Skip to main content

Since the government will release figures on both poverty rates and median incomes on Thursday, now seems like a good time to summarize how the government goes about calculating poverty.

Calculations are made by the US Census Bureau from surveys of US households undertaken each March. The sampling methods, while not perfect, are probably the best that can be done given time and financial constraints. The Census Bureau tries to ensure that its sample is representative of the country and that it adequately represents all age, racial, regional, etc. groups in the nation.
 
The surveys ask about the household composition (how many people, who heads the household), socio-demographic information (race, age, etc.), and most important of all, how much income was made during the previous year. From this information, the Census Bureau computes two key figures that receive most of the media attention—the median income in the nation and the poverty rate in the nation. The median income figure is supposed to show indicate how middle-class households are doing. Has their income gone up or down in the past year? Has it increased in real terms (i.e., can it buy more things)? The poverty line is supposed to measure the percentage of households whose income is not sufficient to purchase the basic food, clothing and shelter needed to survive during the year. It represents the extent to which both the market economy and government programs have failed to provide adequate income to its citizens.  

The US is one of the few countries in the world with a numerical set of poverty lines and an official definition of poverty. These were developed in the early 1960s by Mollie Orshansky of the Social Security Administration. She was given this task in response to a request by President Johnson, who was about to declare a war on poverty and who wanted to be able to show his progress on this battlefield.

Orshansky proceeded as follows. Using data compiled by the US Department of Agriculture on the minimum amount of food required to survive, she calculated the cost of the subsistence food budget for families of different sizes. Then she looked at government surveys (undertaken in the 1950s) of household expenditures. On average, these surveys found that families spent around one-third of their income on food. So Orshanksy multiplied the cost of a minimum food budget for each family type by three in order to arrive at a poverty line. The national poverty rate is the percentage of households that fall below their poverty line. Every year the poverty line for each family type gets increased based upon the annual rise in consumer prices. Poverty lines in the US thus represent a fixed and constant real standard of living. The poverty rate measures the fraction of households who cannot obtain this standard of living with their income, or who cannot purchase basic necessities with their annual income.

The figures for 2007, reported by the government last year showed that the US poverty rate was 12.5% (with 37.3 million poor Americans). This was up from 11.3% in 2000—the year before "W." took office (whether he was actually elected or not is still a matter of debate). The poverty rate for children in 2007 was 18%, up sharply from 16.2% in 2000.

According to Rebecca Blank, Undersecretary of Economic Affairs in the Commerce Department (which houses the Census Bureau), the numbers to be released on Thursday will show further sharp increases in poverty. She has hinted that the national poverty rate will be at around 12.7% and that an additional 1.5 million Americans were poor in 2008 compared to 2007. Such increases are only to be expected given that the economy tanked at the end of last year, and that the rate of unemployment increased sharply. With fewer jobs and with less income, we can only expect a decline in the median household income as well as an increase in the US poverty rate. The only question is how big the decline will be for 2008. Of course, when the 2009 figures are release next year, we can expect to find that things are even worse.  

Tomorrow I will summarize some of the many criticisms of how the US government computes the poverty rate. Of particular interest to me is the large amount of consumer debt that households have, and how paying interest on this debt means that they are unable to buy basic necessities—even though their income is above the poverty line. On Thursday I will discuss the release of the poverty rate figures in considerable detail.  

Originally posted to steven pressman on Tue Sep 08, 2009 at 09:01 AM PDT.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Tip Jar (5+ / 0-)

    "The mind that cannot philosophize, ossifies"- John Barth

    by steven pressman on Tue Sep 08, 2009 at 09:01:43 AM PDT

    •  In $$s Here is what it means (1+ / 0-)
      Recommended by:
      Hedwig
      Well, here's is what poverty looks like to the Federal Government as of January, 2009's Mike Leavitt report to Congress:

      The 2009 Poverty Guidelines for the
      48 Contiguous States and the District of Columbia

      Persons in family    Poverty guideline
             1                        $10,830
             2                          14,570
             3                          18,310
             4                          22,050
             5                          25,790
             6                          29,530
             7                          33,270
             8                          37,010
      For families with more than 8 persons, add $3,740 for each additional person.


      http://aspe.hhs.gov/...

      And, as if a family with such a low income could afford a dime, this is what they will be forced to pay for mandated insurance:

      Federal poverty  
      level (FPL)            Premium payment limit (as a percent of income)
      133% or less               1.5%
      150%                            3.0%
      200%                            5.0%
      250%                            7.0%
      300%                            9.0%
      350%                           10.0%
      400%                           11.0%

      For example, a family of three at 133% of the federal poverty line ($24,352 in 2009 annual income) would be required to only pay annual premiums of $365 toward a Basic plan in the
      Exchange.

