Thursday, July 22, 2010

what does the poverty rate mean?

From the derivative of a Christine Vestal Stateline.Org article in the C-J...

More than 15 million Americans are unemployed, homelessness has increased by 50 percent in some cities, and 38 million people are receiving food stamps, more than at any time in the program’s almost 50-year history.

Evidence of rising economic hardship is ample. There’s one commonly used standard for measuring it: the U.S. Census Bureau’s poverty rate. It guides much of federal and state spending aimed at helping those unable to make a decent living.

But a number of states have become convinced that the federal figures actually understate poverty, and have begun using different criteria in operating state-based social programs. At the same time, conservative economists are warning that a change in the formula to a threshold that counts more people as poor could lead to an unacceptable increase in the cost of federal and state social service programs....

The current formula for setting the federal poverty line unchanged since 1963 takes the cost of food for an individual or family and multiplies the number by three, under the assumption that people spend one-third of their incomes putting meals on the table. While the formula may have been a good way to estimate a subsistence cost of living in the early 1960s, experts say food now represents only one-eighth of a typical household budget, with expenses such as housing and child care putting increasing pressure on struggling families.

The fact that food takes so little of our budgets today points to the idea of relative vs. absolute poverty. Our poor obviously today live much better than the poor-- or even the middle class-- in the 1960s. And so, measures of "poverty" are arbitrary in this sense as well.

In addition, the official measure fails to account for regional differences in the cost of housing, it doesn’t include medical expenses or transportation, and at $22,000 for a family of four, the poverty line is considered by many to be simply too low.

Equally worrisome for policy makers is the Census Bureau’s failure to consider in-kind federal and state aid in calculating income. The existing formula counts only pre-tax cash income, leaving out such benefits as food stamps, housing vouchers and child-care subsidies, as well as federal and state tax credits for the working poor.

As she starts to note, the official measure is also only a year-to-year snapshot (vs. a lifecycle of earnings) and ignores wealth, unreported income, and non-cash transfers. So, it is one of our more flawed statistics.


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