Statistically speaking, the US government understands poverty about as well as Marie Antoinette did. For the last 60 years, the United States’ poverty threshold has determined low-income Americans’ eligibility for Medicaid, food stamps, and a litany of other social programs. Families above the poverty line – currently $24,300 for a family of four – should, in theory, have enough income for their basic essentials. But the costs and definition of basic essentials have changed across time and region, without a corresponding change in the poverty line. Unmoved since the Kennedy Administration, the United States’ current poverty line should be replaced by a relative poverty measure as the eligibility determinant for all present and future social programs.
Federal measurement of poverty started in 1963, when a statistician at the Social Security Administration named Mollie Orshansky developed a statistic coined the Orshansky Poverty Threshold.The number stems from a food budget developed by the Department of Agriculture designed to minimize costs while meeting nutrition standards – assuming the mother was a “careful shopper [and] skillful cook.” Since the average household in the 1960s was estimated to spend about a third of its income on food, Orshansky simply multiplied the cost of this budget by three. While Orshansky’s measure helped jumpstart President Johnson’s War on Poverty, it has not held up well over the ensuing five decades as a reliable standard for doling out means-tested social programs. For example, in 2016 the average household spent just 9.8 percent of its income on food, meaning that the major aspect of the calculation no longer holds. That could be solved by merely changing the multiplier from three to ten, but such a tweak would still be insufficient.
Simply multiplying the cost of a thrifty food budget does not encapsulate the increasingly complex realities of poverty. Health insurance, transportation costs, and access to essential goods and services can drastically affect quality of life and how one family can stretch $24,300. Furthermore, the poverty line is the exact same throughout the continental US, meaning the current poverty threshold fails to account for differences in living costs across states. That’s a big problem when New York City’s average rent for a one-bedroom apartment is triple the national average.
The federal government has taken notice of these structural problems and taken steps to try to measure them. The impact of both standard of needs and geographic variation on the poverty rate is accounted for by the Census Bureau’s supplemental poverty measure – a measure that does not affect eligibility for programs like food stamps, but can contribute to a better understanding of poverty in modern America. In 2015, the official poverty rate was 13.5 percent while the rate based on the supplemental measure was 14.3 percent. This means more than 2.5 million Americans may be deprived of government benefits they need, like reduced lunch and Pell Grants, because of an overly simple statistic.
But even the supplemental poverty measure is limited because it is relative. In other words, it’s based on a household’s ability to pay for basic essentials rather than what they lack compared to an average middle class household. When being poor is defined as a lack of access to certain goods, instead of falling too low on an income spectrum, the federal government becomes incapable of capturing relative deprivation, income inequality, and barriers to upward mobility. In turn, the outdated poverty statistics focus the government’s anti-poverty goals on basic subsistence rather than the possibility of upward mobility.
America would not be the first nation to adopt a relative poverty measure. The most widely used example of a relative poverty line comes from the European Union. According to its official definition, a person is at risk of poverty if their household income – before taxes and government transfers – falls below 60 percent of the nation’s median income. Calculating this definition is less complicated than the supplemental poverty measure and would allow the average American’s spending habits to do much of the statistical work. Indeed, since the current American poverty line is only about 22 percent of the median income, a 60 percent threshold would guarantee that everyone above it could afford basic necessities and a decent standard of living. This, coupled with cost of living and insurance adjustments based on regional data, would be an improved method of capturing the complexity of modern American poverty.
However, the biggest advantage of a relative poverty measure is its ability to assess income inequality. Income inequality, increasingly relevant for anti-poverty policy in the United States, can serve as an important indicator of the issues facing impoverished Americans beyond a lack of basic essentials. Several of the United States’ policy problems are stratified along income lines, and complex underlying issues like affordable housing disparities and the achievement gap cannot be fixed solely through cash transfers to bring struggling families above an absolute threshold. In order to combat inequality, and take advantage of growing public consciousness surrounding the issue, a relative poverty rate is the best available option, since a relative measure of poverty could only be reduced by increases in actual, disposable income. Therefore, the measure would force policy makers to look closer at underlying causes of inequality, illuminating paths for deeper structural change.
Income inequality also manifests as relative deprivation, a problem that has never been widely considered in US policy making. Relative deprivation is the lack of certain goods that are necessary for full engagement in society, but aren’t necessary for survival. Internet is a perfect example. Lacking Internet access isn’t necessarily a matter of life or death, but since it is necessary in order to find employment, education, and access to services, it becomes a necessity. In certain areas of concentrated poverty, especially rural areas, dial-up is less of an annoying relic and more of a contemporary barrier. In turn, measuring poverty as a percentage of median income would give relative deprivation a quantifiable spotlight; being beneath the threshold would be understood as at risk for not only poverty, but also for social and economic exclusion.
The most expedient way to execute these changes could happen in two large steps. The first would be the official adoption of the relative poverty measure by government agencies, including the Department of Health and Human Services, which operates Medicare and Medicaid, the White House Office of Management and Budget, and the Census Bureau, through executive order. While this would allow Americans to become comfortable with the new relative measure and fix a demonstrably flawed poverty line, it alone cannot adjust eligibility requirements and help millions of Americans get the assistance they need. To fully realize that goal, Congress could act to amend parts of the Social Security Act to change the eligibility requirements. This policy shift would be politically challenging, especially given that a portion of funding for some social programs, like Medicaid, come from state treasuries. If the controversy over Medicaid expansion under the Affordable Care Act serves as an indication, any attempt to substantially increase program eligibility would be hotly contested. A more gradual approach would increase political consciousness of relative poverty before springing it on state budgets, even if the federal government initially foots the majority of the bill. Federal policymakers could adopt the relative poverty measure in the same capacity as the supplemental poverty measure – experimental, but poised as a potential tool for future legislation.
If the supplemental poverty rate is any indication, the EU-modeled relative poverty measure will increase the number of people considered impoverished, a politically contentious step. However, dropping outdated metrics and statistics that consequently deny assistance to millions of low income Americans is an important adjustment toward a more equitable and accurate social welfare system.