How the Poverty Rate Could Change if National Academy of Sciences’ Formula is Adopted

The U.S. Census Bureau made headlines recently when it announced that the poverty rate for a family of three (two adults and a child) is $17,330. For two adult and two kid families, the poverty rate is $21,834.

Can a family really live, even at poverty levels, on less than $22,000?

The Census Bureau provides information on its Web site about how it measures poverty. There is a growing chorus that says it’s time to update the poverty threshold to more realistic figures. If this happens, a lot more people would be classified as living in poverty. There are, of course, political implications to all of this.

The Economic Policy Institute took a look at how this issue is playing out around the country
:

“In 2007, EPI took a detailed look at basic costs in different parts of the country and built the Basic Family Budget Calculator, which assembled the costs of basic housing, food, child care, transportation, health care, taxes, and other necessities in different regions of the country. Besides offering detailed data on how much costs vary across rural and urban areas and different geographic regions, the calculator shows that poverty thresholds are too low just about everywhere.

“Take Peoria, Illinois, often considered your typical American town. A family of four living in Peoria would, according to the Family Budget Calculator, likely require an annual income of $42,324, including $623 per month for housing and $643 for food, based on 2007 costs. That’s almost double the 2008 poverty threshold. Other regions would require a much higher income. In Chicago, for example, the Basic Family Budget Calculator says a family of four would need $48,800. On New York’s Long Island, where housing costs even more, the annual budget for a family of four shoots up to $71,913 a year. Basic family budgets in some other regions of the country come in much lower. Rural Arkansas comes in at $37,338 a year; rural Texas at $38,862. These regions are comparatively inexpensive, but still have costs for essentials that easily exceed incomes at the official poverty threshold.”

The Associated Press reported on how the poverty figures would stack up if the government adopted the National Academy of Sciences’ revised formula for determining the figures:

“The National Academy of Sciences’ formula, which is gaining credibility with public officials including some in the Obama administration, would put the poverty rate for Americans 65 and over at 18.6 percent, or 6.8 million people, compared with 9.7 percent, or 3.6 million people, under the existing measure. The original government formula, created in 1955, doesn’t take account of rising costs of medical care and other factors.

” ‘It’s a hidden problem,’ said Robin Talbert, president of the AARP Foundation, which provides job training and support to low-income seniors and is backing legislation that would adopt the NAS formula. ‘There are still many millions of older people on the edge, who don’t have what they need to get by.’

“If the academy’s formula is adopted, a more refined picture of American poverty could emerge that would capture everyday costs of necessities besides just food. The result could upend long-standing notions of those in greatest need and lead eventually to shifts in how billions of federal dollars for the poor are distributed for health, housing, nutrition and child-care benefits.”

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