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Methods of Poverty Measurement in the United States

VII. Methods of Poverty Measurement in the United States

An examination of how the current poverty measure was developed is required if a proposal for a new measure is to withstand scrutiny.  Further, a proposal for a more comprehensive, or ‘better,’ definition of poverty demands that all the aspects, or facets, of poverty be examined to ensure their inclusion in the proposed definition.  These examinations include developing an understanding of the relevance and effectiveness of current and previously proposed measures.  The process undertaken to develop the current poverty thresholds (measure), and the subjective, absolute, and relative facets of poverty are distilled below.

The Current Poverty Threshold

There are two primary measures of poverty used by the U.S. government.  One of these is the poverty guidelines, which are issued by the Department of Health and Human Services (HHS), and used to determine whether people are financially eligible for various assistance programs.  The second, the poverty thresholds, are issued by the Census Bureau, and used for statistical purposes such as estimating annual numbers of people in poverty and presenting data classifying them by demographic characteristics.  It is the poverty threshold that is the primary subject of analysis in this thesis.

The current official poverty thresholds are based on metrics developed by Mollie Orshansky, an economist with the Social Security Administration (SSA), in 1963 and 1965 (Fisher, 1992).  She used food cost data based on the 1955 U.S. Department of Agriculture (USDA) Household Food Consumption Survey and data from the U.S. Census Bureau (Census) and developed a complex process of calculating different thresholds for different types of households (farm or non-farm), different family compositions (household head over or under 65 years of age, household head gender, number and ages of children, number of adults in the household, whether the household was comprised of unrelated individuals, etc.) to establish 124 detailed thresholds (62 for non-farm families and 62 for farm families).  She then had to determine how much income was necessary to cover non-food expenses, and to determine the differences in income needs between farm and non-farm families.

From the 1955 USDA Household Food Consumption Survey, Orshansky determined that food costs were, on average, approximately 33% of after-tax income for an average family of three or more persons.  Thus, a factor of “three” was used as a multiplier against her estimated food budgets for variously-sized and situated families to determine minimum income needs, now more commonly referred to as the poverty thresholds.

Orshansky then set about using these factors for determining income needs for two cost levels (low-cost and a lower still economy level, choosing not to use the two highest cost level plans – liberal and moderate).  The low-cost level was based on food plans originally developed in 1933, while the economy level food plan was introduced in 1961.  The economy food plan was 75-80% of the low-cost food plan, as it was intended for “…temporary or emergency use when funds are low…”  She assumed that if family income dropped, expenditures for non-food items would (could) be decreased as well, so that food costs would remain approximately 33% of total after-tax income.  On the face of it, this seems a faulty assumption since costs for necessities such as housing and transportation cannot readily (or necessarily) be reduced.

Despite the seemingly “scientific” approach Orshansky used to develop the poverty thresholds, Ruggles notes that “Watts has characterized our existing poverty measures as ‘simply a collection of more or less arbitrary and eminently vulnerable rules’” (1968).  Indeed.

The threshold levels were developed in the absence of data we now have, and based on economic and demographic facts that no longer exist.  For instance, assistance programs for food, childcare, housing vouchers, and the like did not exist at the time and now serve to supplement incomes but are not included in measures of household income.  Housing costs and transportation costs have risen sharply during the same time.  Wages for low-income earners have largely remained flat or declined during the past 40 years.  Additionally, low-income households generally had no federal income tax obligations and the Earned Income Tax Credit was not in existence.

It should perhaps be noted here that Orshansky indicated several times that she had not intended to introduce a new general measure of poverty, but, rather, she was trying to develop a measure of the relative risks of low economic status among different demographic groups of families with children (Orshansky 1978).  Essentially, the originator of the current poverty threshold is on record as saying her work is being misused.  That this misuse continues 36 years after this assertion reveals a serious policy-making failing on the part of the U.S. government.

Additionally, as Orshansky herself stated, “…there is no generally accepted standard of adequacy for essentials of living except food,” and “if it is not possible to state unequivocally ‘how much is enough,’ it should be possible to assert with confidence how much, on the average, is too little.”  A 1965 Social Security Administration memo states: “it was not the poverty level but the near-poor or low-income level (the thresholds derived from the low-cost food plan) that was described as “a minimum adequate standard.”  Thus, development of poverty thresholds based on “standard budgets” for all household expenditures was not pursued.  In effect, the poverty threshold was developed as a measure of what was minimally required to survive, not that which was required to thrive.  And yet, when society has delivered existence at levels higher than subsistence, human needs change from surviving to thriving.  This physiological need to thrive was foundational to the establishment of international human rights and the declaration of the war on poverty in the U.S.

