The Census Bureau recently
requested public comment by June 25 on its proposal to develop a “supplemental” poverty
measure (SPM). Based on 1995 recommendations made by the National Academy of
Sciences (NAS), the proposal includes several useful reforms. However, there is
room for improvement.
Overhauling the poverty
measure is sometimes presented as a technical issue, and the approach
recommended by the NAS as a fait accompli that simply needs to be
implemented without making any policy decisions. This isn’t the case. While
there are a myriad of technical issues involved in operationalizing the NAS
approach, there are also major policy questions . These include, most importantly,
where to actually set the supplemental poverty threshold, a question that
the NAS called “ultimately political.”
Three modifications to the
SPM are essential: 1) the thresholds must be set at a minimally decent level,
one that doesn’t continue to “define poverty down” as the current measure has;
2) education and basic savings should be treated as necessities rather than
luxuries; and 3) the thresholds should be adjusted upward for families without
health insurance. These modifications would improve the measure’s accuracy and
are consistent with the overall approach NAS recommended.
Adequate Poverty Thresholds: as a measure of “typical” living standards, median
income provides a yardstick for judging the poverty measure’s adequacy. When
established in the early 1960s, the poverty line was equal to nearly 50 percent
of median income. Because it has only been adjusted for inflation since then – a decision made by the Nixon administration – and not for increases in mainstream living standards,
the poverty line has fallen to just under 30 percent of median income. As a
result, to be counted as officially “poor,” you have to be much poorer today,
compared to a typical family, than you would have in the 1960s.
Absent improvements, the SPM
will not address this problem. Previous Census estimates suggest that the SPM
will result in poverty thresholds that might be modestly higher than the
current ones, but will almost certainly remain less than half of the amount
that budget-based approaches – and public opinion – suggest is needed to maintain a barebones standard of
At a minimum, the
supplemental measure should reflect a living standard that is at least as high,
when compared to today’s typical living standard, as the official poverty
measure was in the mid-1960s. Census should also adopt additional measures – at the same time as the SPM – that reflect the income needed to “make ends meet” at
a basic level. At a minimum, this should include a “market-basket” measure, similar
to the family budget standards once produced by the Labor Department, and a
measure pegged to a percentage of median income (an approach championed by
Martin Luther King, Jr. shortly before his assassination).
A related concern is that
proposed geographic adjustments to the measure, while producing sensibly higher
poverty thresholds in a few states, would result in thresholds lower than the current ones for many
states. The declines may be particularly large for the poorest states in regions
like the Deep South, Appalachia, and the Southwestern border.
found that a poverty measure based on the original NAS recommendations could
result in lower poverty rates in most states. However, that outcome depends on
policy and technical decisions the administration will need to make. The SPM
has changed in some ways since this analysis was conducted. As a result, the
state-level supplemental thresholds could end up lower than, similar to, or
higher than, the official thresholds.
However, there’s nothing
specific in the proposal that would rule-out “sub-official” poverty thresholds.
To resolve uncertainty, the Census Bureau should provide opportunity for the
public to comment on any state-level thresholds that result from the
Because the current measure
has defined poverty down since the 1960s, the SPM should not result in state-level
poverty thresholds lower than the current official ones. Just
as setting the federal minimum wage or EITC at a lower level in poorer states
would be unacceptable, sub-official poverty lines for poorer states should not
Education and Savings: the supplemental measure treats basic savings (for retirement, a rainy
day, or children’s education) and education (including tuition, fees, and
student-loan repayments) as luxuries rather than necessities. This
makes no sense in today’s economy. At a minimum, the measure should treat
education-related spending and basic savings as non-discretionary expenditures
that are subtracted from the family income that is compared to the SPM
threshold. This is how the proposal
already treats work-related spending on child care.
The Uninsured: the supplemental measure would subtract out-of-pocket expenditures on
health care. However, the uninsured may not have the resources to make
necessary expenditures on health care—and CBO
projects that 21 million people will remain uninsured in 2016, so health care
reform doesn’t eliminate this problem. To
address it, the poverty thresholds for the uninsured should be adjusted to
include the costs of health insurance.
Shawn Fremstad is Director of the Inclusive and Sustainable Economy
Initiative at the Center for Economic and Policy
Research, which conducts both professional research and public education to
promote democratic debate on the most important economic and social issues that
affect people's lives. He blogs at cepr.net and inclusionist.org.