May 31, 2010
In a critical commentary on the Obama Administration’s proposed supplemental income poverty measure (SIPM), a proposal based almost exclusively on recommendations made by the National Academy of Sciences in the 1990s, Robert Samuelson makes the puzzling claim that “the administration is defining poverty up.” As usual, Samuelson gets things precisely wrong, not surprising given that in a commentary that has the chutzpah to close with a call for “political neutrality,” Samuelson cites only two “poverty experts”, both of whom are conservatives at right-wing think tanks. In fact, the official poverty measure has defined deprivation down over the last few decades, moving it further and further away from mainstream living standards over time, as well as from majority public opinion of the minimum amount needed to “get along” at a basic level. As I detail in a recent paper, the biggest concern we should have with the SIPM is that it will lock in this defining down of the poverty standard, not that it will “define poverty up.”
The extent to which the current poverty measure has defined deprivation down can be seen by comparing the poverty line’s movement over time with public opinion on the minimum income families need to make ends meet. For several decades, Gallup has asked adults: “What is the smallest amount of money a family of four (husband, wife, and two children) needs each week to get along in this community?” When it was initially developed, the official poverty line was equal to about 72 percent of the average response to this “minimum get-along” question. By 2007, the poverty line had fallen to 41 percent of the average response to the get-along question (the 2007 poverty line was $21,500; the minimum get-along average was $52,087). If the poverty line had kept pace with public opinion on the minimum get-along amount over time (that is, remained equal to 72 percent of that amount), the poverty line would have been $37,500 in 2007 rather than $21,500.
Samuelson might respond that the American people don’t have a very good sense of what it takes to make ends meet. But other concrete evidence suggests otherwise. In a 2008 paper, James Lin and Jared Bernstein of the Economic Policy Institute (EPI), using a fairly standard methodology for computing “basic family budgets”, estimated that on average nationwide, working families with two parents and two children need an income of $48,778 to maintain a “safe but modest standard of living,” a number quite consistent with public opinion.
If the current poverty measure were an accurate measure of “the amount needed to meet basic needs,” as Samuelson asserts, one would expect most people experiencing food insecurity to live below the poverty line. But, in fact, the majority of food-insecure households, roughly two-thirds, live above the federal poverty line. In 2008, some 9.9 million households experiencing food insecurity had incomes above the federal poverty line, compared to 5.54 million with incomes below it. While the gap narrows somewhat when looking only at the most severe form of food insecurity—what the Department of Agriculture calls “very-low food security,” but is more typically described as hunger—a majority of households experiencing it also have incomes above the federal poverty line.
In essence, the current federal poverty measure started out as a measure of very low income and ended up as a measure of extremely low income. The reasons for this are far from politically neutral. The beginnings of the shift toward an ideologically conservative approach to measuring poverty date to the late 1960s. As Gordon Fisher notes, in 1968, the Johnson administration prohibited the Social Security Administration from “tak[ing] a very modest step toward raising the poverty thresholds to reflect increases in the general standard of living,” a decision that would have increased the poverty threshold by 8 percent in real terms. This decision appears to have been an ad hoc one, driven by the administration’s short-term political need to avoid reporting an increase in poverty five years after declaring “war” on it. However, when the Nixon administration adopted the poverty measure as an official statistic in 1969, it formalized the disconnection between poverty and living standards by tying the official measure to the Consumer Price Index, without making any allowance for real increases in living standards. The disconnection was further solidified when the administration failed to act on recommendations made by a federal interagency task force in 1973 to update the measure for changes in living standards.
When the decision to only update the poverty line for inflation was made in 1969 it may not have seemed as consequential as it does in retrospect. At that time, the poverty line wasn’t the only federal measure of basic income security. For much of the 20th century, the federal government had also used and published “family budget standards”—similar to ones produced today by various non-governmental organizations and researchers—that better reflected the minimum income needed to “make ends meet” at a basic level. Most notably, the Bureau of Labor Statistics at the Department of Labor operated a Family Budgets Program for some three decades after World War II. The program had its origin in a request Congress made to the Bureau of Labor Statistics to determine “what it costs a worker’s family to live in the large cities of the United States.” The Family Budgets program continued to operate through the 1970s. In 1980, an Expert Committee, one similar to a National Academy of Sciences panel, made recommendations for updating the methodology. But instead of adopting those recommendations, the program was eliminated in 1981 during the first year of the Reagan Administration. In essence, between 1969 and 1981, a narrowly conservative conceptualization and measure of poverty as extremely low income had securely taken root and effectively displaced a more mainstream and multifaceted understanding of poverty and basic income security.