There is appeal to using a market basket of “necessary” goods to determine poverty thresholds.  Arguments about what goods and services are “necessary,” not surprisingly, are numerous.  Some, including Watts, have proposed making the poverty threshold more robust than just counting the number of people that fall below the line (Ruggles notes that clearly a person making $1 more than the poverty threshold is not any better off than one making $1 less than the poverty threshold).  Rather, he and others suggest measures that take into account the depth of poverty and its incidence in a comprehensive poverty index (how many people are poor and by how much).

The Economic Opportunity Act was passed soon after President Johnson’s 1964 declaration of war on poverty.   During the act’s implementation in late 1964, along with the establishment of the Office of Economic Opportunity, preprints of Orshansky’s soon-to-be-published “Who’s Who Among the Poor: A Demographic View of Poverty” were being circulated throughout the federal agencies.  Orshansky’s economy-level poverty thresholds were adopted as the quasi-official federal definition of poverty (for statistical, planning, and budgetary purposes) by the newly formed Office of Economic Opportunity in May, 1965, in part, it is believed, because they closely matched poverty threshold levels being developed independently by the Office of Economic Opportunity.

Unusual is that the requirement to calculate the poverty rate, and the method that must be used to do so, was assigned to the Census Bureau directly in OMB Directive 14 in 1969.  This means official changes to its method of calculation may not simply be made by the statistical agency responsible for the measure, as is generally the case for other statistical measures, but, rather, must be a directive issued by the Presidential Administration.  This directive also narrowed (from .30 to .15) the differentials used for farm and non-farm family poverty thresholds.

Infrequently, the poverty threshold calculation has been evaluated, and new ones proposed.  In one such example, changes to the poverty threshold calculation method were taken up by the Interagency Committee on Income and Wealth Distribution Statistics during the Carter Administration, and later reviewed and approved by the Reagan Administration’s Working Group on Economic Statistics of the Cabinet Council on Economic Affairs in November, 1981.  These changes, based largely on recommendations made by Orshansky herself in the late 1970s, removed entirely the differential between farm and non-farm family poverty thresholds (raising farm families up to the non-farm family level), eliminated separate thresholds for male- or female-headed households (and averaging the former thresholds together to establish a new, single threshold – a poor use of statistical ‘mean’), and extended the matrix of poverty thresholds to make the largest family size category “nine persons or more,” rather than the previous (and original) “seven or more persons.”

Some of the infrequent evaluations of the poverty thresholds sought to address both the length of time that had passed since their adoption as well as the specifics measured by them.  The Bush Administration, in January of 1990, signed off on an initiative intended to improve the quality of federal economic statistics, including the federal poverty measure.  A report from the Council of Economic Advisors regarding this initiative states “the poverty index we use is based on research that was done in the 1950s and 1960s and may not be well suited to the 1990s.  Although most major statistical series are revised every 5 (five) years to reflect current price, consumption, and production patterns, the official poverty measure has not had a significant revision in over 25 years.”  While mentioning the experimental poverty measures that use different definitions of income and price changes as reported by the Census Bureau, these documents also stated: “Nevertheless, our basic understanding of appropriate measures of poverty remains far from complete.  Additional research on relevant prices, consumption patterns, and family composition in the 1990s is needed to improve our understanding of the level and distribution of economic need in this country.”

Also in 1990, Patricia Ruggles of The Urban Institute published “Drawing the Line: Alternative Poverty Measures and Their Implications for Public Policy.”  In it she writes “Even if we accept, as this book does, the view that our current standards represented a reasonable social minimum in 1963, normative standards change over time, and norms such as the poverty line (threshold) must consequently be reassessed periodically.”  She continues: “…to be comparative in normative terms to its 1963 level our current poverty standard would have to be substantially higher.”  In fact, she found that “Even the much less detailed examination of consumption patterns and needs offered here [her book] implies that the poverty line should probably be substantially higher than it is currently – close to $15,000 for a family of three in 1988, for example, rather than at its official level [in 1988] of about $9,500.”  Using such a “corrected” poverty threshold would have also resulted in poverty rates of more than 20%, rather than the official rate of approximately 13% at the time.  Ruggles points out that a poverty threshold that inaccurately measures the poverty rate as low and declining is likely to keep anti-poverty program funding from being seen as a “national vital priority.”   Further, “if we [the U.S.] believe that circumstances are improving more (or more rapidly) for some population subgroups than for others, we may choose to reallocate spending to provide more to those whose need appears to be greater.  For these reasons, basic flaws in our current measures that result in misleading conclusions about the incidence of real economic need should be of concern to policy analysts and policymakers.”  Indeed, as those that are poor are more frequently also those who cannot work, or cannot find work, the “poor” have become accused of being “takers of resources” from society rather than being those in “need of resources” from society.

