NCPA - National Center for Policy Analysis


October 21, 2009

How should poverty in America be counted?  The Census Bureau uses a calculation that put the number at 39.8 million last year.  But a revised formula that lawmakers are considering adds more than 7 million Americans to that number.  If the revised formula is adopted, it could upend long-standing notions of those in greatest need and lead to shifts in how billions of federal dollars for the poor are distributed for health, housing, nutrition and child care, says

The Census Bureau on Monday released national and regional estimates based upon the revised formula, as well as variations of the formula, because of the interest expressed by lawmakers and the Obama administration in seeing a fuller range:

  • The revised formula, based on recommendations from experts at the National Academy of Sciences, shows the poverty rate to be at 15.8 percent, comprising nearly 1 in 6 Americans; that's higher than the 13.2 percent under the current formula used by the government.
  • The current formula, which dates to the 1960s, defines poverty as total income that falls below three times the annual cost of groceries; so for a family of four, the poverty level is now a one-size-fits-all $21,834.
  • And since only grocery costs are factored in, the official poverty rate has varied little over the years.
  • The academy's formula factors in expenses such as clothing, housing and out-of-pocket medical costs, as well as geographic differences in housing costs; it includes as income non-cash aid such as food stamps, public housing and free school lunches.

For 2008, the Census estimated the poverty threshold under that formula would be $24,755.  Many of those who would be newly defined as poor under this formula are older Americans with growing out-of-pocket medical expenses.

At the National Center for Policy Analysis, analysts agree that the academy formula is an improvement.

"It's very difficult to determine who's in poverty based on the national one-size-fits-all" calculation used by the Census Bureau, says senior policy analyst Pamela Villarreal, so "the bottom line is there have been some positive reforms to the formula."

However, the revised formula does have some problems, she said. For instance:

  • It doesn't include health care benefits, which proportionally favor the poor and elderly more than other Americans.
  • Adding the thousands of dollars in such benefits to incomes when calculating poverty would place more people above the poverty line.
  • The academy formula still overstates the poverty rate by about 25 percent.

Source: Report, "Is poverty at 40 million -- or 47 million? U.S. releases higher figures from revised formula as lawmakers mull change,", October 21, 2009.

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