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At Last, A Better Measure of Poverty
Today, the Census Bureau released a supplement to the official poverty measure that is much more accurate in analyzing levels of hardship in the United States.
The Supplemental Poverty Measure is more accurate because it includes the Earned Income Tax Credit, SNAP, TANF and other anti-poverty program benefits that effectively add to the overall income of a household receiving these benefits.
The official poverty measure counts earned income only. In 2010, if a family of four had earned income that put them $2,000 below the poverty line, they would still be counted as poor by the official measure even if they received $3,000 in SNAP benefits. With 45 million people receiving SNAP, you can imagine the numbers of people counted as poor could change somewhat once those benefits were included in the calculus.
By the same token, the official poverty measure fails to account for expenses that could have a huge effect on hardship - for example, health care expenses. The official poverty measure does not count out-of-pocket medical costs. Seniors spend a considerably larger share of their income on prescription drugs, much of it not covered by Medicare. By the official measure, seniors consistently register poverty rates below 10 percent, much lower than children and adults. In 2010, senior poverty was officially 9.0 percent, but by the supplemental measure poverty among seniors rose to 15.9 percent, and this was due mostly to out-of-pocket medical costs.
On a more positive note, child poverty declined to 18.2 percent, down from the official rate of 22.5 percent. What this shows is that a safety net is functioning to protect children from the hardships of poverty. However, let's not exaggerate functionality: 18.2 percent of children in poverty is still scandalous.
One of the things I like about the new measure is it shows the poverty-reducing effects of individual programs. The two programs that lifted the most people out of poverty in 2010 were the EITC and SNAP. In 2010, the EITC reduced poverty by 2 percent (it reduced child poverty by 4.2 percent), and SNAP reduced the poverty rate by 1.6 percent (it reduced child poverty by 3 percent).
Overall, the poverty rate in 2010 actually went up according to the supplemental measure. Officially, 15.2 percent of the country was living in poverty, and by the supplemental measure poverty climbed to 16.0 percent.
The supplemental measure is a vast improvement over the official measure, which has been widely viewed as outdated for decades. The official measure was formulated when living costs were dramatically different. Health care didn't eat up as large a chunk of household budgets, and child care didn't even figure into the equation. Where people lived made little difference, that is, living costs in major metropolitan areas were assumed to be the same as in rural areas of the country.
Why did it take so long for government to come up with a more accurate picture of material hardship? Hard to say for sure. Inertia is one explanation, but there's got to be more to it than that. I could only speculate, but that's for another time.
The bottom line is the more accurately the government measures poverty, the clearer it can see where to target benefits to reduce hardship. Knowledge is the first step to better programming, but a small step compared to the necessary poltical will to make it possible to eliminate hardships altogether.
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