The last comprehensive evaluation of the poverty threshold took place in mid-1990.  At an interagency working subgroup on poverty composed of Executive-Branch agency employees, a draft agenda of possible research on poverty measurement was submitted to the Council of Economic Advisors, but no further action resulted pursuant to this initiative.  Thus, the aforementioned 1981 changes represent the last made to the poverty threshold levels save for the annual adjustments made in accordance with changes in the Consumer Price Index (CPI).

In summary, the U.S.’ official poverty thresholds were based on food budgets that were intended for use solely during emergencies (not long-term existence), as they were 75-80% of long-standing low-cost food plans.  They were based on the assumption that non-food costs (rent, transportation, etc.) for low-income families can be reduced if income decreases.  They were established when food costs were significantly higher, as a percentage of income, than they are today.  They were established before today’s additional “near-income” programs existed.  They were developed using a “multiplier methodology,” which was based on a normative assumption involving consumption patterns of the population as a whole, not empirical consumption behavior (or needs) of low-income families.  They, unlike most federal statistical measures, are not revised every five years; thus, they are based on research and data that are more than 50 years old.  They also were not developed, despite their coming into existence just prior to President Johnson’s declaration of war on poverty, to define any official U.S. governmental or societal position on the acceptable levels of, nor measure the experience of one’s existence in, poverty.

Unfortunately, as Ruggles notes, “Concern about poverty is no longer as high on the national agenda as it was in 1969.”  Despite the recent increase in attention that poverty is receiving now, on the 50th anniversary of Johnson’s declaration of war on poverty, there is not much evidence to suggest the public will demand, or that policymakers will make, significant enhancements to the U.S.’s measure of poverty.  In fact, no serious effort to develop and implement an updated poverty threshold by the U.S. Government has been undertaken since the 1990’s.

Other Poverty Threshold Proposals

After reviewing the literature it is obvious there is much disagreement as to what the proper measure of poverty is.  This is evidenced by academics, reports, advocacy organizations, etc., citing different measures to better fit their perspective of the proper measure of poverty.  Some groups, at least occasionally, report poverty as those living below 150%, or below 200%, of the poverty line (suggesting that the official poverty line minimizes the size of the “problem”), while others stick with the official poverty line yardstick.  Others include data on the numbers of people that earn less than 50% (severe poverty) of the poverty line (perhaps either suggesting that the number of individuals living below this line shows the problem is worse, or better, than the official measure suggests, depending on the views and goals of the reporting organization).  While such measures (25%, 33%, 50% 81%, 100%, 133%, 175%, 200%, 250%, 300%, etc.) are legitimate ways to identify different groups to determine qualification for federal assistance benefits, these different “measures” just confuse the issue.  In fact, their simple existence calls into question the definition and conditions that constitute poverty.

Patricia Ruggles does an excellent job of summarizing the different kinds of poverty measures in use or proposed throughout history.  These summaries are conveyed below.

‘Absolute’ Poverty

Consumption- or income-based measures of poverty below some ‘objective’ measure are the earliest, and broadest, according to Ruggles.  Orshansky’s measure is of this type.  These measures can hold great appeal to many because they seem ‘scientific’ (because they appeal to ‘expert opinion’).  Also appealing is that they provide a fixed benchmark against which to measure ‘progress’ in combating poverty.  For these reasons, politicians who are concerned about poverty often think of the problem in terms of these absolutes.

Additionally, people of different ages, or from different cultures, often have different or outdated ideas of what constitutes the ‘minimally acceptable standard of living’ such ‘objective, absolute’ measures identify.  For example, it is not uncommon for the elderly, knowing through learning or experience of the conditions the poor lived in 50+ years ago, or those from other cultures with lower standards of living, to maintain those standards throughout their lifetimes, rather than adjusting them to match society’s changes in standards of living.

