The measure by which we judge poverty is a fraud of statistics. It blinds us to the depth and breadth of poverty in America, undermines our solutions and gives comfort to those who wish to ignore or capitalize on the poverty-making engines of our society.
For almost 50 years, our official US Census Poverty Threshold - the line above which everyone is considered ‘not poor' - has been simply based on a pre-tax income less than ‘three times a thrifty basket of food’. When you hear a news report on the rate of poverty in America, this is the statistic you are being quoted.
According to this official measure of poverty, 20% of Americans are now below the poverty line. But I will argue here that the real number of poor Americans - those who can no longer pay for all their basic needs - is really around 35-40%. Another 10-15% are in danger of joining them, should their annual earnings decline or collapse, or should extraordinary costs impact them. So fully half the population of this country is either in poverty or at risk of ending up in poverty, should significant misfortune or an unexpected ‘bad break’ befall them.
Federal poverty levels are so far out of line with actual basic living costs, that rent alone would consume the annual salary of anyone living below the poverty threshold. You simply cannot afford to rent an apartment anywhere in America , if your income is below the poverty level, never mind also pay for food, health care, transportation, heat and electricity.
When governments under-report poverty, they also underfund social programs meant to address and mediate issues around poverty. Even when you advocate on their behalf, using the federal poverty line undermines political support to address the problems of the poor and popular understanding of a socio-economic crisis. Particularly one as severe as the bottom half of our economy is experiencing right now.
It leads policy makers to ignore economic reality for up to half of America and produce ‘solutions’ that either make problems worse or leave too many out in the cold. By under-reporting poverty, we have blinded ourselves to the depth of our economic problems.
In this diary, I will detail and compare the current cost of essential human needs, to the US Census Poverty Threshold, the HHS Poverty Guidelines, using mostly government price records to determine two family budgets - one a single male, 18-50 and a family of 4, with two children. I will also compare those budgets with Census statistics for household income, to arrive at my larger estimates of poverty.
Please read on....
A Definition of Poverty
What is poverty? Poverty is not having enough resources to attend to the basic needs of living. In a capitalist society, that means being economic self-sufficient, by one means or another. In a cash economy, that means enough money to pay your bills and otherwise participate in the economic life of your society. In a twenty-first century economy, that also means ready access to communications and the internet. And in an economy being remodeled by neglect, into a landscape of temporary, part-time and contracted labor practices, that also means a reserve for those times when there is no income and there is no support.
In theory - or at least ‘in rhetoric’ - the purpose of a social program in a capitalist society is to triage the crisis of poverty, attend to the problems of surplus labor and help the poor become economically self-sufficient. Contrary to popular opinion, poor people do have rights in society, thanks to local, national and international human rights and social welfare law. So who we designate as ‘poor' and who we don't, will have a profound effect on anyone who is eligible for rights, protections and assistance. Or, if excluded from being defined as 'poor,' who must survive or drown on their own.
When too many people are poor in an economy, it has profound and usually devastating consequences for everyone. In a collapsing economic environment, poverty breeds poverty. So failure to accurately count everyone in economic danger has profound social and political consequences as well. I will go into the socio-economic and political effects of poverty in a later diary. Some of them should be self-evident.
For now, let’s focus on the gap between economic realities and our federal measures of poverty, let’s see what the current poverty thresholds look like.
The US Census Poverty Threshold
For those unfamiliar with the term, ‘poverty threshold’ means the maximum income you can make in a year and still be seen as ‘poor’ by the state. Being recognized as ‘poor’ gives you standing and rights in our economic and legal system - through our human rights - as well as making you eligible for assistance in times of need.
Now compare your family budget to the offical US Census Poverty Threshold in the 48 states today (as of December 2010):
Size annual monthly
Household income income
unit level level
1 10,890 907.5
2 14,710 1225.83
3 18,530 1544.17
4 22,350 1862.5
5 26,170 2180.83
6 29,990 2499.17
7 33,810 2817.5
8 37,630 3135.83
For each additional person, add 3,820
If you earned more than these sums, you are not poor, according to the federal government.
