignored other indicators such as housing, transportation, utilities, health care, child care and other critical markers, Olshanksy’s index was adopted by the federal government and the federal poverty line was born.

Although the poverty line is adjusted each year to account for inflation, the index that measures poverty has never been changed. Nor does it consider differences in geography. Therefore, the same criteria that measure poverty in Beverly Hills, Manhattan’s Upper East Side, and Chicago’s Gold Coast uses the exact same numbers to measure poverty in Detroit’s Brightmoor neighborhood, the Mississippi Delta or Appalachia.

Why is the index used to measure poverty so important? As the Stanford Social Innovation Review notes, “The federal poverty line is used to determine eligibility and appropriations for all types of federal, state, and local aid, including SNAP, TANF, and Medicaid. How the line is determined has real material implications for low-income families. The poverty line is also the most important way that America measures how well it is treating its most disadvantaged members.”

It is clear that the current index to measure poverty is inherently flawed, and critics have argued for years that it must be redesigned in order to account for geographic disparities, standard indicators such as shelter and transportation, and to adequately meet the basic needs of low-income citizens.

A little more than 20 years ago, the National Academy of Sciences commissioned a Panel on Poverty and Family Assistance to redefine and accurately measure poverty. While their recommendations were lauded by many, the government ignored their proposal.

In a 2008 LA Times editorial, economist Rebecca Blank wrote, “Unfortunately, no president (Democrat or Republican) has wanted to touch this political hot potato. If a new measure shows higher poverty, the president looks bad, but if a new measure shows lower poverty, he’ll be accused of dismissing the problem.” This default position speaks directly to the scenario that was explored on The West Wing.

In an attempt to circumvent the inept poverty line, nonprofits and government agencies have resorted to setting eligibility requirements above the poverty line. For example, households may be eligible for certain programs if they fall at 150 percent or 200 percent of the federal poverty line.

In other words, a household could earn twice as much as those on the poverty threshold and still be eligible for certain social programs and services. This is necessary because most people at 200 percent of poverty are essentially poor themselves. However, 200 percent may still be far from an adequate measure of poverty in America.

In 2014, the federal poverty guideline, which determines eligibility for Medicaid, is $11,670 for a single-person household. For a household of three, the federal poverty threshold is $19,790. This means if a family of three earns $20,000 a year, they are not considered poor.

To further demonstrate the erroneous nature of the poverty guidelines, the Oregon Center for Public Policy developed the Oregon Basic Family Budget Calculator in 2013. This tool illustrates the income required for a “basic level of economic security” and takes into account not only the regional differences of the Pacific Northwest, but also geographic differences in Oregon.

In Oregon’s two largest cities, Portland and Eugene, a family of three requires incomes of $62,169 and $60,312 respectively to achieve economic security. This is more than three times the income of a three-member household hovering around the federal poverty guideline.

If this is accurate, then the recently reported record of 46 million poor Americans in 2014 is not representative of the truth. In reality it would seem that between 130 and 140 million Americans could realistically be classified as poor or economically insecure.

That is roughly 44 percent of the entire American population. This also means that approximately two-thirds of those truly in need of services are being neglected. Are things really this bad? What must we do to make them better?

Clarence Hightower is executive director of Community Action Partnership of Ramsey & Washington Counties. He welcomes reader responses to 450 Syndicate Street, St. Paul, MN 55104.