As with any problem in public policy, we need to be precise in how we define poverty. Using cutoffs like the poverty line is crucial to understanding how our society is faring and how well-being conditions are trending. If the goal of defining poverty is to identify when people don’t have access to enough resources, then we need to figure out both how people access resources and what counts as “enough.” In other words, we need to know what we are counting and where the cutoff is for being considered “in poverty.”
To better understand how we define poverty in the U.S., let’s take a look at the official poverty measure. The official poverty measure is one of two poverty measures reported by the Census bureau annually. Its key characteristics are (a) that it measures only wage income, and (b) that its thresholds vary based on family size.
Using wage income as the measure of resources has many advantages, most importantly that it is easy to collect for the population each year. This makes it easy to keep an accurate time series and to see how trends change from year to year.There is a balancing act in policy analysis between accuracy and accessibility of data, and sometimes it is worth trading off some useful information to have more measurements in time.
A drawback of using wage income as the only measure of resources is that it fails to account for other factors such as access to public benefit programs. For example, some states may deny individuals convicted of felonies access to programs like the Supplemental Nutrition Assistance Program (SNAP, formerly known as “food stamps”) or Temporary Assistance for Needy Families (TANF), two common subsidies for low income individuals. Those people will have to spend more of their income on necessities and will be worse off than someone with the same income who has access to those programs.
The other annual poverty measure reported by the Census bureau, the supplemental poverty measure, includes these benefits in its measurement of family resources. Additionally, the supplemental poverty measure only counts income after taxes and subtracts certain expenses such as medical or work expenses. We assume these other costs are unavoidable, and count them as a subtraction from a person’s total income.
These adjustments are significant in that they are still easy to measure annually and they paint a much more accurate picture of what resources an individual has to spend on their needs. Going a step further, it is possible to imagine how having even more granular information about an individual’s resources might tell us more about whether or not they are experiencing poverty.
One example could be if we had survey data about how often an individual has to pay for their own food. Perhaps a nearby friend or relative can offer some assistance. Someone who has this network of support would have more discretion with how they allocate their resources than someone who does not.
Of course, this exact information would be difficult to find for every person. It might be useful to collect just one time or once every few years to fill in the gaps in our understanding of poverty, but it just isn’t realistic to get this data every year. Balancing accuracy and accessibility is difficult, but as we see between the official and supplemental poverty measures there is often easily accessible information that improves our understanding.
The second defining characteristic of the official poverty measure is that the cutoff for determining who is in poverty depends only on the number of people in the household. If a household’s income is below the threshold for the number of people living there, then everyone in that household is considered to be in poverty.
This is an example of an absolute poverty threshold, which is constructed based on some conception of “basic needs.” In other words, this poverty measure defines a strict cutoff where everyone below is considered in poverty and everyone above is not. Absolute poverty thresholds are based on the idea that there is some universal amount of resources that people need to live. The idea is that if someone falls below the threshold, then they must be sacrificing something critical just to get by.
One benefit of an absolute threshold is that it makes comparisons between places easier. If one state has lower poverty than another, then we might look to the first state as an example for ways to alleviate poverty. It also makes it easier to compare trends across places. If poverty rises in some regions then we know something needs to change.
The major downside of absolute thresholds is that they often fail to acknowledge differences between regions. For example, the cost of living in a big metropolitan area like New York or Los Angeles is much higher than in a small Midwestern town.
These alternatives are called relative poverty measurements, and although they are more difficult to compare and understand, they add a lot of useful information to the poverty discourse. While absolute poverty measures are about a universal definition about what is “enough,” absolute poverty measures are about how individuals compare to those around them.
The supplemental poverty measure makes this adjustment by including adjustments for geographic differences in housing costs. By using a simple adjustment, the supplemental poverty measure still makes comparisons between geographic groups fairly simple.
Exactly how to trade off simplicity for local accuracy is a decision that relies a lot on the story you are trying to tell. If an analyst is trying to tell the story of poverty in a single city over time, tailoring the poverty measure to that place very specifically makes a lot of sense. If instead the goal is to compare poverty across states or nations, then a simpler and more general measure might perform better.
—
A lot goes into defining a good measure of poverty. At Scioto, we have our own Ohio Poverty Measure that is a more accurate representation of poverty in Ohio than either of the Census measures. It would be beneficial for more state and local governments to seek out more locally accurate pictures of poverty in order to help guide their policy decisions.
As useful as it is to compare poverty across states, the barriers that prevent extremely detailed national poverty analysis are much easier to overcome for smaller areas. Taking the time and doing this additional research could bring new information to light and hopefully would give policymakers the information they need to improve the lives of those who need help the most.