Indeed, goods and services that were luxuries, unacceptable, uncommon, or non-existent, 50-60 years ago are so commonplace today that to be without them is unfathomable.  Such things, respectively, include televisions, women employed outside the home, a striving for meaning in one’s life, and smart phones.  Because of these kinds of changes, an “objective” minimum quickly stops being applicable.  An “absolute” measure of poverty that is adjusted only for changes in price levels will “miss” these changing consumption patterns, and ultimately show a declining rate of poverty when in fact society’s idea of being deprived an acceptable standard of living will have changed.  In fact, Ruggles notes that Orshanksy expressed considerable dismay in the late 1980’s at the codification of her original standard into a rigid scale, and instead thought “attempts should have been made to adjust her thresholds to reflect changing patterns in consumption over time.”

Another concern about absolute measures of poverty and their tendency to show declining incidence of poverty is that they do not count as poor those low wage workers who often work multiple jobs.  Over time, these individuals end up ‘climbing’ above the artificially low ‘poverty’ threshold, but they are not enjoying a standard of living deemed a social norm – a 40-hour work week.  In fact, due to this phenomenon, Ruggles notes that by 1990, most low-wage workers were excluded from the count of the population living in poverty.  As these individuals and their families’ still experience significant economic (and other types of lifestyle) deprivation, they serve as evidence that poverty is not only suffered as penance for laziness.

Ruggles presciently identifies another risk that this defect in the measurement of poverty presents.  As the official poverty threshold declines relative to growth in income, those whose incomes remain under it tend to be the most entrenched in poverty because they have the most difficult problems.  These include the disabled, low-skilled, un- and under-educated, unemployed, and single mothers.  These individuals are accused of being representative of the poor (Weissmann), which has become true over time as the poverty threshold has moved farther from the relative line of deprivation it once measured.  The situation skews the perception of the poor along with its inaccurate measurement of poverty, which leads at best to ineffective poverty alleviation policymaking.

Some, such as Watts (1967), have proposed using maximums spent for different needs as a percentage of income.  This might entail identifying as “poor” those that spend 20% or more above the average household expenditure on food.  Haagenaars and De Vos (1988) are noted as describing another variant of “appropriate maximum” used in the Netherlands, which focuses on total fixed costs as a proportion of income.  For instance, as income increases, it is expected that the proportion of income spent on basics (food, housing, etc.) would decrease, suggesting improving conditions for those families.  However, the use of ‘maximums’ still does not capture changes in consumption patters, and thus remains deficient as a comprehensive method for measuring poverty.  For instance, higher incomes might lead a household to move to a more costly neighborhood with better schools, resulting in a reduction of financial condition but improvement in educational quality experienced by the household.

‘Relative’ Poverty

Relative poverty measures represent the second largest class of poverty definitions according to Ruggles.  At one end of the spectrum are simple arbitrary ties to income levels (i.e. defining as poor those families whose incomes fall into the bottom 10% or 20% of the total income distribution.  At the other end, a very complex measure would be like the one proposed by Townsend (1979) that examines each individual’s consumption of a comprehensive list of “commodities and services and then calculates a ‘deprivation index’ based on the number of areas in which the individual’s consumption falls below social norms.”  Both of these examples are uncommon, however.  The most common proposals for a relative measure of poverty are those that use an income or consumption cutoff that is easily expressed as a proportion of the median for society as a whole.  Usual among these kinds of proposals are those that identify poverty as having an income level of 50% or less of median income.

Critics of relative indexes argue that poverty cannot be shown to be reduced without redistributions (or changes) within the income distribution because without such, the ratio of poor will remain constant.  Other critics argue that it is too difficult to design and enact policies that effect redistribution of income to a sufficient degree to improve the lives of the least well-off in society.

These critiques seem hollow, though, if one remembers President Johnson’s goal of not just eliminating poverty, but preventing it.  If poverty is to be reduced, the proportion of the population that is poor must be reduced, with the goal being to reach zero.  One way to gage whether that is happening is by tying the measure of poverty to the fluctuating median income of society as a whole.

Still others propose that the measure of poverty should be based on a percentage of consumer expenditures and updated each year so as to keep the threshold tied to the changing (presumably growing) standard of living enjoyed by the general population.  This is the case with the panel convened by the Census Bureau and the National Academy of Sciences in the early 1990s.

According to Fisher (1992), in Fiscal Year 1991, Departments of Labor, Health and Human Services, and Education appropriation bill included a $600,000 provision to the bureau of Labor Statistics (BLS) “to enable the Bureau to develop, in conjunction with the National Academy of Sciences, the appropriate methods of revising the current official poverty measure.  The Bureau should contract with the National Academy for a study to provide a basis for the revision.”  There had been disagreement between the House, which wanted the BLS to conduct the work, and the Senate, which wanted the Census Bureau to conduct the work; ultimately the House version was passed, but the BLS then transferred the money to the Census Bureau.  The Census Bureau then contracted with the National Academy to conduct this study along with one to study various issues related to family assistance and welfare programs (based on a different Congressional directive whose funds were provided to HHS then transferred to Census).

