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Old poverty line inadequate to reflect today's family needs

THE BALTIMORE SUN

For more than 30 years, the U.S. government has defined who is needy by using a measure known as the "poverty line" - the income threshold that purports to determine who is poor and who is not.

But experts of virtually every stripe agree that the nation's official measure of poverty - never designed to be permanent - is outdated. And despite years of studies by economists and poverty experts, there is no agreement on how to repair it.

In an open letter to administration officials last month, 42 economists, social scientists, researchers and advocates urged action to improve the measure, calling its flaws "critical."

But updating the measure is a political minefield. Some experts say that, depending on the method used to determine a new poverty line, the number of "poor" could rise, placing greater demand on government programs. One Baltimore case study, for example, demonstrated that a family of four would need twice the current poverty level of $17,050 to meet basic needs.

Other experts believe the number of people considered poor could shrink, because a new poverty line would reflect the dollar value of government benefits, which are not now included.

If the measure is changed, the composition of the group labeled "poor" would likely change as well, adding more white, working and elderly people to the mix.

"It's the people who are, in some sense, playing by the rules who are not being currently recognized in our poverty measure," said David M. Betson, an economics professor at the University of Notre Dame who has studied the measure.

The U.S. Census Bureau and the Office of Management and Budget have been working for years to come up with more accurate definitions. OMB spokeswoman Linda Ricci said officials are working on a response to the open letter.

Some researchers fear that the political sensitivity of the issue and the paucity of data to support a new measure could scuttle reform attempts for years to come.

"Given that [the measure] has never been altered, the prospects that it will be altered in the future are certainly slim," said John F. Cogan, a fellow at the Hoover Institution at Stanford University and an economic adviser to presidential candidate George W. Bush.

Based on cost of food

The "poverty line" as we know it came from the work of Mollie Orshansky, a Social Security analyst who began experimenting with a yardstick in 1963. A former U.S. Department of Agriculture economist, she calculated a family's cost for a minimal diet that met basic nutritional standards.

Then, Orshansky - reasoning that food costs constituted about one-third of the typical family budget - multiplied that sum by three.

She sent the numbers to her boss, never guessing that a few years later they would become the official government standard, used both as a statistical measure of poverty and to determine eligibility for government programs.

Although the numbers are adjusted for inflation, the method of determining the poverty threshold - published annually by the Census Bureau - hasn't changed.

But living and spending patterns have changed. Housing and transportation costs each now require a larger share of the family budget than food, according to consumer surveys by the Bureau of Labor Statistics. Child care has become another significant expense.

The official poverty measure is applied identically to people throughout the continental United States - even though costs of living and average incomes vary widely. Alaska and Hawaii are assessed differently. Taxes and medical costs aren't considered; neither is the value of government assistance such as day care vouchers or housing subsidies.

Consider the monthly budget for the family of Tarsha Moreno, a Baltimore single mother with a full-time job - who showed up at a Towson food bank recently for help with food and her electric bill.

Moreno, 34, earns $20,800 a year working for a Hunt Valley collection agency - $3,750 more than the 2000 poverty amount for her household of four.

After taxes and other payroll deductions, Moreno nets about $1,300 a month. She spends $420 for her two-bedroom apartment in Northeast Baltimore; $150 for child care (the rest is subsidized); $140 for electricity. Although she receives some food stamps, she spends $175 of her wages on food - plus $120 to pay off a loan and $50 for diapers.

That leaves less than $250 each month to pay for her hour-long commute to work on public transportation five days a week, her phone bill, laundry, clothing, and household items for her two teen-agers and her 1-year-old. Moreno has not been receiving child support.

Although her children are covered under the Maryland Children's Health Insurance Program, Moreno has no medical insurance. Nor does she have a bank account.

"The system is backwards," Moreno said. "What happened to the people that's already working? Where's the money for the household stuff? Trash bags? Toothpaste?"

Change proves elusive

Orshansky, retired for 18 years and living in Washington, says her work should be updated. "I'd love to see someone come up with something different, whether it is better or not," she said. "But I don't think it's very likely."

Efforts to revise the measure have been made since the 1970s - to no avail.

A panel of experts convened by the National Academy of Sciences worked for several years to revise the formula. In 1995, the group suggested the threshold be based on a contemporary budget for food, clothing, shelter and utilities, and include a small amount for other necessities.

Last year, census researchers developed experimental measures based on the panel's report. Using 1998 data, they found that the percentage of Americans defined as living in poverty - 12.7 - would have grown by 2 or 3 percentage points, depending on the measure used.

The composition of the poor also would have changed. The incomes of some families who received extensive government services would have exceeded the alternative poverty thresholds. Others would fall below the experimental thresholds.

Not everyone believes the aggregate number of poor would grow under a revised measure. Cogan, the Bush adviser who served on the NAS panel - and dissented from its recommendations - said many economists believe inflation has been lower than reported for years.

That, coupled with government programs that pay a large portion of poor families' expenses under welfare reform, could mean the measure has incorrectly identified too many people as poor, Cogan said.

As government officials have recognized problems with the measure, federal programs - such as Head Start, the Children's Health Insurance Program and food stamps - increasingly have been altered to cover people like Moreno, whose income exceeds the poverty threshold.

"The problem, and you already see this, is that the current measure is so bad that serious people [in the field] don't use it any more," said Thomas Corbett, associate director of the Institute for Research on Poverty at the University of Wisconsin, Madison.

Some experts have tried to answer the question of who is poor by including regional variations.

In Maryland the average percentage of people living below the poverty line was 7.8 percent, lowest in the country for the years 1997 and 1998, according to a recent study. But those percentages don't factor in how much families have to pay for necessary items.

In a recent book titled "How Much Is Enough?" economists and analysts at the Economic Policy Institute reported that a family with one adult and two children would have needed between $20,000 and $40,000 in 1996 dollars to afford basics, depending on the region in which they lived. The poverty threshold for such a family in 1996: $12,636.

Using a Baltimore case study, authors Jared Bernstein, Chauna Brocht and Maggie Spade-Aguilar found that a family of four would have needed an income of $34,732 in 1998 to meet basic needs. Even at that level, the family "would have to give up many 'unnecessary' goods that most families take for granted, including restaurant ... meals, vacations, movies, and savings for education, retirement and emergencies."

Cogan, the Bush adviser, said too little comparable regional data exists to establish poverty thresholds in different parts of the country. That, coupled with varying judgments about what a family needs to survive, makes establishing the poverty threshold anything but simple, he said.

"Ultimately, the choice of that measure is a policy choice," he said.

Poverty line: out of date?

Economist say the official federal poverty threshold no longer reflects who is poor in America. This sample budget shows that a Baltimore family of two working parents and two children would have needed an annual income of$34,732 in 1988 to cover basic necessities like food, housing, health care and taxes - more than double the poverty threshold for that year.

Family budget for Baltimore, 1998

Two parents working full time, one 7-year-old, one 3-year-old

Monthly Shares

Food $500.20 17%

Transportation 222.22 8%

Health care 266.65 9%

Housing 628.00 22%

Child care 626.08 22%

Other necessities 338.46 12%

Gross monthly taxes

- federal payroll and federal, state and local income

2,581.61

Total monthly 312.74 11%

Total annual 2,894.36

34,732.28

Poverty threshold for 1998=$16,660

SOURCE: Jared Bernstein, Chauna Maggie Spade-Aguilar, "How Much is Enough? Basic Family Budgets for Working Families," Economic Policy Institute, 2000.

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