      A family of three at 400% of poverty ($73,240), where the premium subsidies end, would be required to pay no more than $8,056 in annual premiums for a Basic Exchange plan.
      http://fpc.state.gov/...
      page 15

      REALLY, a family of 3, earning $73,000 can afford $8K in premiums and $10,000 for out of pocket?

      Are the Corporaticians in DC on Crack or something?  Or does hob knobbing with the Insurance Oligarchs make them stupified.

      FRIENDS, DON'T TAKE IT ANY LONGER!

      Poverty does not mean powerless. Unite!

      by War on Error on Tue Sep 08, 2009 at 09:34:51 AM PDT

      [ Parent ]

  •  One of the worst elements of poverty ... (3+ / 0-)

    ...in the U.S. is how many children are affected. As in so many other arenas, we are behind much of the developed world.

    Other nations prevent the worst economic difficulties by giving aid to all families, including, of course, health coverage, child care assistance and paid family leave.

    Here we wait until working families crash. At that point, the families become eligible for means-tested benefits that tend to be highly stigmatized; most families who need help receive little or none. The best thing going is the Earned Income Tax Credit.

    But while we do little for these families, middle- and upper-income Americans receive numerous government benefits that are mostly unavailable to those working people on the lower end of the income scale: tax-subsidized employer-provided benefits like health insurance and 401ks) and tax breaks for home owners. Middle- and upper-income families collect most of the benefits from the child tax credit and the child care and dependent tax credit because neither is fully refundable. These benefits cost the government three times more than benefits for low- and moderate-income families.

    Some people would be better off not reading diaries they comment on, since they already have all the answers.

    by Meteor Blades on Tue Sep 08, 2009 at 09:13:32 AM PDT

    •  poverty, children and tax breaks (1+ / 0-)
      Recommended by:
      Meteor Blades

      Yes, the situation for children is worst of all; but the US does worse than other developed nations for all groups. Sadly, poverty rates in the US are nearly as bad as in most developing countries.

      And, yes, the government is largely to blame, since before taking account of taxes and government spending, the US looks just like every other developed nation in terms of poverty rates and the size of the middle class.

      And, yes, yes, yes, one big problem is that the tax breaks provided by the government go mainly to help the wealthy. One of my favorite examples concerns children. In the US, households receive exemptions for children on their tax returns. These are designed to help households raise their children. But with a fixed dollar amount for these exemptions, and the fact that they are not refundable, low-income households get back nothing (since they generally don't owe taxes). Middle-income households get back little, since they are in low tax brackets. The wealth, who need the help the least, get back the most since they are in the highest tax bracket.

      By just following the example of the other countries in the world and instituting a child allowance program (a fixed dollar amount per child that everyone gets) we would reduce child poverty in the US considerably. We could even fund it by just eliminating child deductions from taxes. Even better, we could fund such a program also through general revenues.  

      "The mind that cannot philosophize, ossifies"- John Barth

      by steven pressman on Tue Sep 08, 2009 at 09:38:46 AM PDT

      [ Parent ]

    •  Back up a truck (0+ / 0-)

      and let's get some fact-check here.

      But while we do little for these families, middle- and upper-income Americans receive numerous government benefits that are mostly unavailable to those working people on the lower end of the income scale: tax-subsidized employer-provided benefits like health insurance and 401ks) and tax breaks for home owners.

      If your company/business doesn't offer 401k, you are allowed to open up a self-IRA and get the same tax deduction.

      As for the deductions for mortgage interest and health care benefits, both provisions were inserted by democrats in the 1986 tax reform who insisted on it.

      Other nations prevent the worst economic difficulties by giving aid to all families, including, of course, health coverage, child care assistance and paid family leave.

      "other nations" you refer to in western europe are free-riders and freeloaders. The US spends 1 out of every 5 federal tax dollars on defense because we, in effect, are subsidizing the defense of Europe for the last 40 years. If any of these welfare states had to provide for their own defense, they would not be able to maintain their budgets.

      •  some real facts (0+ / 0-)

        If you are in the zero tax bracket, you don't get anything back from the government for setting up an IRA-- as if a low-income household might be able to do this. Similar problems exist for middle-class households. And similar problems exist for many of the other government tax breaks (such as the mortgage deduction and property tax deduction, which are contributing to the US housing crisis).

        The big difference between the US and other European nations, is not the defense spending-- it is that our tax system and our spending system favors the wealthy rather than the middle class and the poor.

