Deconstructing the Poverty Line

| 7/13/2010 5:28:25 PM


Back in March, the Census Bureau announced that it is developing a (long-awaited) new way to measure U.S. poverty, which will supplement our current (and woefully outdated) federal yardstick. What’s so misleading about the current measure? Dollars & Sense has the answer. As Jeannette Wicks-Lim, a research professor at the Political Economy Research Institute at UMass-Amherst, writes:

The problem isn’t just that the poverty line is too low. Anyone can multiply the poverty line by two and use that to define poverty; that’s how eligibility for subsidy programs like reduced-price school lunches is determined. The official poverty line, however, actually represents a standard of living that deteriorates year after year.

The problem is that the Census Bureau adjusts the poverty line every year for overall inflation with the “Consumer Price Index for All Urban Consumers” (CPI-U). To calculate the CPI-U, a team of Census Bureau surveyors asks consumers about their purchases and determines the cost of a typical “basket” of goods and services purchased [such as food, housing, child care, health care, and transportation].

The change in the price tag of this basket from one year to the next is the overall inflation rate. The flaw in using the CPI-U to adjust the poverty line is that the budget of a low-income house hold is very different from that of a middle-income household.

Health care and child care take significantly bigger bites out of a lower-income family’s average budget than they do in the CPI-U’s everyperson “basket,” Wicks-Lim explains, and both of those costs have been rising far faster than inflation. (57 and 50 percent respectively between 1999 and 2009, while inflation rose just 29 percent).