What Yesterday’s Poverty and Income Numbers Don’t Tell Us About Economic Hardship

Yesterday’s Census Bureau report on trends in income and poverty is bleak reading. In addition to historic income declines for middle income families (the largest in the 60 years on record), the number of Americans whose incomes dropped below the official poverty line increased by 2.5 million, from 37.3 million to 39.8 million.

The poverty numbers tells us that things got worse last year—something, of course, we already knew—but they don’t give us an accurate picture of how many people are really struggling to make ends meet, or experiencing concrete forms of material deprivation, like having too little to eat, or not being able to pay their mortgage or utility bill.

There’s little disagreement here in Washington on this point. Liberals and some conservatives like Ron Haskins of the Brookings Institution argue that the official poverty measure fails to include both important benefits like food stamps and major expenses like child care, and doesn’t adjust for differences in geographic housing costs. Legislation introduced by Rep. Jim McDermott and Sen. Chris Dodd—H.R. 2909—would revise the poverty measure to address these issues.

Conservatives like Robert Rector of the Heritage Foundation argue that the current poverty measure and measures that would set slightly higher standard? like McDermott/Dodd fail to measure “real poverty,” which they equate with extreme material deprivation. They point to data showing that many people living below poverty line have air conditioning and VCRs to make their case that even the current poverty measure is set too high.

The best way to produce an accurate assessment of economic hardship is to move beyond the outdated idea that we can accurately measure by using a simple income line, even one that, like McDermott/Dodd, takes expenses and in-kind benefits into account. Instead we should measure “real poverty” instead of income poverty using a metric that counts someone as poor if they had both low income during the year and experienced a certain level of material hardship.

There is a ready model for this approach. A few years ago the U.K. government adopted a new approach to poverty measurement that takes both low-income and specific material hardships into account. They now use it to measure progress toward their goal of eliminating child poverty by 2020.

This kind of measure would still include an income line, but it should be set at roughly twice the current federal poverty line, or about $44,000 in 2008. Why the higher amount? Public opinion surveys have consistently found that most Americans think this is the amount needed to “get along” or “make ends meet” at a basic level. And, most Americans who suffer from specific forms of material hardship have incomes that fall above the official poverty line, but below 200 percent of it. Finally, the higher income line would ensure that groups who have to spend more to meet basic needs are counted. In particular, people with disabilities, who, even when their incomes are between 100-200 percent of the poverty line, are as likely to experience material deprivation as people without disabilities living below the poverty line.