Richer measure of poverty on its way

Next week, the U.S. Census Bureau will release its annual report on poverty in the United States. The report will tell us how many Americans had income in 2009 below the federal poverty level, which is $18,310 for a family of three. It is widely expected that the 2009 numbers, reflecting the worst of the Great Recession, will show historic increases in the number of  Americans falling below the poverty line.

As it has since the 1960’s, the 2010 Census Bureau numbers will be based on a measure that looks strictly at a household’s cash income and that is pegged to the cost of a 1950s basic food diet, adjusted for inflation.  The measure has long been criticized as inadequate: among other limitations, it fails to reflect the real costs families face in meeting basic needs; it fails to adjust for regional differences in the cost of living; and it excludes non-cash income and benefits received by low-income families. Over the years, a number of researchers and policy groups have developed alternate measures of poverty and economic security, including the Self-Sufficiency Standards that were developed for Oklahoma and other states.  Back in 1995, the National Academy of Science issued a report called Measuring Poverty that provided recommendations for modernizing the poverty measure. The NAS recommendations were adopted by Mayor Bloomberg in New York, among others, as a basis for formulating anti-poverty policies. but were ignored, for various reasons, by the Clinton and Bush administrations.

This past March, the Obama Administration announced that beginning in 2011, the federal government will release a Supplemental Poverty Measure (SPM) alongside and concurrently with the official poverty measure. The new measure will include a broader set of expenditures, such as housing, clothing, utilities and child care, in determining the poverty threshold. It will also include more sources of income, such as the Earned Income Tax Credit and food stamps, in calculating a family’s resources.

According to Rebecca Blank, the Under Secretary for Economic Affairs in the Department of Commerce who was instrumental in promoting the measure:

The supplemental poverty measure will provide an alternative lens to understand poverty and measure the effects of anti-poverty policies. Moreover, it will be dynamic and will benefit from improvements over time based on new data and new methodologies.

The Administration was quick to stress that the new measure is intended to supplement, not replace, the official poverty measure, which will “remain the definitive statistical measure” and will continue to be used to determine eligibility for government programs.

Some critics, such as Robert Rector of the Heritage Foundation and columnist Robert Samuelson were quick to ascribe the new measure to a desire to increase the ranks of the poor so as to promote income redistribution programs. However, as Michael Laracy of the Annie E. Casey Foundation has noted, the SPM is based on the recommendations of a non-partisan panel of experts, and it is unclear whether the poverty rate will be higher or lower under the supplemental measure.

Jodie Levine-Epstein, a leading social policy analyst, notes that the supplemental poverty measure will bring new and rich data to bear on such questions as the effect that government programs have on reducing poverty and how the costs of basic needs contribute to poverty. If this new data can help us paint a more accurate picture of the situation of low-income families and design more effective policies, it will mark an important step forward.