Thursday, August 20, 2009

Poverty Numbers Expected To Rise - Do They Tell the Whole Story?

US-Census-ACSLogoGenerally at this time of year, the story turns to "Poverty Day," the day when the newest statistics from the American Community Survey show changes in the Federal Poverty Level. While the stats won't be released until late September this year, reports indicate that we will see a statistically significant increase in the number of people "living in poverty," that is, below the Federal Poverty Level.

However, the Federal Poverty Level (FPL) is not the same as a measurement of all people who are struggling in the United States. The FPL was created in 1965 by Mollie Orshansky, who developed the estimate using the Department of Agriculture’s “economy food plan,” which provided a food budget for families to prevent starvation on a temporary or emergency basis.

Orshansky modified the food plan for different family sizes and multiplied the budget for each family size by three, since one-third of household income was spent on food. Though in later years, Orshansky advocated for stronger and more accurate poverty measures, her calculation, adjusted for inflation, became the FPL we use today. In 2009, the FPL for a family of four is $22,050.

However, food now consumes a smaller share of a family’s budget than it did in 1965. Increased housing costs, not to mention child care and healthcare costs that were not part of a 1965 budget, have changed family spending to the point where three times the amount spent on food is not enough to cover all expenses. Furthermore, the FPL was designed to apply to a family’s after-tax income, but today is applied to their before-tax income, which means the family has even less money available to spend. Finally, the FPL remains a fixed amount throughout the continental United States, even though living costs vary widely.

What does this have to do with the poverty numbers? The number of people living in poverty in the US (which is expected to be at least 12.7%) only shows the number of people living below the outdated FPL. In Pennsylvania in 2007, about 9% of households fell below the FPL, but 21% of households actually earned less than what they need at a minimum to support their families. So 12.7% actually underestimates the number of those earning less than what they need, which in turn undermines the ability to locate and serve families in crisis. In other words, when the poverty numbers are released, remember that there are also families who are being overlooked that are in need.

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