It isn’t clear yet whether the SIPM will address this problem. Based on the estimates Census has released to date, the SIPM threshold for a family of four might come in two or three thousand dollars above the current poverty threshold. While a poverty threshold in this range would be modestly higher than the poverty threshold, it is still an “extremely-low” income standard rather than the kind of “very-low” income standard that the federal poverty line originally represented, and far from public opinion and concrete budget numbers on what it takes to afford necessities. (It is also important to note that the SIPM thresholds are not directly comparable with the current poverty thresholds because of differences in how the SIPM defines income and treats certain out-of-pocket expenditures. However, taking these differences into account does not change the ultimate conclusion that the SIPM is an extremely low-income measure, in part because many of the changes are offsetting, especially for families with children.)
So, what to do? In his opening paragraph, Samuelson notes that the question “who is poor in America” is “not an easy one to answer” because there’s no “conclusive definition of poverty,” and that despite “poverty’s messiness, we’ve tended to measure progress by it against a single statistic….” This is one of the few things Samuelson gets right before he goes off on tangents about immigration and cell phones, but he completely fails to draw the obvious implication from it, that is, if poverty is a multifaceted concept, why not use more than one measure to best capture it?
This is exactly what the United Kingdom did earlier this year when they adopted a new official statistical framework for measuring poverty that is composed of four measures. The first two measures are low-income measures set at 60 percent of median disposable income (net of taxes), but adjusted differently over time. The first one is adjusted each year only for inflation (the UK calls this one an absolute poverty measure), the second is adjusted annually for changes in median income (what the UK calls a relative poverty measure). The third measure combines income, using a slightly higher income standard (70 percent of median disposable income), and material deprivation (measured using an eleven-item index of deprivation, with the deprivation indicators all being items that substantial majorities of the UK public view as necessities). Under this “low-income-plus-deprivation” measure, a person is counted as poor if they have both a low income and experienced a severe level of material deprivation as measured by direct indicators. The final measure is of “persistent poverty” and tracks the number of people counted as income poverty (using the “relative” income measure) in 36 out of the prior 48 months.
It would be easy to adopt this kind of tiered poverty measure in the United States, and most of the improvements included in the administration’s proposed measure (such as counting various benefits like the EITC and food stamps that aren’t currently counted, and subtracting certain expenses that aren’t currently subtracted) could be incorporated into the first two tiers of the measure (the ones that measure “relative” and “absolute” income poverty). Instead of setting the initial income poverty thresholds to the somewhat complicated formula proposed by the administration (the 33rd percentile of expenditures on food, housing, and clothing multiplied by 1.2, with various adjustments for housing status and locational differences in housing costs), we should follow the UK’s lead and set the thresholds to a percentage of median income, ideally one that is consistent with mainstream public opinion data and other evidence on what it takes to afford necessities. Using income rather than a particular set of consumption expenditures to set the threshold has a number of advantages, including greater transparency and likely public understanding, and more stability over time (median income is less likely to bubble and pop than housing prices).
In developing a deprivation index like that used in the third tier of the UK measure, we shouldn’t assume that only certain traditional goods (i.e., food, shelter, clothing, utilities), are necessities of contemporary modern living. Instead, the list of necessities to include in a deprivation index should be developed based on both community and expert input on current social necessities, as well as survey research that asks the working-age American public to identify, from a list of goods and services, those items that are necessities and that no one in the United States should be without today.
This approach would provide a more accurate, balanced, and transparent picture of economic deprivation due to limited resources than the current poverty measure. It would also blunt many of the conservative criticisms of the administration’s proposal—because it would include separate “absolute” and “relative” measures, it would be “political neutral” in a way that the current measure is not. Finally, the incorporation of direct indicators of deprivation would provide a more concrete sense of the lived experience of poverty, something that is lacking from income-only indicators.
