Why the way we measure poverty matters

A national panel is recommending changes to a key poverty measurement. It might sound technical, but the stakes are high.

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SOURCEThe Center for Public Integrity

The ability of millions of Americans to make ends meet hinges on how we measure poverty.

But the “how” may shift after a national panel recommended changes to one of the Census Bureau’s poverty measures.

Designing a fair and accurate measure is no simple matter. It’s also surprisingly political because it drives public policy and government spending, including who gets access to help such as the Supplemental Nutrition Assistance Program. 

“There’s two main uses for poverty measures,” said Indivar Dutta-Gupta, executive director of the Center for Law and Social Poverty. “One is determining eligibility for programs or benefits or tax credits. The other is just to paint a portrait of the actual income deprivation that families face throughout the country.”

Some of the debate boils down to which of the Census Bureau’s two poverty yardsticks is more appropriate for determining who qualifies for government aid: the Official Poverty Measure or the Supplemental Poverty Measure. 

The country’s Official Poverty Measure was developed in the 1960s, based solely on a family’s ability to purchase food. The supplemental, with data first released in 2011, uses a standard of living based on expenditures that include food, clothing, shelter and utilities, compared against a household’s post-tax income, which accounts for government aid and the Earned Income Tax Credit.

It’s rare for the two measures to go in different directions — but recently they have.

The poverty rate under the Official Poverty Measure grew from an estimated 10.5% to 11.6% of the population between 2019 and 2021, the Census Bureau reported last year. In contrast, the rate under the Supplemental Poverty Measure decreased from 11.8% to 7.8%. 

One of the main reasons: stimulus payments from the government to households during the COVID-19 pandemic, which helped raise many households’ incomes temporarily. 

That’s the backdrop to a new National Academy of Sciences panel report, requested by the Census Bureau, that recommends the agency make the Supplemental Poverty Measure its official yardstick and incorporate several updates to it. 

Unlike the Official Poverty Measure, whose methodology has remained largely unchanged since its inception, the Supplemental Poverty Measure was designed to evolve with the changing demands of society. 

The panel was tasked by the Census Bureau to see if the supplemental measure, or SPM,  “was adequately measuring the economic needs of disadvantaged households in the country,” said James Ziliak, professor of economics and director of the Center for Poverty Research at the University of Kentucky, who chaired the panel.

“The SPM has a long and sound conceptual basis but itself is imperfect and should be continuously improved,” said Dutta-Gupta, who was also on the panel. “The hope is to get a more accurate portrait of poverty in the United States.”

Medical care — and specifically health insurance — should be included when considering a basic-needs bundle for a household, the panel found.

The panel also determined that child care has become a large and rapidly growing portion of families’ out-of-pocket spending.

“Every child needs care, and we’re spending significant resources for households to meet that care,” said Ziliak.

The panel also suggested ways  for the Census Bureau to better capture housing costs, generally the largest component of a household’s spending. 

Perhaps most significantly, the panel felt that this measure should no longer be considered “supplemental” but be elevated to be the “Principal Poverty Measure” and used as the “nation’s headline poverty statistic.” 

That could have big ripple effects. The Official Poverty Measure — or a close variation — is used by nearly two dozen government agencies to determine eligibility for federal programs, according to the panel’s report.

There’s wide recognition that the current official measure’s income thresholds for poverty are far below what families need to sustain themselves. Many agencies try to account for that with their program eligibility limits: The USDA sets the maximum income to qualify for the Women, Infants and Children nutrition program at 185% of the Official Poverty Measure thresholds, for instance.  

“There is a desire to have an absolute measure of poverty,” said Gregory Acs, vice president for income and benefits policy at the Urban Institute, who was not on the panel. That’s what the Official Poverty Measure is meant to do, “but that misses the point. What food a family needs to buy and what constitutes a healthy diet has changed over time — and what you need to participate in society has changed.” 

The panel suggested continuing to use the current Official Poverty Measure — though perhaps renaming it the Basic Poverty Measure or Basic Income Poverty Measure — to maintain data on historical poverty trends and as an alternative yardstick for program eligibility.

The panel’s recommendations sparked some political pushback. U.S. Sen. Marco Rubio, a Florida Republican, sent a letter to the Census Bureau that expressed concern over the potential impacts.

The report, Rubio wrote, “recommends a sweeping set of changes that would prevent our government from accurately measuring poverty and would instead advance progressive political priorities. The authors of this report have not only overstepped their commission, but have also broken a sacred trust long defining the relationship between research experts and policymakers.” 

“Poverty measures, in other words, are not purely technical instruments,” he added. “They signal a national consensus about the goals of our economy and system of government.”

In addition to criticizing the panel’s recommendation to elevate the Supplemental Poverty Measure, Rubio disagreed with the suggestions to include other variables in the calculation, like childcare and health insurance. 

A May study from a right-leaning think tank, the American Enterprise Institute, determined that several federal programs — including food assistance — would expand to cover families making more money if the Supplemental Poverty Measure was broadly used to determine program eligibility. That would come with a multi-billion-dollar price tag, the study concluded.

The Official Poverty Measure has long been criticized by experts across the political spectrum, but many say it still serves a purpose.

“For program eligibility at the household level, you want a straightforward measure that’s not hard for people to document or produce lots of paperwork for sources of income,” Dutta-Gupta said. “If you made that measure too complex for program eligibility, then families struggling would have to figure out if they need to get their housing assistance before food assistance and other things that would be highly undesirable.”

Ziliak said it would be a huge administrative undertaking for the federal government to change eligibility rules for so many programs. The Official Poverty Measure also offers historical trends and data going much further back than the supplemental measure. 

“Official poverty gives us a consistent long history,” said Liana Fox, assistant division chief for economic characteristics at the Census Bureau. “SPM allows us to study the impact of government programs on reducing poverty.” 

Others have said that neither of these measures are adequate for determining who is most disadvantaged economically, but have suggested that a consumption-based measure, rather than an income-based measure, would be better.

The debate over the National Academy of Sciences panel’s suggestions shows just how subjective defining poverty is. And it underscores the importance of that definition for households struggling to cover basic costs of living.

“I think it’s important for people to understand how we measure poverty so they understand how public policy and macroeconomic conditions impact poverty,” Dutta-Gupta said. “Large changes [in poverty] are entirely because of the economy or public policy changes. It has shockingly little to do with people’s individual choices.” 

But all of these measures have been facing new challenges over the past decade. Survey responses involved in these data collection efforts are decreasing as people regularly screen phone calls from unknown numbers and answer their doors less — and some communities have long been hard to reach. To address this, the Census Bureau is trying to use other data, including administrative information from programs like Social Security.

“But that data is often terrible at identifying some identities, like race, and don’t perfectly align with the poverty measures,” Dutta-Gupta said of the administrative data. “I would note that in general, the worst data quality is often from people who are struggling the most.”

The Census Bureau’s Fox said that any changes implemented to the Supplemental Poverty Measure would take years to implement. 

An interagency working group will be vetting the report’s recommendations. Once that’s done, there will be a multiyear process for public engagement. 

Fox said the agency’s priority is to be transparent.

Acs thinks it’s important not to lose sight of the people that the poverty rate encompasses as we weigh these changes.

“We measure poverty because there are people who have such limited resources that they cannot make ends meet,” Acs said. “They cannot fully participate in society. They are so resource-deprived that it is a threat to their health and wellbeing.”

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