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Who’s poor? It’s debatable

The government’s official definition of poor draws criticism.

Who exactly is poor in America depends on how you define poverty.
REUTERS/Jessica Rinaldi

Are we as poor as U.S. Census Bureau numbers suggest?

That’s a question that’s been getting attention lately, first in a piece in the New York Times Magazine by Paul Tough, and then in a paper presented in September by  a pair of academics who suggest consumption rather than income is a better measure of poverty.

Who’s poor and who’s not is a timely topic during election season, and  the U.S. Census Bureau just announced (in September) that 15 percent of the population — 46.2 million people — is officially poor. Asterisk: that’s about the same as last year’s accounting.

But defining poverty is complicated.

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Using a poverty measure devised in the 1960s by Social Security analyst Mollie Orshansky, the government currently defines “poor” as a family of four trying to live on a little more than $23,000 a year.

Among those taking issue with that definition are economists James X. Sullivan from the University of Notre Dame and Bruce D. Meyer from the University of Chicago.

Sullivan and Meyer say the government’s official measure of poverty does not reflect “the full resources available to families,’’ such as tax credits — including the Earned Income Tax Credit and Child Tax Credit — or non-cash benefits like food stamps, housing subsidies or public health insurance.

Other measures

They argue that a better way to identify the most disadvantaged individuals is a method of real purchasing ability, and looking at assets and advantages, such as house size, car ownership and education level.

Paul Tough, a contributing writer to the New York Times Magazine, in a deeply researched article offering a sense of place about the inner-city poor in Chicago, also addresses the issue. 

From Tough’s article:

And while it is true that the Census Bureau’s official poverty figures have grown steadily worse under Obama, rising to 15.1 percent of Americans under the poverty line in 2010 from 13.2 percent in 2008, those dismal numbers come with a significant caveat. When government statisticians calculate the poverty rate, they include only cash income. And over the last two decades, and especially during the Obama administration, the way the federal government gives aid to poor people has shifted away from cash transfers toward noncash transfers — food stamps, Medicaid subsidies, housing vouchers — none of which are included in a family’s income for the purposes of poverty statistics. If you do count food stamps and other noncash aid, the poverty rate has, according to some calculations, not gone up much at all during the Obama administration, during the worst economic crisis in 70 years.

Well, yes and no. The Supplemental Poverty Measure rolled out late last year after 15 years of discussion and much hand-wringing does add in safety net programs and tax credits and things like child-care expenses for working parents to update the government formula developed in the 1960s.

Under the supplemental definition, the income level of America’s poor is slightly higher, says New York Times writer Teresa Tritch in a piece headlined “Reading Between the Poverty Lines,”  and their numbers increased and would be 16.1 percent of the population instead of 15.2 percent. New numbers are due in November.

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“In the new formula, called the supplemental poverty measure, the poverty line, based on the cost of food, shelter, clothing and utilities, is $11,282 for an individual and $24,343 for a family of four, slightly higher than the official threshold,” Tritch writes.

Not used

Problem with this revised definition of poverty?

“It’s not used for anything,’’ says Kara Arzamendia, research director at Children’s Defense Fund- Minnesota.  “We’re still using the same old broken-down measure,’’ and it is still being used to measure eligibility for public assistance programs as well, she says. 

The Census Bureau does not use the Supplemental Poverty Measure for its official count. According to Pew Research analysts:

[The old]… guidelines–with relatively modest modifications — remain the official word on who is and who isn’t poor in America. This is despite recurring criticism from both the left and right and the periodic convening, beginning in 1968, of numerous poverty-measure review committees, interagency task forces and expert bipartisan panels, along with the issuance of extensive technical reports on their findings and differences. And, on the basis of some of these deliberations, the Census Bureau has, in more recent years, published several alternative measures on its website, although these generally draw little attention.  

Why? There is no easy fix.

Says the Pew report: 

The most straightforward explanation for the durability of the Orshansky measure is that, while it is not difficult to point to its deficiencies, devising widely acceptable remedies is far from simple. The sources of controversy range from basic philosophical differences to practical difficulties in concept, measurement and data collection.

Enter Sullivan and Meyer, who add that the newer Supplemental Poverty Measure, which is meant to correct some of the flaws of the Census Bureau’s official poverty measure, too, falls short.  

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“The new poverty measure that many people thought was going to be an improvement, in terms of figuring out who we should call ‘poor’ doesn’t seem to be an improvement,’’ says Meyer.

They say the supplemental measure is effective in accounting for after-tax income and non-cash benefits but doesn’t sort out the poorest and includes better-off people.  

From a news release from the University of Chicago, where Meyer does his research: 

“Meyer and Sullivan find their consumption-based measure better captures more of the most disadvantaged than those based on income, because it accounts for savings usage, ownership of durable goods, access to credit and the use of anti-poverty programs. The most disadvantaged families all appear to report their consumption more accurately than income.’’

‘Pretty good’

But University of Minnesota economist Maria Hanratty from the Humphrey School of Public Affairs calls the supplemental measure “pretty good,’’ though being only a year old, it is difficult to analyze to any great degree, she says.

She applauds such definitions so society can determine whether so-called safety net benefits are working. That speaks to the role of government, she says, in determining: Are we doing enough to help the poor?

Adds Arzamendia, even Meyer and Sullivan say, and she quotes to me from their writings: “[T]he selection of a poverty cutoff is inherently arbitrary, so the finding that the poverty rate as calculated by the Supplemental Poverty Measures exceeds the official rate is a subjective or political decision, not a scientific one.’’

Still, she says, the Supplemental Poverty Measure “a step in the right direction.’’  Those numbers are due later this fall.