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Change the Way We Measure Poverty

Hartford Courant

May 03, 2010

Starting next year, the federal government will take a few baby steps toward changing the way it measures poverty, something that is decades overdue. The government has used its official poverty guidelines to divide the haves and have-nots for 45 years. The income levels decide who qualifies for hundreds of state and federal programs such as food stamps.

Any changes at first, anyway will just supplement the status quo. That's too bad, because the income guidelines are inadequate, to say the least. The government yardstick has no more to do with the reality of making ends meet in the 21st century than the price of eggplants. Unfortunately, the measurements not only determine eligibility for government aid; they also shape the debate concerning problems of the poor.

Mollie Orshansky, a government economist, came up with the original method of measuring poverty in 1963 as an in-house research project for the Social Security Administration. She multiplied by three the cost of food needed to feed a family in 1955, using the cheapest meal plan based on a U.S. Department of Agriculture survey of low-income households.

The Johnson administration adopted her formula for its anti-poverty programs in 1965. The approach was simplistic, but made some sense. Groceries cost more then than they do now. Multiplying the cost of food by three, it was thought, would take into account other family expenses, giving an accurate snapshot of what a poor family needed to live. The formula has been adjusted for inflation ever since.

But currently, the average family spends only about one-seventh of its income on food. Moreover, in the 1950s, housing was cheaper. Paying for child care was a rarity because many women didn't work. Energy costs and medical insurance were fractions of what they are today. The current formula doesn't count the amount paid in taxes.

For the elderly, the poverty guideline is distorted in a different way: It doesn't take into account the price of drugs, which is a major burden for many retirees.

According to the guidelines, the poverty level in 2009 for a family of four was $22,050 a year. For a family of three, it was $18,310. It would be a challenge for anyone in Connecticut to manage on such a small income. Rent alone for a typical two-bedroom apartment, not counting utilities, could easily take up half the money. The income could go further in regions outside the Northeast. The government, however, has never changed its one-size-fits-all approach. This lack of nuance has sparked bipartisan dislike.

Conservatives believe the guidelines exaggerate the income of the poor because they don't take into account the value of government assistance, such as Section 8 housing that subsidizes the cost of rent. Others disparage the guidelines because they undervalue the income of the working poor, who struggle to make ends meet and often get no help at all.

So why has the method continued for so long? Money, of course. Few aside from anti-poverty advocates have an appetite for changing the inaccurate status quo, fearing it would cost our debt-laden government money in subsidies to the poor it cannot afford. Yet it makes no sense to use guidelines that do not reflect reality.

Thus, the Obama administration wants to inch toward a different formula to measure poverty but not commit to using any new numbers that may result. The government will probably use an approach that a National Academy of Sciences panel devised in 1995, but at least initially, the numbers will supplement the status quo, not change it.

Still, any lurch toward reality is encouraging. The National Academy of Sciences method would take into account the cost of clothing, utilities and shelter. The government might even tinker with using regional differences in living expenses. The poverty guidelines now adjust upward for the higher cost of living in only two states, Alaska and Hawaii. Yet it is obvious that the cost of renting an apartment in Stamford, Conn., and Biloxi, Miss., are substantially different.

The benefit we would all gain by changing the standard is injecting an element of honesty in discussions of poverty. We can't address the issue adequately if the data we use haven't been substantially reassessed in 45 years.

And even Ms. Orshansky, who died in 2006 at the age of 91, said she intended her formula to be used as a research tool, and never thought it should be used as a widespread measure of poverty. "The best that can be said of the measure," she once wrote, "is that at a time when it seemed useful, it was there."

It's no longer useful. But it's still here.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
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