Modernizing the Way Poverty Is Measured

The focus on accounting for results in the economic recovery package has intensified the call by anti-poverty advocates to modernize how the nation measures poverty.

The current measure, which was created in the 1960s and based on data from the 1950s, sets the poverty threshold at $21,000 for four, a figure that advocates say does not accurately reflect the economic realities faced by millions of Americans.

On June 17, Rep. Jim McDermott, D. Wash., reintroduced legislation designed to modernize the calculation of poverty.  The Measuring American Poverty Act of 2009 proposes a measure of poverty that would be based on current consumption patterns for food, clothing, shelter and other basic needs.  It also takes into account income assistance from public programs and geographic differences in the cost of living. A parallel bill will be introduced by Senator Christopher Dodd, D. Conn., later this year.

The Census Bureau considers a household to be poor if its resources are insufficient to meet human needs. A poverty measure includes both a poverty line (or threshold), which is the level of income below which a household is considered to be poor; and an income measure, which outlines the way a household’s resources will be counted.

The current poverty measure omits key expenses such as transportation to work, child care, and state and local taxes, as well as non-cash benefits such as food stamps, housing assistance, the Earned Income Tax Credit, and the Child Tax Credit.  

Anti-poverty advocates say that improving the way the nation measures poverty will help the public, policy makers, and researchers in understanding of the effects of the nation’s antipoverty programs and policies.