These contracts led to a 30-month, two-part study by a panel of academic experts (the Panel on Poverty and Family Assistance).  The results of this panel were published in a May 1995, report that proposed a new approach for developing an official poverty measure for the U.S.  Their proposed measure still defined poverty as economic deprivation, but used a combined budget allowance for food, clothing, shelter (incl. utilities) plus a small additional amount to cover household supplies, personal care, non-work transportation, etc.), rather than the current “food budget and multiplier” method.

For a family of four (two adults and two children), the panel recommended setting the clothing/shelter/food budget allowance at 78-83% of the median spent for all same-type families for these items according to the Census’ Consumer Expenditure Survey.  The poverty threshold would then be derived by use of a small (1.15 to 1.25) multiplier applied to the newly determined budget allowance for clothing/shelter/food.  This proposed poverty threshold would result in a figure 14% to 33% higher than the poverty threshold as calculated using the current method (in the early 1990s).  In 1988, Patricia Ruggles estimated the poverty threshold, if her recommendations for using consumption patterns and needs was conducted, would imply the threshold should be nearly 58% higher than the official measure at that time, resulting in a threshold of nearly $15,000 for a family of three instead of the official threshold of approximately $9,500.  The panel further recommended that the poverty threshold be calculated each year based on changes to general population expenditures on the budget allowance items (using a three-year average to smooth out business and economic cycle ups and downs) so that the real growth in the general population’s standard of living would be accounted for in the poverty measure (thus keeping the threshold relative, and relevant, to the living conditions of the general population over time).

The Panel put great merit on the notion that the poverty measurement should be based on consistency.  That is, that the definition of family resources income used should be consistent with the underlying poverty thresholds.  This principle is what they used to criticize the current thresholds for using after-tax money income expenses applied to before-tax money income data.  Similarly, the panel criticized the experimental poverty measures published by the Census because they included the value of health insurance to families’ resources without making the necessary adjustments to the thresholds to account for medical care needs.

Other important proposals of the Panel were: 1) their definition of family resources as “the sum of money income from all sources together with the value of near-money benefits (i.e. food assistance) that are available to buy goods and services in the budget, minus expenses that cannot be used to buy these goods and services (i.e. taxes, child care and work-related expenses, health insurance premiums),” 2) their proposal to adjust housing costs across geographic areas using the Decennial Census, Census’ nine geographic divisions, and the size of Metropolitan Statistical Areas (MSAs) within these divisions, 3) that the family resources definition would not included out-of-pocket medical expenses and not include medical care needs, and finally, 4) that their proposed poverty threshold should replace Orshansky’s still-used poverty threshold as the official measure of U.S. income and poverty statistics.

A criticism made by some about poverty measures is that those people determining what ‘poverty’ is (both income and consumption levels) likely do not have first hand experience living in poverty.  Some of these critics assert that experience is the best teacher and should be drawn upon by policy makers.  These perspectives lend support to a ‘relative’ measure of poverty.

‘Subjective’ Poverty

A newer measure of poverty is based on subjective definitions.  These address one of the concerns raised previously about absolute measures; that perhaps those setting the threshold should have first-hand experience with poverty.  Subjective definitions of poverty are based on surveys that use “poor” households’ “own assessment of the minimum or ‘just sufficient’ amounts of income or consumption needed by people like them” (Ruggles, 1990).  Only a few studies have applied this method to U.S. data, among them Colasanto et al (1984), which used Wisconsin data, and De Vos and Garner (1989), which compares results from the 1982 Consumer Expenditure Survey (CES) in the U.S. with results obtained from Dutch survey data.

Some of the questions asked of poor households include “Living where you do now and meeting the expenses you consider necessary, what would be the very smallest income you and your family would need to make ends meet?” and “What income do you consider to be just sufficient for the household?”  One proposed subjective poverty threshold is the intersection of the actual level of income with the self-identified ‘just sufficient’ level of income.

