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The Inclusive Economy
Taking a Look at the New Poverty Data
By Ethan Geiling on 11/08/2011 @ 04:30 PM
Yesterday, the Census Bureau released its much-anticipated supplemental poverty measure. The goal of this new measure is to provide a more accurate picture of poverty in the United States.
For years, poverty experts and researchers have contended that the official poverty measure is outdated, misleading and ultimately not useful. The official measure was developed about a half-century ago and is based on the assumption that families spend one third of their after-tax income on food.
This measure fails to take into account many things. Two of the most common criticisms of the official poverty measure are that:
- It doesn’t account for government benefits, like food stamps and the Earned Income Tax Credit
- It doesn’t account for differences in cost of living (e.g. it costs much more to live in Manhattan than it does to live in rural Mississippi)
The New York Times wrote a great article last week explaining the history of the official poverty measure and criticisms by researchers.
The Census Bureau published this helpful table summarizing the differences between the official measure and the new supplemental measure:
Source: U.S. Census Bureau, 2011
Some big takeaways from the new supplemental measure data:
- Poverty is higher than previously assumed. In 2010, there were 49.1 million people (or 16.0%) in poverty according to the new supplemental measure, compared to 46.6 million (or 15.2%) according to the official poverty measure.
- There are more older Americans living in poverty according to the new measure (9% with the official measure vs. 15.9% with the new supplemental measure). This is likely because the new supplemental measure takes into account expenses like out-of-pocket health care costs, which are likely to burden older Americans.
- There are fewer children living in poverty according to the new measure (22.5% with the official measure vs. 18.2% with the new supplemental measure). This suggests that government programs helped keep millions of children out of poverty.
- Expansions in programs under the 2009 Recovery Act kept millions of people out of poverty. The Center on Budget and Policy Priorities released a great analysis of the effects of specific programs on poverty. It found that the expansion of the Earned Income Tax Credit (EITC) and Child Tax Credit kept 1.6 million people out of poverty, the temporary Making Work Pay tax credit kept 1.5 million people out of poverty, and expansions in SNAP kept 1.0 million people out of poverty. Overall, the EITC reduced the poverty rate by two full percentage points. Ultimately, these findings many influence the budget debates going on in Washington by showing the important role that safety-net programs play in reducing poverty.
- The new supplemental measure finds that the poverty rate among blacks is lower than previously estimated; 25.4% with the new supplemental measure, compared to 27.5% with the official poverty measure. But more whites, Asians and Hispanics are in poverty. The proportion of Hispanics in poverty is higher than the proportion of blacks.
Source: U.S. Census Bureau, 2011
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