Poverty metrics are used as a measurement of economic well-being, as a benchmark for determining eligibility and benefit levels for some government programs, and as a basis for distributing resource across states.
The first federal poverty measure was created in the early 1960s. The Census Bureau still uses the 1960s calculation, adjusted for price inflation, as the basis for federal poverty thresholds (i.e., income figures that determine how many people are classified as poor for statistical purposes). A second and related measure, the Department of Health and Human Services Poverty Guideline, is used for administrative purposes.
The official poverty measure has significant limitations. The method for determining it is outdated, based on spending patterns from the 1960s. It fails to account for tax credits and in-kind benefits provided through current government programs (such as housing subsidies and food assistance). It also fails to account for changes in medical care, housing, and child-care expenses, which have become a larger share of family budgets and have risen at a rate outpacing inflation. Furthermore, the current poverty measure for those age 65 and older is lower than the threshold for the rest of the population. This inaccurately assumes that spending on basic needs decreases with age.
As a result, the Census Bureau now produces the Supplemental Poverty Measure. The poverty rate for Americans age 65 and older is 50 percent higher using the supplemental rather than the official poverty measure (14.1 vs. 9.2 percent in 2017), largely because the supplemental measure accounts for the large burden of out-of-pocket medical spending on low-income older adults.
Currently the full benefits of the supplemental measure have not been realized. No government programs use the measure to determine eligibility for any program. And the Census Bureau provides to the public only a few tables based on the measure.
MEASURING POVERTY: Policy
Updating the poverty threshold and its effects on assistance programs
Congress should mandate the use of the Supplemental Poverty Measure (SPM) developed by the Census Bureau in lieu of the existing federal poverty measure. In addition, Congress should adopt the new poverty measure in defining eligibility for assistance programs.
The Census Bureau should produce detailed publicly available data based on the SPM.