Now try to fit your basic living costs - shelter, food, heat/hot water, electricity, phone, health care, education and sufficient savings/retirement to manage the normal bumps of life, the very recipe for economic self-sufficiency - below our current poverty thresholds. Be honest. You can't. The only way to get your budget under these numbers is to sacrifice a critical need, like food, shelter or heat.
Welcome to the world of poverty economics. Remember that when you feel the urge to give advice to a poor person on how to 'better manage their money.' They have more experience than you. They know what's being sacrificed, far better than you ever will.
At the level of policy, we know this poverty threshold is a false number. This is why different programs use different multipliers (133%, 150%, 200%) of the official poverty threshold or the HHS poverty guidelines, in order to reconcile our poverty measures with economic reality and apportion aid. But even then, they are all based on a false number, that is - in turn - based on a false ‘rule of thumb’, three times a weekly and thrifty basket of food. And as we shall see further on, perhaps even that number is false.
The best way to tackle the veracity of this statistical problem, is to itemize basic living expenses as the market defines them - and as government reports them - to see where the gap is between the cost of living and our current measures of poverty. The first number will tell us where the line of self-sufficiency is and who is at risk. By comparing those costs to the federal poverty measures, we can see how many people may be missing from the stats. And from there, we will have a better sense of the problem.
Along the way, we will touch on the economic stressors and ‘budget busters’ that become the land mines for the poor and everyone else who is falling into poverty. By comparing real living costs against the measure of poverty and then comparing it to US Census figures on household income, we can make a more reasonable guess about the depth and breadth of poverty in America today.
The central question driving this piece is how many people in this country do not earn enough to be economically self-sufficient?
In order to answer that question, we need to first ask ourselves, “how much do things cost?”
The Cost of Living
To answer this question, let's first remind ourselves of what 'poor’ means. It means you don't have enough money to cover necessary expenditures. You are not economically self-sufficient.
We need to be honest about what resources are needed in 2011 for someone to even be able to participate in the economy, get a job, get to work, etc. For the purposes of discussion, I will use two budgets: a single male 18-50 and a family of four, 2 adults, two children.
My numbers have been drawn as much as possible from government or industrial data, such as price reports, average expenses and other data. Where my research skills failed to find a government number for a specific need, I surveyed industrial research and made my ‘best guess’ for the purposes of discussion.
Most of the data used comes from 2008-2009, though they are all the most current government data. Some of it - particularly housing stresses - was gathered before the roof came in on the housing market. I erred to the lowest cost report, when ever ‘official measures’ contradicted other data. So my budget numbers, overall, should be seen as low, even if one number strikes you as potentially high. Where possible, I point out how these numbers are not truly reflective of current cost.
Let’s start with costs we can all agree are critical to human existence: food, shelter, clothing, heat/utilities, basic communication technology, transportation and health care. The subtotal reflects those costs. To that number I will add a modest number for savings and retirement, since life never goes to plan and one day we will all be too old to work.
Education will not be added to this budget - yet - so the biggest budget busting figure is still missing. Yet without education, those who are poor or near poor will have great difficulty of ever reaching economic self-sufficiency.
