Masking the True Poverty Rate

According to the Census Bureau, the poverty rate for the United States was 10.5 percent in 2019, “the lowest since estimates were first released for 1959.”  What the Census Bureau didn’t say is that the poverty measure it uses is still based on 1959 assumptions that have little to do with the realities of families today. If we had poverty measures that replaced these outdated assumptions with modern ones, the real poverty rate would be much higher, especially for children.

Several of these outdated assumptions relate to care, gender, and children’s developmental and participation needs. One of the bedrock assumptions of the Official Poverty Measure (OPM) is that every family includes a “housewife.” That is, a married woman whose full-time job  is “running or managing her family’s home — caring for her children; buying, cooking, and storing food for the family; buying goods that the family needs for everyday life; housekeeping, cleaning and maintaining the home; and making, buying and mending clothes for the family—and who is not employed outside the home ….”

The vast majority of women were married and not working in the labor force in the late 1950s, so this assumption may have made sense back then, although even that is debatable. Regardless, it holds little water today when most women are in the labor force and only about half live with a spouse.

Moreover, the “housewife” assumed by the OPM is not just any “housewife,” but a qualitatively specific kind of housewife. According to Mollie Orshanky, the economist at the Social Security Administration who developed the poverty measure, it assumed: “a careful shopper, a skillful cook, and a good manager who will prepare all the family’s meals at home.”

Because the OPM assumes children are being cared for by housewives, no allowance is included in the poverty line for the child care a parent may need to work outside the home. As a result, a parent working outside the home is treated as having the exact same set of needs as a parent working inside the home. Another fundamentally important form of care, health care, is also not included in any meaningful way in the OPM.

Finally, the OPM treats children as equivalent to little adults without any distinct developmental needs. Interestingly, the family budgets produced by the Bureau of Labor Statistics in the 1960s did “assume that maintenance of health and social well-being, the nurture of children, and participation in community activi­ties are both desirable and necessary social goals for all families of the type for which the budgets were constructed.” Yet, these same assumptions were not applied to the OPM when it was developed.

What about the federal government’s other poverty measure? The Supplemental Poverty Measure (SPM), was adopted during the Obama administration and based in large part on recommendations made in 1995 by an academic panel of the National Academy of Sciences.

Although it is a newer measure than the OPM, the SPM leaves these outdated assumptions mostly in place. According to the SPM, two adults raising two children in 2019 needed only $28,881 to not be poor (assuming they rented and lived somewhere with average housing costs), an amount just under $3,000 more than the OPM’s that same year.

As Barbara Bergmann and four other experts put it in 2011: “the most dramatic development of the last half-century has been the flow of women into the formal labor force, with the resulting partial marketization of child care (in the case of the United States). It’s vexing, then, that the first major reform of poverty measurement [the SPM] in the last half century doesn’t satisfactorily represent the implications of that development.” To this I would add that it is similarly vexing that the SPM does not take children’s developmental and social participation needs into account in any meaningful way, despite several decades of research documenting the importance of these needs.

In a new report, published by the Bernard L. Schwartz Rediscovering Government Institute at The Century Foundation, and jointly released with the Center for Economic and Policy Research, I make several recommendations that would increase the relevance and accuracy of poverty measurement in the United States, particularly when it comes to the treatment of child care, health care, and children’s development and participation needs.

It’s also important to note that the American public is already ahead of the experts. As I detail in the report, public opinion surveys show that the public thinks that the federal government sets the poverty line at a significantly higher dollar amount than SPM. Similarly, when the public is asked to name the minimum income needed to get by where they live, the responses average more than twice the SPM.

Will resetting the poverty line in a reasonable fashion mean that more Americans will be counted as having resources below it? Yes, but that’s only because a reasonable reset will provide a more accurate picture of who is economically deprived by today’s standards, rather than yesterday’s. At the same time, such a reset will help capture the extent to which care- and child-related benefits, like Medicaid and child care assistance, reduce the real poverty rate, and have the added benefit of better reflecting the public’s understanding of what it takes to not be poor today.

This first appeared on Spotlight on Poverty and Opportunity.