How we measure poverty matters — and a proposed change would make it worse

Last year, 621,076 Oklahomans were living in poverty according to official estimates — that’s 15.8 percent, or one out of every six, of us. Oklahoma’s poverty rate is above the national average and has been for over a decade. Even more problematic is the fact that the Official Poverty Measure (OPM) underestimates the number of people facing poverty-level hardship — it’s very likely that there are more people struggling with poverty and financial insecurity than we currently count.

The Trump Administration has recently proposed a plan to adjust the way we measure poverty, but these changes would not make the measure more accurate. Instead, this change would make the poverty measure less accurate and result in hundreds of thousands of Americans losing access to the safety net programs that help them weather hard times and move out of poverty.

The Official Poverty Measure underestimates poverty 

The OPM, first developed in the 1960s and still in use today, is outdated and produces estimations of poverty-level income that are too low — it underestimates the number of people living in poverty — as dramatized in this clip from The West Wing. Currently, the poverty threshold is $13,064 a year for a single person and $25,465 a year for a family of four in pre-tax (not take-home) income. While that may be enough to get by for a few months, it’s not enough to support a family long-term, and Americans recognize this. Most people think the poverty threshold for a family of four should be closer to $33,000 — 34 percent higher than it actually is — and this estimate is still not what families actually need to meet minimum living standards. A recent estimate of the annual income needed for self-sufficiency in Oklahoma County was $43,638 for a family of four (nearly twice the poverty threshold at the time).

The primary reason the poverty thresholds are lower than what families actually need to live on is that the way we determine who is, and who is not, living in poverty is outdated. The OPM was developed in the 1960s by calculating the cost of a minimally adequate food diet and then multiplying by three to account for other necessary expenses. Food is the basis of the formula because the average low-income family at the time spent about one-third of their budget on food (the biggest expense for most families). That’s still how we determine the poverty thresholds today, even though we know that food is no longer the biggest expense for low-income families.  The cost of other things has risen much faster than the cost of food, and housing now takes the largest share (41 percent) of a low-income family’s budget. Food claims only about 15 percent. The relative cost of necessary expenses is very different today than it was in the 1960s, and we need a better poverty measure that reflects our current reality. 

The Administration’s proposal to change the measurement will make it less accurate

While the method we use to measure poverty doesn’t change, the cost of living does. Products and services get more expensive over time and we adjust for that by increasing the poverty thresholds each year to account for inflation. The inflation measure we use right now is the Consumer Price Index (CPI), but the Administration is proposing that we use the chained CPI instead. The chained CPI differs from the regular CPI in one, very important way — it assumes that as products become more expensive, consumers will begin purchasing less expensive alternative products. We’d purchase store brand cereal in a bag when the name brand cereal in a box got too expensive, for example. While this assumption may work for the general population, it’s a problem when applied to low-income consumers because it ignores the fact they were probably already purchasing the least expensive option available. When the least expensive option becomes more expensive, the next step is to not purchase that product at all — you go without. 

This proposal would have long-term, negative effects on the Safety Net

Because the chained CPI assumes that consumers will purchase less expensive products as prices increase, this measure reports a slower increase in expenses each year than the regular CPI. This means that using the chained CPI to adjust the poverty thresholds would result in smaller increases in the threshold each year.  While this won’t be a significant problem the first year we use the new inflation measure, several years of smaller increases in the thresholds will have a much bigger impact — put simply, the poverty thresholds will be lower with the chained CPI than they would be with the regular CPI. And since they’re already too low, this change would have a very large long-term impact on how many people are classified as living in poverty in the U.S.

Lowering the poverty threshold will make it harder for people struggling with economic insecurity to access the safety net and get help when they most need it. Most programs that help low-income families access health care, purchase prescription drugs, and put food on the table use the OPM to determine who is eligible and who is not. Shrinking access to the safety net would make life harder for

  • Low-income seniors and people with disabilities who can’t afford their prescription drugs
  • Low-income children and pregnant women who need health care coverage
  • Individuals who need tax credits to purchase health insurance from the Affordable Care Act marketplace
  • Low-income families who need help buying groceries
  • Students who qualify for free and reduced-priced lunches at school
  • Young children who attend Head Start programs
  • Low-income taxpayers who need help filing their tax returns

These individuals and families will still need these programs, but they won’t be able to access them anymore. They and their families will be forced into incredibly difficult choices to cope with the loss of this help. 

Changing the way we measure poverty doesn’t change the number of people who struggle with poverty in everyday life

Lowering the poverty threshold won’t mean that we actually have fewer people living in poverty. It will just mean that many individuals who are still struggling with poverty won’t be able to access the programs that were designed to help them. It might make us feel better to see that fewer people are classified as living in poverty, but this change will not do anything to actually move people from poverty to economic security. This proposed change would simply make an already inaccurate measurement even less accurate, hurting millions of families in the process. 

You can help us push back against this proposed change. Click here to submit your comment about this harmful proposal today, then ask your friends to comment as well. Comments can be submitted through June 21st.

ABOUT THE AUTHOR

Courtney Cullison joined OK Policy in March 2017 as a policy analyst focusing on issues of economic opportunity and financial security. Before coming to OK Policy, Courtney worked in higher education, holding faculty positions at the University of Texas at Tyler and at Connors State College in eastern Oklahoma. A native Oklahoman, she received an Honors B.A. in Political Science from Oklahoma State University, and an M.A. and Ph.D. with emphasis in congressional politics and public policy from the University of Oklahoma. While at OU, Courtney was a fellow at the Carl Albert Congressional Research and Studies Center. As a professor she taught classes in American politics, public policy, and research methods and conducted original research with a focus on the relationship between representatives and the constituents they serve.

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