The way we measure poverty is not the best way to do it.
The current poverty measure–known as the “Official Poverty Measure”--was originally developed by economist Mollie Orshansky during the War on Poverty in the 1960s. At the time, the average family spent about a third of their income on food. Orshansky then surmised that a family that had three times the income necessary to pay for a “thrifty food plan” would have the resources necessary to survive. Thus, the official poverty measure was born.
Since then, the economy has changed. Due to advances in agricultural technology, the average family now spends about one-eighth of their income on food. Meanwhile, essentials like health care and housing have gone up in price over time.
Due to these changes in the economy, economists have proposed an update to the official poverty measure. This was first put forth in a 1995 National Academies study to modernize the U.S. poverty measure. The proposal put forth a number of recommendations to modernize poverty measurement in the U.S., but sat on a shelf for over a decade before being implemented.
In the late 00s, New York City calculated the New York Poverty Measure, a new measure of poverty based on the recommendations from the National Academies. Soon after, the Census Bureau calculated the first Supplemental Poverty Measure, a new measure for the United States that incorporates the recommendations of the National Academies study into a new national poverty measure.
The findings of the Supplemental Poverty Measure were a little surprising. Overall, the measure found a nationwide poverty rate very close to the official poverty measure. The real departure, though, comes when the data is disaggregated.
For instance, child poverty is lower and elder poverty is higher in the Supplemental Poverty Measure than in the Official Poverty Measure. This is because the Supplemental Poverty Measure counts a lot of benefits programs that help families with children as income that the Official Poverty does not. It also subtracts the cost of medical out of pocket expenses from family income, which makes elderly people look poorer than the Official Poverty Measure.
The Supplemental Poverty Measure also has big impacts on regional poverty. Because it includes a cost of living adjustment based on housing costs. This leads to poverty being much higher on the West Coast and much lower in the Midwest in the Supplemental Poverty Measure compared to the Official Poverty Measure.
The Supplemental Poverty Measure made what was possibly its biggest policy splash yet last year when the Census Bureau released its annual poverty numbers and found that the Child Tax Credit lifted two million children out of poverty in 2021.
All this matters because recently, a researcher at the conservative American Enterprise Institute published a working paper recently decrying use of the Supplemental Poverty Measure in federal policymaking. His argument is that changing from the 1960s Official Poverty Measure to the more modern Supplemental Poverty Measure would automatically increase federal spending on SNAP (formerly known as “food stamps”) and Medicaid.
What we know about the Official Poverty Measure is this: it is outdated and no longer reflects how policymakers or the public think about poverty. The Supplemental Poverty Measure comes much closer to what poverty looks like in 2023. If this is a better path forward to addressing poverty in 2023, there is no reason the U.S. should hesitate from taking it.