The Poverty Line is Outdated
The official poverty measure — also known as the federal poverty line — is remarkably outdated.
By Areeba Haider and Justin Schweitzer on March 5, 2020
In 2018, 38.1 million people were in poverty. Or at least that’s the number the U.S. Census Bureau has calculated. For decades now, researchers and advocates have argued that the official number is much too low. Using more complex measures of economic insecurity and the costs facing low-income households, one study found that at least 3.2 million more people should be classified as being “in poverty” based on inflation changes alone; another analysis found that almost 51 million households struggle to pay for basic necessities such as food, housing, and health care.
The way poverty is measured isn’t just a technical question but also a moral one. It has significant consequences for how many families receive assistance—and how many are left behind.
What is the poverty line?
Despite being one of the most crucial measures of economic well-being and deprivation, the official poverty measure—also known as the federal poverty line—is remarkably outdated. To determine if someone is in poverty or not, the government uses a threshold developed in the 1960s. At that time, the government estimated that food was about one-third of the average family’s expenses. To be considered “in poverty,” then, meant having a pretax income less than three times the U.S. Department of Agriculture’s estimate of a bare-minimum food plan. This calculation has remained unchanged over the decades, save for adjustments for inflation. In 2018, the poverty line was $25,465 for a family of four—two adults and two children—and the official poverty rate was 11.8 percent.
That threshold, and other government poverty statistics, does not reflect the economic reality of America today. The calculation doesn’t take into account housing, transportation, child care, or medical costs. It doesn’t consider geographical differences, even though costs of living vary significantly across the country. And it doesn’t align with the lived experiences of millions of U.S. residents, especially given that 43 percent of people can’t afford to pay for basic necessities, 40 percent would struggle to find $400 in an emergency, and almost one-third of respondents to a recent Center for American Progress poll said that they or a family member did not have enough money to buy food at some point in the past year.
Why does the poverty line matter?
An outdated or flawed poverty measure isn’t just an obscure statistical nightmare for policymakers, researchers, and academics; it also has very real implications for people across the country. Dozens of programs at the federal, state, and local levels, as well as some private companies and charities, use the federal poverty line to determine who is in need of extra help. That help comes in a lot of different ways, but it can often mean the difference between being able to meet basic human needs and going without.
Some examples of the many programs the poverty line affects include the three detailed below.
Supplemental Nutrition Assistance Program (SNAP)
In order to qualify for SNAP, formerly known as food stamps, households must have monthly income at or below 130 percent of the federal poverty line. More than 36 million people rely on SNAP each month to afford groceries. The money makes a huge difference in reducing food insecurity, particularly in children, and people just above the arbitrary cutoff could desperately use some of this assistance. More than 33 percent of all food insecure households aren’t considered poor enough to qualify for SNAP.
School Breakfast Program and National School Lunch Program
Children from households making up to 130 percent of the federal poverty line are provided free meals at school every day; those from households making between 130 percent and 185 percent of the poverty line qualify for reduced-price meals of 30 cents per breakfast and 40 cents per lunch. On average, these programs give out a combined 34 million free and reduced-price meals each school day to hungry children who may otherwise be forced to skip breakfast and lunch entirely. These programs are immensely important: They have been shown to improve nutrition and health, as well as improve school attendance, student behavior, academic performance and achievement, and long-term educational attainment.
Health insurance through Medicaid and the ACA marketplaces
The federal poverty line can ultimately be the deciding factor in whether someone has health coverage and is able to get treated. Medicaid eligibility levels vary by state, but they are all dependent on the poverty line. In states where Medicaid was expanded as part of the Affordable Care Act (ACA), people with income levels up to 138 percent of the poverty line qualify for the program; in states where Medicaid wasn’t expanded, the eligibility cutoff is 100 percent—or far less. In addition, percentages of the federal poverty line are used to determine the premium subsidies and cost sharing assistance available to those who purchase insurance on the ACA marketplaces. This means that the poverty line affects much more than people’s budgets. Changing the way poverty is measured to encompass more people would leave fewer uninsured and save thousands of lives.
Other vital programs that rely on the official poverty measure include additional food and nutritional support programs; programs that provide financial aid for students; Head Start, which offers supports for young children; health and social services; workforce training; legal services; and assistance with energy and internet and telephone costs, among much more.
Conclusion
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This isn’t the only effort to change the way poverty is measured in the United States. An interagency technical working group of the Office of Management and Budget is currently soliciting comments about alternative ways to calculate poverty, and its recommendations could mean the difference between helping and hurting millions of people.
If the United States hopes to end poverty, it needs to do a much better job of measuring it. That means creating official calculations that at least consider the real costs households face, that reflect mainstream standards of living, and that stay accurate over time. Failure to do so could have far-reaching consequences for decades to come.