How do we measure poverty?

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The most widely used measure of poverty in the United States is crude and inadequate. The official poverty threshold is equal to three times the cost of a minimum food diet in 1963, adjusted for family size. No, the “1963” in the previous sentence is not a typo.

This is irrational in so many ways: What’s the magic in “three times the cost of food”? Food cost was easily measured and was considered a good proxy for the overall cost of living. Yet relative prices have hardly stayed the same—health care costs, in particular, have risen much more rapidly than the cost of food. The cost of housing and food have certainly not moved in lock step.

The poverty threshold also excludes non-cash income support such as the Supplemental Nutrition Assistance Program (food stamps) and employs a very simplistic model of family size.

More startling, note that there is no adjustment for location. The poverty threshold is the same in chilly Fargo, N.D., as it is in temperate San Diego, despite the dramatic difference in the cost of getting through the winter. Heating degree days in Fargo are nine times that of San Diego. Massena, N.Y.—just across the border from Canada—has two-thirds more heating degree days than New York’s Central Park.

That’s just heat. What about the cost of housing itself? The Census reports median gross rent in Queens to have been $1,500 in 2017, two-thirds more than Monroe County’s $900. That’s $7,200 per year, worth 600 hours at New York City’s $12-an-hour minimum wage.

The Census Bureau and the nation’s policy analysts are well aware of these problems. In 2010, the Census Bureau began calculating the “Supplemental Poverty Measure,” an index that takes account of regional variation in housing costs, employs a much more sophisticated measure of the cost of living, and incorporates non-cash income assistance.

This alternative measure still falls short in the eyes of many.  The Self Sufficiency Standard considers a much broader set of cost factors. See a recent application for New York City.

The official poverty statistic, despite its warts, continues to be the standard by which we allocate funding for countless programs and compare well-being from one community to another. Learn more about poverty measurement from the University of Wisconsin-Madison.

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