Measuring Poverty

Special blog post by Lewis Warne, an NCPA research associate.

In 2011 Congress

defunded the Supplemental Poverty Measure (SPM, an). The SPM is an alternative to the Official Poverty Measure (OPM) that has been used since the 1960s.  The goal of the SPM is to provide a more comprehensive picture of poverty by including factors left out of the official measure.

The two major components of any poverty measure are the Poverty Threshold and the Resource Measure.

Poverty Threshold.  The threshold is meant to establish the minimum resources that a family requires. The official poverty measure that most are familiar with bases its threshold on a basket of food goods called the “Economy Food Plan.” Prices are adjusted yearly, multiplied by three, and adjusted for family size to determine the threshold. The 2011 weighted average poverty threshold was $23,021 for a family of four.

The threshold for the Supplemental Poverty Measure is based on the 33rd percentile of spending on food, clothing, shelter, and utilities by families with two children as determined by the Census. This major change considers the population’s spending on basic goods instead of relying on a set basket of goods. The adjustments also include more sophisticated measures of family composition and new location based considerations. Overall the Supplemental Poverty Measure thresholds are more scientific and better reflect the needs of families.

Resource Measure.  The Resource Measure aims to include all resources available for a family to obtain basic needs, including in-kind benefits provided by the government. It also excludes and ignores necessary expenses and taxes that cannot buy basic goods (FCSU). The SPM seeks to consider all resources available to families (see chart):

The graph below shows the difference between the Official Poverty Measure and the Supplemental Poverty Measure:

  • The SPM considers about 3.3 million fewer children under 18 years in poverty, about 18.1 percent of the population compared to  22.3 percent in the OPM
  • About 3.5 million more 18- to -64 year olds would be impoverished, an increase from 13.7 percent to 15.5 percent.
  • The percentage of seniors in poverty would increase from 8.7 to 15.1; more than 2.5 million seniors would now be “in poverty”

The living situation of these populations might not change if the Supplemental Poverty Measure replaces the Official Poverty Measure, but it does provide a clearer picture of poverty in America.

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Comments (4)

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  1. Kyle says:

    Very interesting.. Will the SPM replace the OPM?

  2. Pam says:

    Not likely, unless Congress reallocates funds for it. But there is no doubt that the current measure is outdated, particularly since food purchases take up a much smaller portion of income than they did a half century ago.

  3. Evan Carr says:

    Mollie Orshansky is probably jumping for joy wherever she may be. The SPM seems like a quasi-relative measure, which I feel would be the best adjustment to the current measure. As opposed to the relative measures which Europe uses, I think the quasi-relative measures make more sense because they adjust for in-kind and non-cash benefits, many of which are recieved through social welfare programs. The relative measures, based on a percentage of median income, tend to fall during economic downturns as median income stagnates or declines, despite rises in poverty. Poverity in America by John Iceland is great primer on this topic.

    Quasi-relative measures, like the one developed more than a decade ago by the NAS, would provide a different poverty rate than our current measure which like you said, takes the standard food basket and multiplies by three. The estimates I have seen place food at about 20% of a modern household’s budget. As I see it, the resistance to changing the official measue is twofold. First, changing the measure would mean that the wide range of government agencies that qualify beneficiaries would have to transition to the new measure, certainly a cumbersome task. Second, any change to the measure would likely increase the poverty rate by some percentage. No politician wants to be the elected leader that presides over “A Poverty Crisis!” as the media will aptly dub it.

  4. Gabriel Odom says:

    To diffuse the expected media backlash from switching to the SPM would indeed be difficult – but largely unnecessary.
    Anyone who falls outside the OPM poverty threshold now, but inside the SPM threshold, will not consider themselves any more or less poor just because of some change in government measure. A family of four earning $23,022 per year does not feel less impoverished than a similar family of four earning $23,021 per year – even though the second family is considered “poor” while the first isn’t.