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Behind the Numbers: Poverty

On September 16, 2015, the Census Bureau will release new national data on poverty, income, and health insurance in the U.S. in 2014. As we get ready to crunch numbers, we thought it would be helpful to take a deeper look at what these numbers tell us—and don’t tell us—about poverty. We’ll get a somewhat fuller picture because for the first time, on the same date, the Census Bureau will be releasing data on poverty using two different measures: the “official” poverty measure and the “supplemental” poverty measure.” Here are a few FAQs on poverty and the Census Bureau data.

What does the official poverty rate measure?

The official poverty rate measures the percentage of the U.S. population with income below the federal poverty threshold, often referred to as the “poverty line,” for their family size (e.g., $24,008 in 2014 for a family of four with two kids). Income is calculated before taxes and includes only cash income such as earnings, pension/retirement income, Social Security, unemployment benefits, and child support payments.

What doesn’t the official poverty rate measure?

A number of federal and state benefits that help support lower-income families are not counted as income in the official poverty measure. “Non-cash benefits” like food stamps (SNAP) and housing assistance, and refundable tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit, do not count as income for purposes of calculating the official poverty rate.

In determining if an individual or family is poor, the official poverty measure also does not take account of expenditures, such as those on medical needs or child care, which can be very large for some families and leave them little income to meet other basic needs.

How are the official poverty thresholds set?

The official poverty thresholds, which were established in the 1960s, are adjusted for inflation annually—but they have not been adjusted over the past 50 years to reflect changes in consumption patterns, demographics, and overall living standards. Moreover, the same poverty thresholds apply to every family of a given size across the country; they do not vary based on the cost of living in different areas.

How does the “supplemental” poverty measure differ from the official measure?

To provide a fuller picture of economic wellbeing, the Census Bureau has developed a “supplemental” poverty measure. The supplemental measure accounts for additional resources like refundable tax credits (like the EITC) and noncash benefits (such as SNAP and housing assistance). On the expense side, it takes account of work-related expenses (like transportation and child care), taxes, and out-of-pocket medical expenses. It also uses updated data to establish poverty thresholds and considers geographic differences in cost of living. You can learn more on their website.

How are the differences in the poverty measures likely to affect reported poverty rates?

The child poverty rate may be lower under the supplemental poverty measure than under the official measure, because the supplemental measure reflects the impact of many safety net benefits targeted to families with children that are not counted as income in the official measure. The poverty rate for seniors may be higher under the supplemental measure than under the official measure, because the major source of income for seniors, Social Security, is pre-tax cash income that is already counted in the official measure, while out-of-pocket medical costs that are especially high for seniors are accounted for in the supplemental measure.

Is anything else different about the data this year?

A special note on the upcoming poverty data release for 2014: after many years of research the Census Bureau has redesigned some of the income questions and survey procedures in the Current Population Survey to increase response rates and reduce reporting errors, and these changes resulted in some differences from previously released data for 2013. For additional technical information please see their website.

Who is most likely to live in poverty?

Poverty is worse for women, children, and many minority groups. In 2013, the official poverty measure showed that nearly six in ten poor adults (18 and older) and two-thirds of poor older adults (65 and older) were women. The poverty rate was about 1.6 times higher for children than for adults and six in ten poor families with children were headed by a woman in 2013. Poverty rates were also higher for many minority groups than they were for whites; about one-quarter of African Americans, Native Americans, and Hispanics were poor in 2013—about 2.5 times the rate for non-Hispanic whites.

By either measure, Census data show that over 46 million people in the U.S. are living in poverty. What can be done to reduce poverty?

The high rates of poverty we have seen in the U.S. in recent years are due in large part to the very severe recession that lasted from December 2007 to June 2009. Unemployment is a key driver of the poverty rate—and some groups, such as African American women and men, continue to experience unemployment at much higher rates than the overall rate, and long-term unemployment remains at crisis levels. However, we do expect to see some declines in poverty—overall and/or for some groups—due to improvements in employment in 2014.

It is important to note that poverty would be considerably more widespread and severe without the federal and state policies and programs designed to support family incomes. For example, Social Security alone prevented more than 22.1 million people from falling into poverty in 2013 (including almost 1.2 million children). As noted above, the official poverty measure does not count the value of non-cash benefits as income—but if it did, the poverty rate would be lower. For example, counting income families receive from the EITC would have lifted more than 5.3 million people above the official poverty line in 2013, including more than 2.7 million children. The supplemental poverty measure will more accurately capture the impact of the safety net.

There is more that the federal government can do. To lift more people above the poverty line, Congress can maintain and strengthen effective programs like Social Security, SNAP, and tax credits for low-income families. It can end the austere budget policies that have slowed job growth and cut programs and services that help low-income families make ends meet [PDF]. Congress can also promote economic growth by investing in infrastructure and providing aid to states and localities to invest in education—starting with the first years of life—and other key services. And it can help women support themselves and their families by promoting equal pay for women; raising the minimum wage; and ensuring access to health care (including reproductive health care), supports for pregnant and parenting workers, paid leave and predictable schedules, high-quality affordable child care, job training, and other supports for women workers.