By Rachel Hammond
In 2018, 12.9% of Ohioans lived below the poverty line according to the Official Poverty Measure. Under the Supplemental Poverty Measure, 10.4% of Ohioans lived in poverty. Why are these numbers different and what do they tell us about people’s abilities to meet their needs?
The Official Poverty Measure was first constructed in the sixties and has been reported annually since 1969. The poverty line was defined as three times the cost of an economy food plan because at that time, most families spent approximately a third of their income on food. This threshold has been adjusted for inflation each year since. Over the past fifty years, spending patterns have changed. Food purchases now account for only one eighth of a household’s spending and the cost of living varies dramatically across the country.
Over time, people have recognized the changes in spending patterns and shortcomings of the Official Poverty Measure. In 1995, Constance Citro and Robert Michaels of the National Academy of Sciences published Measuring Poverty: A New Approach. In the report, they recommended a new official poverty measure for the country that adjusts for geographic differences in cost of living and includes a more complete assessment of a household’s resources. The Census Bureau used these recommendations to create the Supplemental Poverty Measure, and sixteen years later in 2011, they began publishing Supplemental Poverty Measure data alongside Official Poverty Measure data.
The first change in the Supplemental Poverty Measure is the definition of the poverty threshold. The Supplemental Poverty Measure sets the poverty threshold as the average of food, clothing, shelter, and utility expenditures at the 33rd-36th percentiles, multiplied by 1.2 for “a little extra.” This extra 20% added on to the threshold accounts for other necessary expenditures such as household supplies and transportation not related to work. Both measures adjust the threshold for family size. Additionally, the Supplemental Poverty Measure adjusts the threshold geographically by state and metro/non-metro areas within states. It also includes an adjustment for three housing statuses (own with mortgage, own without mortgage, or rent) since people who own their house have less of a resource burden than those who rent or have a mortgage.
The next major change is how household resources are defined. When assessing a household’s resources, the Official Poverty Measure only counts cash income. The Supplemental Poverty Measure, on the other hand, attempts to capture a more complete picture of resources by including the value of safety net features such as SNAP (formerly known as Food Stamps) benefits, housing subsidies, WIC (a supplemental nutritional program for mothers and their children), TANF (cash welfare), tax credits, and LIHEAP (heating and cooling subsidies). The SPM also subtracts from resources medical out-of-pocket expenses, childcare expenses, commuting costs, and taxes paid.
The Census Bureau constructs the Official Poverty Measure and Supplemental Poverty Measure using data from the Current Population Survey. The Current Population Survey contains information on enough households that the Census Bureau can report an accurate measure of poverty at the state level but not at the county level. Since the National Academy of Sciences report was published, New York City, Wisconsin, California, Virginia, and Oregon have published their own supplemental poverty measures using data from the American Community Survey, which has a larger sample size, to provide a much more detailed description of poverty in their states. It is worth noting that New York City released their first report in 2008, three years before the Census Bureau released the Supplemental Poverty Measure.
Using American Community Survey data, however, comes at a cost. While it contains data on more households, each household is asked fewer questions than those included in the Current Population Survey. For example, the Current Population Survey includes information on the number of people in a household who received SNAP benefits in the past year, the number of months they received benefits, and the monetary value of the benefits. The American Community Survey, on the other hand, only indicates if someone in the household received SNAP benefits. Given this, researchers must impute the value of the resources and expenses included in the Supplemental Poverty Measure using regression models.
Scioto Analysis is currently working on developing a state specific supplemental poverty measure for Ohio with the goal of providing a more complete picture of what poverty looks like across the state. The Ohio Poverty Measure will help policymakers understand if and how the safety net is reducing poverty in the state and geographic differences in poverty across the state. More accurate measurement of poverty is the first step towards understanding how to effectively alleviate it.