Background on the Poverty Measure

Originally developed in 1963, the current federal poverty measure has two components: the poverty threshold and the income measure. The poverty threshold is calculated by multiplying the estimated cost of a 1950s short-term emergency food diet by three. Today, however, food costs represent just one-seventh of a typical family’s total budget, while the costs of health care, child care and housing have risen dramatically in the past four decades. These expenses are not included in the current measure, which also does not take into account the varied costs of housing or other basic needs across states and between rural and urban areas.

The income measure is a simple reflection of a family’s pre-tax income, leaving out the significant financial impact of state and federal income taxes. On the flip side, many of the non-cash benefits and tax credits available to low-income families today did not exist in 1963 – and therefore also are not included in the income calculation. These include valuable benefits such as housing assistance, child care vouchers and food stamps, and tax benefits like the Earned Income Tax Credit (EITC) and Child Tax Credit.

Efforts over the years to modernize the poverty measure have been thwarted by political squabbles and concerns about whether a new measure would increase or decrease the number of people counted as poor – and consequently effect eligibility for assistance programs and allocation of federal funds. In 1995 Congress commissioned the National Academy of Sciences to come up with a new measure for measuring poverty in this country.

Today, that report forms the basis of the Measuring American Poverty (MAP) Act, introduced in 2009 by Sen. Chris Dodd (D-CT) and Rep. Jim McDermott (D-WA).

In 2009, an interagency group was formed and charged with developing a set of initial starting points to permit the U.S. Census Bureau, in cooperation with the Bureau of Labor Statistics, to produce a Supplemental Poverty Measure (SPM). The SPM will not replace the official poverty measure and will not be used to determine eligibility for government programs. Instead, the SPM is designed as an experimental poverty measure that defines income thresholds and resources in a manner different from the official poverty measure.

Read more about these efforts to update the poverty measure>