Friday, September 26, 2003
HOW THE POVERTY RATE IS DETERMINED
It sounds as if we will need to take official government poverty figures with a few grains of salt.
Today the Census Bureau will release the official poverty rate for 2002. While that figure is likely to indicate that the ranks of the poor have increased, it unfortunately won't really tell us much of anything about the true extent of poverty in America.
The problem is that the official definition of poverty no longer provides an accurate picture of material deprivation. The current measure was created 40 years ago by a government statistician, Mollie Orshansky, and hasn't much changed since. "Anyone who thinks we ought to change it is perfectly right," Ms. Orshansky told an interviewer in 2001.
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Simple, yes, but there are two basic problems.
First, it fails to capture important changes in consumption patterns since the early 1960's. The research underlying the original thresholds was based on food expenditures by low-income families in 1955. Since her calculations showed that families then spent about a third of their income on food, Ms. Orshansky multiplied a low-income food budget by three to come up with her poverty line. But even she suspected this method underestimated what it took to meet basic needs, and was thus low-balling the poverty rate.
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Second, the current measure leaves out some sources of income and some expenditures that weren't relevant when it was devised. The Census Bureau counts the value of cash transfers, like welfare payments, but it ignores the value of food stamps and health benefits, as well as newer tax credits that can significantly add to the income of low-end working families. Not only would taking these additions into consideration bring down the poverty rate figure, it would also provide a real measure of the effects of these antipoverty programs.
It sounds as if we will need to take official government poverty figures with a few grains of salt.
