Last week, the US Commerce Department introduced a new “Supplemental Poverty Measure” to help better estimate the number of Americans who are poor. As its name suggests, the new poverty measure will not replace the current poverty measure. It also will not be used to determine eligibility for programs like Medicaid, food stamps, and TANF.
So, what’s the big deal?
For years, many of those who study poverty have called for an update to the way we measure economic deprivation. What we regularly call “the poverty line” was developed in the 1960s and hasn’t changed since then (other than inflation adjustments). The formula is simple: it takes a low-cost food budget for families of different sizes and multiplies them by three, because 50 years ago, families spent about one-third of their income on food.
It doesn’t take a poverty expert to see problems with measuring poverty this way. For one, food no longer represents a third of most families’ budgets; housing costs are much more significant. Beyond that, the poverty measure doesn’t take into account taxes that a family pays, and it does not include the effect of benefits like food stamps, housing assistance, or health insurance — which means that officially these programs have no effect on poverty when of course they do. Finally, the poverty measure is the same no matter where you live, even though the cost of living in DC is much higher than the cost of living in West Virginia.
The Supplemental Poverty Measure corrects for many of these issues. It includes the value of benefits like food stamps, the Earned Income Tax Credit, and housing assistance in a family’s resources. And for the first time, it adjusts the poverty line for different areas based on the cost of living in a particular state.
This means that when the Census publishes its annual poverty data this year, we’ll have a better picture of how DC’s policies for low-income residents are helping to reduce poverty. And in the midst of record unemployment, that’s a big deal.