While a subjective poverty measurement is appealing because it provides for input from those that experience poverty, there are concerns.  First is whether the level of ‘just sufficient’ income identified is actually what these individuals believe is sufficient, or what they’ve come to understand society allows.  Another concern is the possibility the answers these individuals provide are influenced by their experience in, and expertise at, having to make due rather than an actual understanding of what is required to fully meet their needs (even those of which they are not aware).  For instance, including the words ‘Living where you do now’ in the question essentially provides the cost of housing from which their answers will spring.  It is possible, if not likely, however, that where the poor ‘live now’ is inadequate (condition, school quality, crime, etc.), and thus, its cost immaterial to the question of minimum need.  Separate from the reference of a current situation, it is not unlikely that most would identify a good wage, safe neighborhood, good schools, high-quality clothing, good health, abundant food, reliable transportation, and other usual goods and services desired by the majority, to be necessary.  It certainly is not unreasonable to imagine that those individuals that possess such a high-quality lifestyle doing without.

VIII. A Better Definition of Poverty

It has been just over 50 years since President Johnson declared “unconditional war” on poverty.  This anniversary arrives just five years after the Great Recession, which itself brought about an increased focus on the economic wellbeing of the nation, and especially on the least affluent among us.  In fact, over the past five years we’ve heard a rising chorus of voices calling for an increase in the minimum wage to help lift low-wage workers out of poverty, for steps to be taken to reverse the decline of the middle-class, and for actions to reduce the widening income gap between the haves and the have-nots.

Patricia Ruggles (1990: xv) notes that “Adam Smith put it more than 200 years ago, poverty is a lack of those necessities that ‘the custom of the country renders it indecent for creditable people, even the lowest order, to be without.’”  Thus, even in 1776, one of the most renowned economic theoreticians believed that social custom and moral obligation played parts in defining poverty.  The Declaration of Independence and U.S. Constitution (and its amendments) embody the thinking of theorists such as Smith and John Locke.  These documents established the societal custom and moral obligation (in other words, human rights) to which the U.S. government would be bound to guarantee to its citizens.

In his 1964 State of the Union address, as noted in the introduction, President Johnson encouraged the American people and their Congress to work towards eliminating, and subsequently preventing, poverty.  To succeed in this charge, however, it is imperative that we agree on what poverty is and how best to measure it.  Without such agreement, there is no way to know when progress has been made in alleviating or preventing poverty (Gorham, 1990).

Ruggles (1990: 16) notes that Hagenaars and De Vos neatly summarized three types of poverty definitions:  “1) Absolute Poverty: Poverty is having less than an objectively defined, absolute minimum. 2) Relative Poverty: Poverty is having less than others in society.  3) Subjective Poverty: Poverty is feeling that you do not have enough to get along.”  Of note is that these types of poverty, according to Ruggles, are often viewed as complete in and of themselves.  None of these definitions fully describe what it means to be poor, however.  The first is an attempt at objectivity, but it could be argued any ‘objectively defined’ minimum is just an arbitrary decision by its creator.  The second is about equality, or lack thereof, amongst citizens.  The third, being a subjective measure, has a perceived lack of accuracy.

With little effort, one can readily find many definitions of poverty that reflect just one, or some, of the three types described above, as evidenced by the following:  Absolute poverty’s definition can be identified in the Bing dictionary definition of poverty: “the state of not having enough money to take care of basic needs such as food, clothing, and housing.”  Aspects of both relative and subjective poverty definitions can be identified in the definition of poverty provided by Citro and Michael (1995) “…define poverty as economic deprivation.  A way of expressing this concept is that it pertains to people’s lack of economic resources (e.g. money or near money income) for consumption of economic goods and services (e.g. food, housing, clothing, transportation).  Thus, a poverty standard is based on a level of family resources (or, alternatively, of families’ actual consumption) deemed necessary to obtain a minimally adequate standard of living, defined appropriately for the United States today.”  And, subjective poverty’s definition can readily be identified in Merriam-Webster’s definition of poverty as “the state of one who lacks a usual or socially acceptable amount of money or material possessions.”

The varied ‘definitions’ of poverty, so readily available to the public, provide different ‘definitions’ of poverty at different times by different sources which prevents a singular understanding of the experience of poverty.  These different ‘types’ of poverty also suggest that there are different kinds of poverty, or at least different measures.  I suggest instead that these ‘types’ of poverty are different aspects of a singular poverty.  Thus, consideration of how these different aspects of poverty can be combined into a cohesive definition is necessary to conduct a more comprehensive evaluation of poverty.  By combining the core meaning of each of these types of poverty, I propose, and will use for the purposes of this thesis, the following definition of poverty:

Poverty is a state of deprived existence experienced (subjective) by people who lack sufficient money, possessions, and levels of economic consumption to satisfy their human needs (absolute) in a manner that adheres to society’s expectations (relative).