Consider how my very modestly defined budget compares to the US Census Poverty Threshold, the HHS poverty measure (a baseline for social programming) and the annual wage of someone working full-time (35 hours, paid) at minimum wage before taxes:
Expenses Annual Cost Annual Cost
Single Adult Family of 4
Rent/mortgage : 775-1,400 mth 9,300-16,800 9,300-16,800
health care 4,824 13,375
Food 2,616 6,144
clothing 575 2,410
heat 1,810 1,810
electric - average: $103.67per month 1,244 1,244
Telephone/Cell Phone 360 480
Internet - 30/40 - estimate 360/480 360/480
Transportation/car 8,487 8,487
Subtotal: 29,576-37,196 43,730-51,230
savings/emergencies: 200/400 month 2,400 4,800
Total: 31,976-39,596 48,530-56,030
Current US Census Poverty Threshold 11,161 22,128
Current HSS Poverty Guidelines 10,890 22,350
Gross Annual Min. wages FT before taxes 13,650 13,650
The first and most important cavat is that the cost of living varies wildly from one region to another. Only the state - or an extremely clever and well-funded research project - can recalibrate their budgets to account for regional variation in living costs. So this budget should be seen as the production of averages. Some costs may excede your localities’ realities, in other places - particularly the major metropoles - these numbers may seem low in one section (rent) and high in another (transportation). Please remember, these numbers are not the product of an exhaustive economic survey, but drawn from what sources I could find to arrive at a basic budget of living costs, sufficient to build a discussion.
In some cases, the information is dated. the Electricity cost is from 2009. The suggested rental ranges are taken from a 2008 Harvard University Center for Housing Studies report. The clothing costs are taken from the Bureau of Labor Statistics CONSUMER EXPENDITURES--2009 report that said Americans spent 1725 on apparel and services. I divided that number by three (1725/3) to arrive at the 575 expense for a single person. I then multiplied that number by 4 to arrive at the family cost.
These are, admittedly, ball park numbers. But since this budget is built off national averages, it should provide a reasonable basis for making an argument about why our current poverty measure is completely absurd.
Savings and Retirement
My numbers for savings and retirement are modest and based on stable work. That is, the person is economically stable at whatever economic level they are living and their savings and retirement investments are intended for a rainy day that isn’t happening now. If the person is not employed full-time and on a permanent basis, then they will need to sock more money away, because rainy days come more often if you can only find transient, part-time or temporary work.
I realize that economic demand on one’s personal budget is completely at odds with the point of making jobs temporary and part-time - cutting wages and diminishing work conditions - but if we were being economically reasonable, we would pay such workers higher wages than their permanent colleagues, since they must go without wages or diminished wages whenever work slacks, while the permanent employees are kept on the books.
But therein lies a hidden tension. The poor must save more, because they have past debts, more delayed necessary expenses (health, car, housing, education) and because they are more likely to be working as temporary and part-time workers. So they need savings more than a tenured college professor, even as life denies them the income to provide for their basic living costs, let alone saving.
I propose 200/400 because its significant enough to make a difference, if it can be reserved for more than two years, and yet is not outrageous or requiring a significantly greater income or self-sacrifice beyond what is wise and healthy. Moreover, it establishes the principle that poverty thresholds and guidelines should recognize that unexpected expenses are a fact of life and that savings is a social good, that the poor should be rewarded for doing, should they be able to manage it. It is a principle that sets itself against current policy, one that looks on aid to the poor like a controlling miser, discounting every advantage a poor person gets in their transactions and punishing the frugal among them.
My numbers may seem high for the avid Salvation Army shopper, but not out of line for someone who buys new clothes. Certainly one good job-hunting suit will bust a single person's 575 annual budget, when all other clothing costs are added in. The US Census median expenditure for on children’s clothing for families making under 36,000 is 630 a child, so that’s my basis for a family of 4. Two adults at 575 and two children at 630. This is what people are spending.
Phone and Internet
My internet and cell phone costs are admittedly 'best guesses' based on my awareness of current costs and set for the most cost-conscious, 'fast enough' and stable service. So, I based the internet access cost at my current phone company-provided service (DSL), after reading a bunch of reports dating back to 2005, that more or less justify my setting the budget at 40 bucks.
You can't get a job these days without surfing the internet for work. You cannot stay in touch with most prospective employers without the internet and you can't migrate from one industry to another without a lot of time spent on the internet. Your children will be at a disadvantage if they do not have a computer in their home and internet access. Even the easiest way - and least error-prone way - to apply for unemployment benefits is over the internet.
