How We Measure Poverty

21May08

Poverty in the United States is measured by the poverty threshold—commonly called the poverty line. Set by the Social Security Administration, absolute poverty is defined by a poverty line drawn at a given income. The threshold used by the federal government was developed by taking the cost of the least expensive food plan (the Thrifty Food Plan developed by the Department of Agriculture), and multiplying that number by three. It was determined in 1955 that t he average family spent about one-third of its budget on food. This measurement was formally adopted in 1969 and is adjusted for family size, number children under 18, and age of head of household. The number is also adjusted yearly using the consumer price index. This type of measure of poverty espouses the theory of absolute poverty. Absolute poverty refers to an unequivocal standard necessary for survival in terms of calories necessary for physical survival, adequate shelter for protection against the elements, and proper clothing. One either falls above or below that absolute dollar amount.

This method of measuring poverty has its problems and is far from an accurate measurement. It excludes in-kind benefits when counting income, it ignores the associated costs of earning income (clothing, transportation, child-care) when calculating net income, it disregards regional variances in the cost of living, ignores tax payments, it ignores the effects of earned income tax credits, it ignores the value of health coverage in determining income and the costs of medical care when determining consumption needs, and it has never been updated to account for changing consumption patterns and expenses. All of these problems distort the numbers of people deemed to be in poverty by the federal government.

On the other hand, The European Union defines poverty as, “[the condition] of those whose resources (material, cultural, and social) are so limited as to exclude them from the minimum acceptable way of life in the Member States in which they live”. This means essentially drawing the poverty line at a certain percentage of the national median income. The EU’s position on the measurement of poverty subscribes to the theory of relative poverty. Relative poverty refers to deprivation that is relative to the standard of living enjoyed by other members of society. Relative poverty can be understood as inequality in the distribution of income, goods, resources and opportunities in a given society.

The absolute approach to defining poverty is subject to the views of those charged with formulating the yardstick. The U.S. continues to use this method because if we too used the relative approach it would become clear that the richest country in the world ranks near or at the bottom of all six dimensions of child well-being as defined by UNICEF. The dominant economic and political structures would be unable to exist if suddenly the real numbers of those impoverished in this country were exposed.