The Economist: Poverty in the United States

Trying to define poverty in the U.S. is at least as complicated as defining unemployment. And the picture becomes even muddier when we try to make comparisons across countries.

In the U.S. there are two official measures of poverty – the poverty thresholds and the poverty guidelines. They are prepared by different arms of the federal government and used for different purposes.

The poverty thresholds are the original version of the federal poverty measure. They were originally developed in 1963-1964 by Mollie Orshansky of the Social Security Administration, who took the dollar costs of the U.S. Department of Agriculture’s economy food plan for families of three or more persons and multiplied the costs by a factor of three.

Economy Food Plan
Per Capita Per Week

Milk, cheese, ice cream 4.1 quarts
Meat, poultry, fish 1.6 pounds
Eggs 5
Dry beans, peas, nuts 0.4 pounds
Flour, cereal, baked goods 3.2 pounds
Citrus fruits, tomatoes 1.7 pounds
Dark green and deep
yellow vegetables 0.7 pounds
Potatoes 2.8 pounds
Other vegetables and fruits 2.8 pounds
Fats, oils 0.6 pounds
Sugars, sweets 0.7 pounds

They are updated each year by the Census Bureau based on the consumer price index. The thresholds are used mainly for statistical purposes such as preparing estimates of the number of Americans in poverty each year.

According to Census Bureau, the nation’s official poverty rate in 2010 was 15.1 percent (46.2 million people), up from 14.3 percent (43.6 million people) in 2009 – the third consecutive annual increase in the poverty rate. The poverty rate in 2010 was the highest since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available. In 2010 the poverty threshold ranged from $10,458 for an individual 65 or older to over $48,000 for a family of nine.

The poverty guidelines are the other version of the federal poverty measure. They are issued each year in the Federal Register by the Department of Health and Human Services. The guidelines are a simplification of the poverty thresholds and are used for administrative purposes such as determining financial eligibility for certain federal programs. Unlike the thresholds, the guidelines are higher in Alaska and Hawaii. These are the figures that are referred to (incorrectly) as the federal poverty level.

More than 30 programs use the HHS poverty guidelines to determine eligibility. Surprisingly, many such as Temporary Assistance for Needy Families, Supplemental Security Income, the Earned Income Tax Credit, large parts of Medicaid, Section 8 low-income housing assistance and low-rent public housing do not.

In many ways the poverty rate is misleading. It does not include in income all of the government programs that help the poor. So, it measures poverty assuming no assistance was provided. A new supplemental poverty measure (SPM) is being developed that will include the effect of the earned income tax credit, nutritional assistance, housing subsidies and energy assistance. It will deduct taxes, work and child care expenses, out-of-pocket medical expenses and child support paid. Preliminary data for 2010 showed the SPM was $24,343 relative to the official poverty level of $22,113.

Poverty, in many ways, is relative. A majority of the world’s poorest countries are in Africa, where poverty means widespread hunger and starvation and the lack of clean water, medicine and education. Sixty years ago, the Chinese wife of a British journalist asked on her first trip to England to be shown London’s poor. Her husband took her to the worst of the London slums. Her comment? “This is a level of luxury that most of the world’s poor cannot even imagine!”

To which Nelson Mandela would have replied, “Overcoming poverty is not a gesture of charity, it is an act of justice.”
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