No, I didn't use pay-as-you-go phone plans, because they are unstable for the user and reflect a compromise for the poor between having a necessity and the money they have to work with. I added 10 dollars over the basic 30 dollar plan for families, expecting they would use their one phone more frequently and with less regard to minutes used.
Heat and Electric
While electric bills are heavily regulated and tend to move incrementally upward, heating bills are more volatile, depending on the type of heating used and the regulations in that state. But both are expected to become more expensive as our energy sources become more expensive. The number used is the median expense from 2009. Its close enough to my own usage for a 2 bedroom in New England, so that I'm sure its lower than a lot of your bills. Not perfect, but good enough for a baseline conversation about living costs.
My food numbers are based the USDA's thriftiest food plan costs, parsed out for what a single man between 18-51 years old and a family of 4 with two adults needs according to the USDA is necessary. There are different numbers depending age/sex and character of the family unit (number of adults/children). But the numers aren't very different, so for the purposes of discussion, these figures will do.
However, according to the USDA, a single male in his prime, should be able to feed themselves in a healthy manner for 33-34 dollars a week.
Reality check: I'm a single guy, who grows most of his own vegetables 6 months a year. I live in an area with lots of small farms. I buy basic staples, cheap cuts of meat, pasta, whole grains, whole beans, fruits and whatever vegetables I can't/don't grow or are out of season in my garden. I don't buy packaged or processed food, except for pasta. No bread (except on occasion), no cookies or breakfast cereals or frozen/pre-made meals. Just raw food.
But even at the height of summer, when my garden is overflowing, I spend 30 dollars on food. At that's up from 20 dollars two years ago. in the winter - when my garden is gone and the crops I stored have run out, my food bill runs about 60-70 dollars a week. So the food numbers I posted up above are too low.
Moreover, the USDA's food plans do not even properly reflect the inflation statistics produced by the Department of Labor. In the past year, food prices have risen 2.1%, according to the latest CPI-U report . Yet, the price of the USDA's thrifty food basket rose only 1% when one compares December 2009 to December 2010.
So even the idealized 'thrifty basket of food' that we base our measure of poverty on, is not reflective of economic reality. So to properly contruct a poor person's food budget - never mind measure their poverty - we would need to increase the budget numbers up from what posted in my budgets. I believe these costs should be budgeted 20% higher. But for the moment, I will leave this low number in place, recognizing we need to revisit the USDA guidelines at a later time.
Housing and Shelter
My housing costs may also be too low for many regions. Consider these current prices for rent in Boston, when compared with the US Poverty Threshold for various households:
Average Rents - Boston MA -January 2011
Size Monthly Annual Poverty Threshold (household size)
Studio 1,780 21,360 11,161 (1)
1 Bedroom 1,950 23,400 11,161 (1)/14,366 (2 adults)
2 Bedroom 2,505 30,060 14,787 (2, 1 minor)/17,285 (3, 2 minors)
3 Bedroom 3,552 42,624 21,756 (4, 2 minors)
As you can see, the average rent in Boston are over twice the US Poverty Threshold. As The Joint Center for Housing Studies pointed out, you need to earn over twice the minimum wage to be able to afford a modest apartment anywhere in this country and more than three times the minimum wage to afford a modest apartment in any US urban area.
Here's what the Joint Center for Housing Studies had to say about the level of economic distress in the housing marketplace for homeowners and renters alike:
All told, 40.3 million households spent more than 30 percent of their incomes on housing in 2008, while 18.6 million of these households spent more than half—up from 13.8 million in 2001. Of those with such severe housing cost burdens, fully 45.1 percent are renters in the bottom income quartile. Indeed, many householders with incomes that are one to three times the full-time minimum wage equivalent still have to devote at least half their incomes to housing
Of course, one finds cheaper apartments in suburbia, exurbia and rural regions. Which is why poorer populations - most notably African Americans - are disappearing from Chicago, New Orleans, New York and elsewhere. Even municipal workers in places like New York City can no longer afford to live in the city where they work.