With this definition of poverty in hand, an ‘equality-poverty threshold,’ which more accurately reflects this definition’s tenets, has been constructed and is compared in the following section to the current official U.S. poverty threshold and a ‘living wage’ threshold developed by MIT.

IX. Comparative Analysis of Poverty Thresholds

The U.S. poverty threshold figure is a household-level gross-income figure calculated each year by the U.S. Census Bureau for purposes of measuring the number of people that are considered to be living in poverty in any given year.  The poverty threshold is not, and never has been, a measure of the number of people that make less than necessary to sustain themselves and their families based on the cost to provide some minimum standard of existence.  The figures for the Living Wage as proposed by Dr. Glasmeier and a proposed equality-poverty threshold are based on those calculated for The Village of Shorewood in Milwaukee County, Wisconsin.

The current poverty thresholds presented here are the preliminary figures for 2013 as provided by the U.S. Census Bureau.  They have been converted to hourly figures for purposes of comparison with the Living Wage Calculator figures for The Village of Shorewood as produced by the Living Wage Calculator created by Dr. Amy Glasmeier at MIT, and the constructed ‘equality-poverty threshold.’

Three family sizes and compositions are compared for each threshold: A single person under the age of 65, a three-person household (one adult and two children) with a householder under the age of 65, and a four-person household (two adults and two children – no variation by age of householder is provided for by the U.S. Census Bureau).  The 2013 preliminary U.S. Census Bureau poverty thresholds are national figures, while the living wage figures and those for the proposed equality-poverty threshold are for Shorewood, Wisconsin.  The MIT Living Wage figures assume one adult in the two-adult household does not work to provide childcare.  For comparison purposes, the proposed equality-poverty threshold makes the same assumption, but in addition, it also measures the income needed to allow the second household adult to work outside the home rather than provide stay-at-home childcare, which may be this adult’s preferred expression of their equal rights and might well lead to future financial advantages for the family in the long run.

As noted previously, the current poverty threshold does not attempt to identify which goods and services are necessary to obtain a minimally acceptable lifestyle – it is simply the inflation-adjusted income level that approximated, in the 1960’s, the income level that identified a subsistence lifestyle.  The MIT ‘Living Wage’ primarily attempts to identify the true income needs to purchase a slightly enhanced, minimally acceptable (subsistence) lifestyle.  In contrast, the ‘equality-poverty’ threshold measure proposed herein attempts to identify the budget categories that constitute the generally accepted and expected lifestyle consumption levels in the U.S. and the resultant annual income necessary to attain this consumption level.

The intent of the ‘equality-poverty’ threshold is to provide a greater understanding of the income levels necessary for households to adhere to the expectations of society, requirements of the economy, and physiological needs of themselves.  This new understanding is expected to demonstrate that far more people experience poverty, to some degree or another, than just the officially poor.  It does so by identifying the wide gap between the income level labeled as poverty in the U.S. and the income level necessary to minimally consume at socially expected and acceptable levels.

Table 1 below shows the budget categories in the MIT ‘living age’ threshold calculations, and those budget categories developed for the ‘equality-poverty’ threshold.  It also provides estimates for savings categories included in the income-needs calculations for the ‘equality-poverty’ thresholds.  Lastly, it includes the monthly and resultant annual incomes necessary (before the income needed to pay taxes is added).

Table 2 below summarizes the hourly wages reflected in the poverty thresholds and hourly minimum wages examined in this thesis.

Table 3 below summarizes the annual wages reflected in the poverty thresholds and hourly minimum wages examined in this thesis.  This table also reflects, for further comparative benefit, figures compiled by the Michigan League for Public Policy (MLPP) in March 2014 for their Basic-Needs Income Levels for Well-Being Report.

In summary, the current U.S. poverty threshold annual income figures are $12,119 for a one-person household, $15,656 for a three-person household (1 adult, 2 kids), and $23,836 for a four-person household (2 adults, 2 kids, regardless of how many adults are working).

The current hourly minimum wage of $7.25/hour results in annual income figures of $15,080 for one-person and three-person households (1 adult, with or without 2 kids), and either $15,080 or $30,160 (assuming both adults earn the minimum wage if they work) for a four-person household (2 adults, 2 kids).  The proposed $10.10/hourly minimum wage results in annual income figures of $21,008 for one-person and three-person households (1 adult, with or without 2 kids), and either $21,008 or $42,016 (assuming both adults earn the proposed higher minimum wage if they work) for a four-person household (2 adults, 2 kids).

