Unless you've opted to ignore all news media lately, you probably know that 28 percent of New Orleanians live in poverty. San Diego's poverty rate is about half that, or roughly 15 percent. Both cities surpass the national average, 12.7 percent, a figure released Aug. 30 by the U.S. Census Bureau, a week before the rest of the world realized that a lot of folks living in southern parts of Louisiana and Mississippi were poor-really, really poor.
The Census Bureau report showed a creeping trend: 1.1 million more people were living in poverty in 2004 than in 2003. It's a number that's been increasing steadily, if only by a few tenths of a percent each year, since 2000.
This information is relevant, intended to show the health of the national economy as well as determine who qualifies for government anti-poverty programs. But how reliable is the data that goes into calculating the country's poverty rate?
Roughly 40 years ago, a woman named Mollie Orshansky, an economist with the U.S. Social Security Administration, came up with a way to determine who was living in poverty. She took what it cost to feed a family of four using the Department of Agriculture's so-called “economy” food plan—the least amount of money a family could spend on food and still maintain an arguably adequate diet. Or, as Stephen Malpezzi, professor of economics at the University of Wisconsin at Madison put it, a diet that included “more Spam than steak.”
Orshansky took the cost of the economy food plan and multiplied it by three. She did this on the already-outdated assumption that food costs comprised one-third of a family's overall budget. That number—cost of food times three—became what's known as the “poverty measure.” If a family's annual income falls below the official poverty measure, also known as the poverty line or poverty threshold, depending on which government agency you talk to, that family is considered to be living in poverty. The number is adjusted to account for varying family/household size and, of course, adjusted for inflation. The current poverty threshold for a family of four is $19,350. So, if a family's income, before taxes, is less than this amount, that family, according to the government at least, is living in poverty.
Since Orshansky's poverty measure was officially implemented in 1969, housing costs, medical expenses, transportation and childcare costs have increasingly eaten up larger portions of household budgets. Orshansky's measure is made more irrelevant by the fact that food costs currently comprise roughly one-fifth of a family's budget. Housing costs, on the other hand, eat up about one-third of household income; in high-cost housing markets like San Diego, that number is easily higher. Neither does the poverty measure take into account government aid like food stamps and Section 8 housing vouchers or the Earned Income Tax Credit-all things intended to lift people out of poverty.
The poverty measure remains a one-size-fits-all formula.
“It's the same threshold for everyone across the United States” said Thesia Garner, a senior research economist with the Bureau of Labor Statistics. “It doesn't matter if you live in high-cost New York City or someplace in Tennessee.”
In 1995, the National Academy of Sciences convened a panel to study ways to revise the poverty measure. Among the recommendations were to look at the actual costs of basic necessities—food, clothing and shelter—rather than an assumed budget. The panel also recommended that geographic cost-of-living differences be taken into account and that out-of-pocket expenses like medical costs and child care be factored in as well. Those recommendations prompted dozens of studies, but not much discussion outside of the research community.
David Betson, an economist at the University of Notre Dame, who, in the late '90s, looked at ways to factor housing costs into poverty measures—not an easy task—said he's pretty much stepped away from that work. “The government is really not willing to devote much resources to looking at this issue, given the politics,” he said.
Indeed, calculating poverty rates by region rather than nationwide carries some serious political implications. While California's poverty rate would go up due to the state's high cost-of-living, low-cost areas like, say, Mississippi would likely see their poverty rate decline. It's doubtful that a senator or representative from a lower-cost area would want to see the poverty rate adjusted geographically, Garner noted. "For a state where living costs are lower, the threshold would be lower, and fewer federal dollars would be going into [that] state. Nobody wants to lose those federal dollars.”
In fact, if one were to look at the issue in the most crass political terms, “blue states”—those that are majority Democrat—would get more of those federal dollars while the more rural “red states” would see a decrease.
Despite the lack of political will, the Census Bureau has come up with more than a dozen measures to gauge, for example, whether aid benefits positively effect folks living in poverty or whether housing costs would significantly alter annually reported poverty rates.
One Census Bureau study looked at the three-year average poverty rate for 1999, 2000 and 2001—just before the housing boom—using the “official” (or, Orshansky) method, 13.1 percent of Californians lived in poverty. Looking at the same three years but using an alternative formula that took housing costs into consideration-conservative cost estimates—California's poverty rate jumped to 18.4 percent, second behind Washington D.C.'s 20.5 percent. New York was a close third at 18 percent.
San Diego State University professor Robert Buck believes fixing the poverty measure isn't going to happen anytime soon. “Whoever changes the official poverty measure is going to admit that there's a lot more poverty in the country, and no one wants to do that on their watch,” he said.Buck also pointed to two trends: an increasing number of single females with dependent children are joining the poverty ranks and, as pensions become “rarer and employment more unstable,” an increasing number of elderly will slip into poverty as baby-boomers retire. Buck and others see research done by folks like Diana Pearce at the University of Washington and, locally, the Center on Policy Initiatives-research that breaks down real costs of living to come up with a “self-sufficiency standard” rather than an arbitrary poverty line-as a more realistic way to guage economic well-being. Many families, Pearce points out, fall into a “policy gap”-they make too much to be eligible for assistance programs, but too little to meet basic needs, especially when it comes to housing. High costs of living combined with an antiquated poverty measure, Pearce says, means “that more of our state's families are in need than our state or nation officially recognize.”