The Poverty Line is Too Damn Low

Earlier this month, the Trump administration announced that it is seeking public comment on producing “additional measures of poverty.” While the request has received little to no attention in the media, it offers an important opportunity to tell the government to adopt a modern poverty measure that reflects what it really takes to make ends meet in today’s economy.

The federal government currently reports on poverty each year using two different measures: 1) the Official Poverty Measure (OPM), and 2) the Supplemental Poverty Measure (SPM). According to the OPM, which set the poverty line for a family of four at $25,465 in 2018, 11.8 percent of Americans are poor. According to the SPM, which set the poverty line at $28,166 for family of four in 2018, 12.8 percent of Americans are poor. A major limitation of both the OPM and the SPM is that they use outdated poverty thresholds that fall below both broad public consensus and expert views on the income needed to not be poor.

In the notice, the administration says that it is “evaluat[ing] possible additional alternative measures of poverty distinct from the OPM and SPM” and that these additional measures “will not be intended to replace the OPM or the SPM” or “intended for use to estimate eligibility for government programs.” Despite these disclaimers, there is no reason why an alternative measure that improves on the OPM and SPM could not eventually displace one or both of them, especially if it better reflects broad public understanding of what it takes to make ends meet in today’s economy.

The administration’s notice does not propose any specific alternative measures, but it does make clear that they are considering both income-based and consumption-based measures of poverty. The former determines whether a household is poor by comparing its income to a poverty line, while the latter compares the amount a household estimates it spent on goods and services to a poverty line.

The notice includes 14 questions that the administration says it is particularly interested in hearing from the public on. Four of these questions are about poverty thresholds, the dollar amount that a family’s resources are compared to in order to determine whether it is counted as poor or not. Because both the OPM and SPM use poverty thresholds that are far too low, it is especially important that any additional measures of poverty have more adequate poverty thresholds than these measures.

This could be done most simply by adopting a poverty measure that sets the poverty threshold equal to 60 percent of median equivalized disposable income, the same threshold the United Kingdom currently uses as its main poverty measure. This would produce a poverty threshold of roughly $44,000 for a family of four today, compared to the OPM’s threshold of $25,465 and the SPM’s of $28,166.

Other questions the notice specifically asks for input on include: 1) what types of income and spending to count in determining whether a household has income above or below the poverty threshold, including whether to count: a) the value of health insurance; b) out-of-pocket spending on health care, transportation, and child care; and c) the value of education; and 2) whether to address the problem of survey misreporting. Other questions that are relevant, although not specifically mentioned in the notice, include: 1) whether student loan and other mandatory debt should be subtracted from income (as recently recommended by an expert commission in the United Kingdom); 2) whether to take the extra costs of disability and social care into account when measuring poverty; and 3) how to ensure the homeless and others who are less likely to be captured in household survey data are included in poverty counts.

The deadline for submitting public comments is April 14, 2020. We’ll be posting more detailed commentary on the notice in March 2020.

This article first appeared on the CEPR blog.