        "The mind that cannot philosophize, ossifies"- John Barth

        by steven pressman on Tue Sep 08, 2009 at 09:47:24 AM PDT

        [ Parent ]

        •  uhuh (0+ / 0-)

          our tax system favors the poor,

          then maybe you can explain to me how i make 100,000 and something like 36 percent of it goes to taxes (state income/federal income/property/FICA).

          How much more should I have to pay?

          •  How about people who make $250,000... (1+ / 0-)
            Recommended by:
            navajo

            ...or $500,000, or a million a year? A graduated income tax with a couple or three additional brackets for upper income people would not impoverish them, but it could help those who ARE impoverished.

            Some people would be better off not reading diaries they comment on, since they already have all the answers.

            by Meteor Blades on Tue Sep 08, 2009 at 10:00:47 AM PDT

            [ Parent ]

            •  ou income tax system is graduated and progressive (0+ / 0-)

              with rates from 10 to 35 percent already. Obama's proposals for tax increases up to 39.6 percent and increasing the capital gains rate up to 20 percent are also acceptable and long overdue.

              But these tax increases will come nowhere near enough to match our spending, and the extra spending Obama is proposing.

              As JIm Cooper (D_TN), one of your fav  5 congressmen has pointed, many Congressman, lib, con, Dem, Rep , use the Department of Defense as a hometown jobs program, on top of the pork barrel spendigng.

              We also subsidize European defense, rich farmers, and there is a fantastic amount of waste,fraud,and abuse in MEdicare.

              But unfortunately, neither party attempts to wrestle with these budgetary issues. It would most likely be neccesary in the future to put the screws on these fuckers and demand a Balanced Budget Amendment.

          •  you should read before you rant! (2+ / 0-)
            Recommended by:
            Meteor Blades, reflectionsv37

            Your taxes are considerably lower than they would be if you were living in any other developed country, and could be even lower if the wealthy paid more. There is just no excuse for letting hedge fund managers making millions claim that all their income is capital gains so that they can only pay 15 percent taxes on it. And there is no justification for not requiring that they pay social security taxes on their income over $100,000.

            "The mind that cannot philosophize, ossifies"- John Barth

            by steven pressman on Tue Sep 08, 2009 at 10:24:23 AM PDT

            [ Parent ]

            •  Social Security sends benefits (0+ / 0-)

              to people who pay into Social Security, The person making 1 million doesn't pay more into Social Security than someone paying 100,000 and recieves no more in benefits. That's why there's a cap, sincewe assume people making over that amount can manage their own retirement. Social Security is supposed to be insurance, not a full pension.

              As for capital gains taxes, our Clinton rate of 20 percent is similar to what you find in other countries.

      •  Low-income people, as I am sure ... (0+ / 0-)

        ...you know, find it difficult to put aside money for the future because it takes what they have to keep up with the present. Up until '86, all interest was deductible. As for Democrats being behind the insertion of the mortgage interest deduction, that's true, but they have also favored a cap on it that Republicans have fought.

        You won't get an argument from me about U.S. troops in Europe - although these have been greatly reduced in the past 20 years - and other military spending that aids Europe. But if the U.S. were not spending so much on the military, there would still be massive opposition to assisting low income people in the states from the usual suspects, including some conservative Democrats.

        Some people would be better off not reading diaries they comment on, since they already have all the answers.

        by Meteor Blades on Tue Sep 08, 2009 at 09:58:49 AM PDT

        [ Parent ]

        •  Correction (0+ / 0-)

          they were also behind not taxing health benefits also.

          And Baucus is the one proposing a "cap" on the tax exemption of health benefits to tax Cadillac benefits, and he is being attacked, not by Conservative Dems or Republicans, but liberal Democrats.

          And I believe you'll find conservative Dems are fiscally conservative, and do not wish to bankrupt America. Therefore, if there is excess money, they'll spend it. There was no Blue Dog opposition to S-CHIP , and it was also Blue Dogs who proposed a millionaire's tax to pay for the expansion of veterans benefit in the GI Bill.

  •  How Did I Miss This Diary?!? (0+ / 0-)

    The name Mollie Orshansky is burned into my brain. I was a grunt in the war on poverty. Not only did we lose the war, but the winners pursued a scorched earth policy.

    When I see poverty stats I cringe. The numbers are so low that poverty = destitution. Thousands more are poor than the stats indicate.

    Thank you for bringing this out. Now we have to bring it forward so that everybody sees what the poverty stats really mean.

    WWTD: What Would Teddy Do?

    by JG in MD on Fri Sep 11, 2009 at 05:22:30 AM PDT

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site