Exclusive Commentary

June 8, 2009: Poor Measurement: Time for a Comprehensive New Poverty Measure, By John Quinterno, primary author of “Making Ends Meet on Low Wages: The 2008 North Carolina Living Income Standard”

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Few statistics have received as much criticism yet have endured as long as the federal poverty measure. While an indicator that better gauges the extent of economic hardship desperately is needed, one that simply patches the current statistic’s most egregious flaws is not. Rather, any worthwhile replacement must not only yield a more accurate measure of what it takes for a household to make ends meet, but also help ground the national understanding of poverty in current economic and political realities.

After years of inaction, there appears to be growing interest in updating the poverty measure. Proposed congressional legislation, for instance, would replace the current measure with one based on recommendations put forth in 1995 by the National Academy of Sciences (NAS). This possibility has sparked debates – including in Spotlight – about the strengths and limitations of an NAS-based statistic. Unfortunately, these important debates largely have occurred as technocratic, inside-the-beltway ones that seemingly have paid little attention to the pragmatic implications of a switch. Four practical questions in particular merit consideration.

First, will the benefits be worth the effort? Replacing the poverty measure will require a considerable effort on the part of national and state advocates. National organizations will push change in Washington, and state-level organizations will be asked to explain the changes to policymakers and journalists, cultivate public support for the changes and prevent the unintended policy consequences that might result from the inevitable misunderstandings. For such efforts to be worthwhile, the new measure should represent a clearly superior alternative to the status quo.

While the NAS-based measure is preferable to the current one in certain technical respects, its practical advantages are less obvious. All in all, the NAS calculation yields a national poverty rate not very different from the current one while replicating one of the current method’s most problematic features: an exclusion of individuals with incomes too high to be officially poor but too low to make ends meet. Analysts wishing to provide an accurate picture of economic hardship still will need to craft such supplemental estimates as basic family budgets and analyses based on multiples of the poverty thresholds in order to correct for the measure’s limitations. If the NAS-based approach yields poverty rates similar to the current ones and replicates existing limitations, is the change worth making? Might the result be a distinction without a difference?

Second, will the new state-level results be plausible? Although the national poverty rate would not change markedly under a switch to an NAS-based measure, state rates would, owing largely to the treatment of housing costs. One recent estimate by Census Bureau analysts found that a switch to an NAS-style measure would cause poverty rates to increase or decrease by at least one percentage point in 36 states; of these states, 10 would experience shifts of at least three percentage points. Poverty rates would rise sharply in the Northeast and fall dramatically in the Deep South and Appalachia—the very parts of the country that arguably are its most deprived.

Although the current measure doubtlessly undercounts poverty in places with high housing costs like New Jersey, a measure that lowers the poverty rates in places like Mississippi is equally problematic. Such an outcome likely will stain popular credibility regarding the accuracy of the new measure and undercut various kinds of support for anti-poverty policies in places plagued by deep, persistent hardship and low-wage economic structures. Moreover, the new state-level poverty rates unintentionally may undermine efforts at racial equity, as many of the states that would see their poverty rates fall the most contain sizable African-American populations.

Third, will a new measure change the debate about poverty? Rightly or wrongly, many Americans – and many American policymakers – think that poverty results from a lack of work and that the “poor” are an entrenched, permanent group. Considerable research disproves such claims, but the evidence has done little to upend ingrained stereotypes and misconceptions. Yet it is these very stereotypes and misconceptions that often obstruct progress. Despite its technical advantages, the NAS-style measure does little to alter public understanding or shift the terms of the policy debate. Given its resemblance to the existing measure, the NAS-based calculation actually may reinforce the idea that poverty and work somehow are disconnected phenomena.

Fourth, is an opportunity being missed? In many ways, the push to change the federal poverty measure appears grounded in the economic and political realities of the early 1990s rather than current ones. The NAS measure originally was developed at a time when the economy was expanding, conservative politics were ascendant and antipathy to poverty programs was mounting. Today’s environment, however, is radically different: the economy is mired in a severe recession, the public is extremely aware of issues related to work and income and the political climate is more hospitable to progressive solutions—especially when those solutions aim at improving the economy for people in general. Might the time therefore be ripe to replace the poverty statistic not with a reformed version of itself but with a more comprehensive measure of economic well-being and social development? Might the current environment lend itself to the adoption of a more encompassing measure that better captures the relationship between overall economic growth and improvements in living standards?

In recent months, a window of opportunity for changing the way in which the United States measures economic hardship appears to have opened. The question is how best to seize that moment. Should analysts and advocates push for a measure that corrects the current one’s most obvious flaws or instead push for a more aspirational and comprehensive approach that clearly ties economic growth to improvements in the material well-being of every American?

John Quinterno is the primary author of “Making Ends Meet on Low Wages: The 2008 North Carolina Living Income Standard,” a family self-sufficiency study published by the North Carolina Budget & Tax Center in Raleigh