The U.S. Census Bureau recently released a new poverty measure to replace the much-maligned official poverty measure that has not changed since 1963, when Ms. Mollie Orshansky, a well-intentioned Social Security Administration employee, created it.
Scholars and policymakers had long complained the 1963 measure was too simplistic and might give an inflated count (if one is conservative) or an undercount (if one is liberal) of the actual number of Americans in poverty. The old measure did not take into account differences in the cost of living in different areas, and did not count income from sources such as food stamps (now called SNAP) or tax credits like the Earned Income Tax Credit (EITC). It also did not account for large expenses like medical costs and child care. The measure had stayed the same for 47 years for two main reasons — political and practical. Given that adjusting for cost of living, government transfers and other important budget items would likely increase the number of Americans living in poverty, no presidential administration was eager to change the measure.
So what does the new measure show? According to The New York Times, the numbers show a slower rise in the number of Americans in poverty since 2006, and a slightly higher number overall in poverty compared to the previous official measure of 46.2 million. Moreover, the new measure shows a shift in who is poor — from families with children to the elderly. Even with Social Security and Medicare, many elderly are burdened with high medical expenses, which the new measure takes into account. In contrast, poor families with children, who may be eligible for a variety of programs like SNAP, Temporary Aid to Needy Families and the EITC, look better under the new measure once those government transfers are taken into account. It is important to note that the new measure also shows a large increase — around 50 percent — in the number of Americans considered “near poor,” or those with incomes between 100 and 150 percent of the federal poverty line. This group does not benefit as much from the transfer programs as do those who are officially under the poverty line, but live in conditions nearly as dire.
The good news? America’s social safety net is working, in a limited way, to lift some Americans out of poverty — especially those in families with children — and the new poverty measure allows us to recognize this. The bad news? These same programs, proven over and over to work to help Americans who need them most, are under attack in federal budget discussions.
In particular, the EITC, which is a tax credit to low-income working Americans, is impugned by those who consider it a handout to Americans who do not pay taxes, including Republican presidential hopefuls Herman Cain and Michele Bachmann. It is critical to note that those who receive the EITC are only not paying federal income taxes; they still pay payroll taxes and state income taxes just like everyone else. Moreover, the EITC is an incentive to work. Those working at unrelenting, low-wage jobs — usually without health insurance — receive the credit at tax time, which can lift their meager incomes by as much as $4,000. That may not seem like much, but it’s often enough to push the family over the poverty line.
The EITC, along with our other safety net programs, are a lifeline for millions of Americans, and the new federal poverty measure proves just that.
Rachel Kimbro, Ph.D., is an assistant professor of sociology at Rice University and a Rice scholar at the Baker Institute.