But if you save money on housing costs by moving away from the metropole center, you increase your transportation costs. You need a car the minute you move into the suburbs. Even if you live along a major mass transit route (e.g. PATH, NJ Transit, Metro, BART, etc.), you still need a car to get around. If you have a family beyond an urbanized area, you need a car and all that comes with it. And if you don't have a car in a rural area, you are dependent on your neighbors and relatives.
While the poor may save on monthly car payments, they own older cars. So their f they are handy and willing to drive old, less-than-pretty cars. They spend a great great deal more on car repairs and they usually own cars that are past their warranty. They pay more for their insurance and their debt is financed at a higher rate of interest.
Yes, we do have subsidies for the poor. But eligibility builds off HHS poverty guidelines, augmented by to one degree or another, in an grudging administrative accommodation to economic reality. Again, the enormous gap between federal poverty measures and economic reality reveals itself.
But we are about to demand that every American get health care coverage. That means we are also going to measure the need of 59 million people without health care using current poverty measures.
So what will be the poverty threshold for getting insurance assistance? The HHS poverty guidelines. How might our new mandated health care system measure poverty when considering need and assistance?
Let's turn to the state where the current model of health care reform was built, Massachusetts. A single person must earn less than 14,628 and a family of four must earn less than 29,328. But as you can see from my section on Boston rents, a studio apartment goes for 21,360 a year. That means any single person living in Boston making 14,628 cannot afford their own apartment. A person making 17,000 in Boston doesn't make enough to cover their rent, but they are liable to pay 700 a year for health care. If they don't pay that bill, they are liable for tax penalties.
Now multiply that stupidity 59 million times. This is where our measures of poverty undermine our efforts to address the problems of poverty, including lack of health care. Never mind causing great distress to millions who do not consider themselves poor, but may, in fact, be poor. Because once you earn a dollar more than the maximum income thresholds for social programming, you are at the mercy of the marketplace.
And when it comes to health care, it’s a pretty merciless environment. Between 2001-2007, health care premiums for family coverage have increased 78%, while wages rose 19% and inflation rose 17%, according to a study by the Kaiser Family Foundation. But in the wake of economic collapse, wages for this past decade have declined. Health care costs, however are expected to keep climbing.
The most outstanding cost not calculated here is the cost of education. Sending children to school costs money. While school lunches make a difference and schools often find ways to cover the gap when children's parents cannot afford basic books, pencils and the like, educating children is not free.
According to the US Census, one child’s annual education/child care expenses ranged from $780 at its lowest to $1,780 at it’s highest in 2009. And these are the expenditures for husband-wife families making less than 36,000 dollars. It adds no ease to the problem that the highest child care/education expenses are in the first two years of life. Or that’s relevance to the child’s future potential development.
If education costs are included in the cost of economic self-sufficiency, then the threshold necessary to determine whether one is ‘poor’ or not is even higher than the numbers posted in my budget.
Previous Total: 31,976-39,596 48,530-56,030
Educational cost (2 children) - 1,560-3,740
As some of you may notice, the kinds of income needed to free a family from economic danger and trouble is now well into the 55-60th percentile for income in America, if they have 2 or more children.
And I haven’t mentioned college yet. But I’ll take that issue up another day.
Poverty and Debt
The poor pay more for interest rates, pay more and higher penalties, use that debt to pay for essentials and can cycle down into a level of indebtedness and lost income (some might say stolen income) due to debt, that they have no way of ever seeing solvency. Even in bankruptcy, education debt is inescapable. Those who know their ancient history know that debt is one of the two ways to become a slave (getting stolen from your home, being the other).