The MIT ‘living wage’ threshold indicates a needed annual income level of $16,380 for a one-person household, $47,628 for a three-person household (1 adult, 2 kids), and $33,984 for a four-person household (no provision for the second adult working exists for the MIT ‘living wage’ threshold).

The ‘equality-poverty’ threshold proposed in this thesis indicates a needed annual income level of $34,465 for a one-person household (1 adult), $79,820 for a three-person household (1 adult, 2 kids), and either $54,856 or $80,939 for a four-person household (2 adults, 2 kids) depending on how many adults work outside the home.

Provided for comparative purposes are an additional set of calculations found in the March 2014 report compiled by the Michigan League for Public Policy which finds that the minimum income levels required in Michigan to meet basic needs are $18,012 (1 adult), $39,768 (1 adult, 2 kids), $47,146 (2 adults, 2 kids, 2 adults working), and $29,112 (2 adults, 2 kids, 1 adult working).

A simple comparison of the current poverty threshold levels to the incomes earned from either the current or proposed minimum wages, or needed to meet the MIT ‘living wage,’ the MLPP basic needs income level, or the proposed ‘equality-poverty’ thresholds demonstrates both the extreme variance that exists between the thresholds compared herein and the irrelevance of the current poverty threshold as demonstrated by its being significantly lower than that necessary to achieve a lifestyle expected by society, desired by the economy, and necessary to fulfill human physiological needs.

 

 

X. Conclusion

Under the light of examination, it seems clear that internationally recognized human “needs” in fact constitute the very same inalienable human “rights” ascribed to all human beings in the U.S. Declaration of Independence and to U.S. citizens in the Constitution of The United States of America.  This suggests that the problem of poverty is correlated to that of inequality, and as such, its very existence (poverty) is evidence that certain U.S. citizens are being denied the ability to enjoy these very rights.

The current poverty thresholds are deficient and misleading, contributing both to ineffective poverty alleviation policy as well as the mischaracterization of its (poverty) sufferers.  If poverty is ever to be eliminated or prevented, critical first steps in doing so are the development and use of a universal, comprehensive definition of poverty, and a more realistic, and up-to-date measure of what living conditions constitute poverty; this measure should also be responsive to changes in societal norms and expectations over time.

The ideas of human rights, human needs, historical context, and philosophies of government examined in this thesis combine to indicate there is a critical need in the U.S. for a new equality-growing definition and measurement of poverty.  Simply put, the definition of poverty should be one that conveys the meaning of all its facets in full.  The measure of poverty in the U.S. should be one developed to ensure all citizens have equal access to, and the capability of, participating fully in its consumptive need-satisfying economy.  Only through a better definition and measure of poverty can a more thorough understanding of the extent of its reach and effects in society be attained.  It will be in an environment of deeper comprehension that President Johnson’s challenge to eliminate poverty can be met and the inalienable rights of all U.S. citizens can be exercised and enjoyed.

The comparative analysis conducted in this thesis demonstrates the need for both a ‘better,’ more universally accepted definition of poverty, and a needs-satisfaction-based poverty measure.  It does so by identifying the gap between the income level deemed the ‘poverty line’ and the income levels needed to achieve a subsistence lifestyle based on current costs, and that needed to enjoy a lifestyle deemed both socially acceptable and civically expected.  A broader understanding by policy makers and the general population that some level of ‘poverty’ (lack of need satisfaction) is experienced by all people earning less than the ‘equality-poverty’ income levels would likely increase demand for, and enactment of, more effective poverty mitigation and elimination policies.

As Ruggles notes, “The construction of an official poverty measure carries with it an implied judgment about social welfare.”  She also identifies a difference in how economists and policymakers tend to view poverty.  Economists generally view poverty as a special subset of the problem of inequality (presumably there would be no poverty if there were no inequality), where policymakers start instead with the notion “that there is some minimum “decent” standard of living, and a just society must attempt to ensure that all its members have access to at least this level of economic well-being.”   If Ruggles is correct, then the perspective of economists rings truest when regard to human rights is given.  Any other conclusion requires the acceptance and continuation of inequality, the elimination of which should be the top priority of policy makers.

“But whatever the cause, our joint federal-local effort must pursue poverty, pursue it wherever it exists—in city slums and small towns, in sharecropper shacks or in migrant worker camps, on Indian Reservations, among whites as well as Negroes, among the young as well as the aged, in the boom towns and in the depressed areas.”

President Lyndon Johnson



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