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Shakespeare wrote: “What’s in a name? That which we call a rose by any other name would smell as sweet.” Maybe Juliet had only Romeo in her mind when she fictitiously spoke these words, but I can’t help but think of them as I consider U.S. personal financial data. Recently we recognized national poverty day. The U.S. Census Bureau released the latest numbers regarding U.S. households. But what do those numbers mean?
The official poverty line in the U.S. is calculated using a simplistic formula that goes back to the 1950’s. At that time, it was estimated that an average household spent 1/3 of their household income on food. The formula simply took the food expenditure (based on 1950’s Department of Agriculture nutritional standards) for a family and multiplied it by three to come up with a threshold for poverty. There are certain problems with this, not the least of which is that it is antiquated and no longer reflects an average household’s needed expenditures. The average household is estimated to spend 10% on food, which is considerably down from the 33.3% used in the formula. This reflects a changing world in which transportation, communication, energy, housing, child-care, and healthcare cost more than they did and their prices have risen at a disproportional rate to that of food. The poverty level has not been adjusted to reflect this. Instead, it has only been adjusted annually based on changes to food costs reflected in the Consumer Price Index. The poverty level is also the same no matter if you are in a rural community or a big city. It doesn’t take into consideration geographic regions of the country or cost of living in those regions except Alaska and Hawaii.
The way the number is technically calculated isn’t what gives me pause though. That is merely mechanics and seems that it could be easily changed. (In reality, there are politics involved with changing that number; but this is still not my point.) To me, the real issue isn’t whether the realities underlying the methodology have changed but whether the question is the right one. The poverty line is set at $22,050 per year for a family of four. Is our question whether or not these families are in abject destitution or if they have a real chance at getting by and getting ahead in our society? Should we measure poverty at a level so low that financial distress would have hit long before hitting the official poverty line? Ask a family of four who makes $30,000 if they are living in poverty. I am doubtful that they will feel any relief to find out they are actually living at 35% above the poverty line.
The measure of poverty should not be based on the bare minimum to ward off starvation (and even that may take the help of government agencies and non-profit organizations). The measure should be based on what a family needs to be self sufficient in their community. We don’t want people to just “not starve”. We want people to have every chance to contribute to society. We want children to have every chance to succeed and get ahead. We want families to be able to get beyond poverty and solidly into the middle class.
It is a hollow victory to technically get out of poverty but still have to rely on community assistance. Month after month when you can’t make ends meet, being above the poverty line is simply semantics. After all, it isn’t the word “poverty” that people are trying to escape. It is the effects of poverty on a family.