Renters save less and earn no equity over time, unlike homeowners. So their ability to leverage equity to make investments in their future is utterly missing. When whole family and community networks are poor, no one has that equity or credit except the predator lenders, check lending services and the loan sharks.
This is how poverty is passed on through the generations. It also makes a third-generation poor person so much more economically endangered than someone from a middling economic background who fell on hard times. So if we were going to really measure poverty - or poverty's intensities - we'd need to calculate it treating time as a negative multiplier.
Beyond the Current Poverty Measures
In the past 15 years, there has been considerable interest in other statistical models for measuring poverty or providing guidance for social programming. There are a number of models being proposed and considered. While I’m still reviewing the literature on the subject, the studies that best matched my own informal measuring of average living costs were the reports coming out of Harvard’s Joint Center for Housing Studies.
The discourse around Supplemental Poverty Measure (SPM) seem overly obsessed with calculating in all forms of subsidy through complex metrics. While this sort of calculus might be of use to those trying to estimate the impact of budget cuts or increases - mostly for the Office of Management and Budgets - it does little to measure want in America.
What we need is a poverty threshold that reflects economic reality. Those thresholds will vary from region to region and community to community, but they need to reflect real expenses. The US Census Poverty Threshold does not reflect economic reality.
How Many Poor in America?
Having examined all the basic costs of living inherent to living in 21st century America and compared them to our standard measures for poverty, let's consider where the real threshold for economic self-sufficiency might be.
Let's return to our revised income comparisons, plus a few other ways of illustrating the problem:
Single Adult Family of 4
Baseline Budget Expenses: 31,641-37,512 47,239-55,631
Budget expenses/plus education: 31,641-37,512 48,799-59,371
Current US Census Poverty Threshold 11,161 22,128
Current HSS Poverty Guidelines 10,890 22,350
Gross Annual Min. pre-tax wages FT 13,650 13,650
200% of Poverty Rate 22,322 44,256
300% of Poverty Rate 33,483 66,384
Lowest Quintile upper threshold 20,712 20,712
Lover middle Quintile upper threshold 39,000 39,000
Middle Quintile upper threshold 62,750 62,750
As you can see, 20% of the population is in deep poverty. A nightmare of economic crises and no moments of peace. 40% of US households have collective incomes less than 39,000 dollars a year. Everyone one of those household needs to be considered 'at risk' if not also impoverished. Even those in the middle quintile - earning between 39,000 and 62,750 - may also be not achieve economic self-sufficiency (the real threshold of poverty), depending on how many children they have and local living costs.
By my estimate, 35-40% of Americans are poor. I believe another 10-15% are one bad break away from joining them in poverty. And in the middle of the worst economic crisis since the Great Depression, more people are joining the poor every day. We cannot possibly respond either to the current economic crisis or the permanent crises of poverty, if we do not know how many people are in poverty and who else is in the economic danger zone.
I realize my little exercise here does not provide conclusive proof for my own particular cost of living expenses choices, even though most of them appear low to me and mostly drawn from government data. That said, I think they do show that there is little relationship between our poverty measures and guidelines and the cost of living in 21st century America.
If we do not significantly upwardly revise our measurements of poverty - so that our thresholds reflect economic reality - then our data does more to mask poverty than identify it. These false measures become the agreed upon public ‘knowledge’ and the foundation of social policy and programming. A nation of politics, building its social policy around a false number.
Worse still, these thresholds drag down the guidelines for determining assistance, reduced pricing and/or protection from corporate providers (heating, insurance, etc.) for those who are in economic danger. Building assistance criteria around a poverty threshold that should be two or three times higher will cost a lot of people the help they need to survive. In short, our current poverty measures and guidelines are doing real harm to the poor and they need to be significantly revised upward.
We need a new poverty threshold measurement. Three times a thrifty basket of food is absurd. We know that and yet we continue to use it. So we are perpetuating a fraud. That fraud costs people their lives and futures and blinds us to the brutal mess we’re making of our people, our economy and our future.