Last week, the Census released new data on income and poverty. The official poverty measure is an important metric, one that tells us what share of people live in extreme economic deprivation in one of the wealthiest countries in the world. Since it’s been in place for nearly 50 years and has been measured fairly consistently, the official poverty measure paints a picture of poverty over time. We know that the share of Americans living at or below the poverty line fell in the 1960s and stayed within a small range over the last four decades or so, generally rising in recessions and falling in expansions. Since 2000, it’s seen a lot more up than down. It held steady in 2014—remaining at 14.8 percent.
The official poverty measure has historical significance, but it has its limitations. It includes Social Security and unemployment insurance as a form of income, but misses some important government supports, like food stamps or the Earned Income Tax Credit. It fails to take into account the fact that the prices of some necessary items, think health care, have grown much faster than overall inflation. It misses some basic costs, such as child-care, which has become increasingly important as women have entered the labor force over the last 50 years. All told, it helps track absolute deprivation, but stops short of measuring what it actually takes to make ends meet or have a modicum of economic security.
For a two-parent, two-child household, living in “official” poverty means earning $24,008 or less, regardless of local costs of living. But an annual salary of slightly more than $24,008 does not make that family well-off, or even provide enough to afford housing and child-care in most communities.
EPI’s Family Budget Calculator shows what it takes to afford the basics of everyday living in 618 metro areas throughout the country. Unlike the official poverty measure, the Family Budget Calculator accounts for a wider range of necessary expenses, like child-care, school supplies, and transportation. Compared with the federal poverty line, EPI’s family budgets provide a more accurate and complete measure of economic security in America. It shows us that, even if a two-parent, two-child household earns $25,000 or even $30,000 a year, they would still struggle to achieve economic security. The suggested family budget for a two-parent, two-child family ranges from $49,114 a year in Morristown, Tennessee to $106,493 in Washington, D.C.
And not only do many families struggle to afford the basics, still more live just on the edge of economic security, unable to weather life’s uncertainties or plan for the future. Notably, the EPI budgets do not include several components of what might be considered a middle-class lifestyle. There are no savings for a rainy day (e.g., job loss or unexpected medical bills), savings for retirement (except through Social Security payments), or investments in children (e.g., enrichment activities or college savings). These are adequate but decidedly modest family budgets—they show what it takes to get by, but not to thrive.
While we have policies to keep people from falling into poverty (e.g. Social Security kept 25.9 million out of poverty in 2014), policy for the past 40 years has fallen short of building a strong middle class. Much more progress could have been made to reduce poverty and build a strong middle class had economic growth over the last four decades been broadly shared. Unfortunately, wage growth has been stagnant for decades for the majority of working people.
The minimum wage, which serves as a minimum standard under which no one’s pay can fall, has been eroded by inflation. Nowhere in the country can a minimum wage worker meet the requirements of the EPI family budget for even a one-person family. Raising the minimum wage will not only help workers living at the poverty line, it will have ripple effects, putting pressure on wages further up the pay scale. And President Obama’s efforts to update overtime regulations will mean higher pay or more leisure time for 13.5 million workers.
The Family Budget Calculator shows the high cost of child-care: In 500 metro areas, child-care beats out rent as the largest expense for a two-parent, two-child family. This is clear evidence that we need to expand supports to make child-care more affordable for more families.
Finally, one of the most critical factors in suppressing wages is the erosion of collective bargaining and the decrease in job quality for working people. Enacting modern labor standards, such as paid family leave and paid sick days, as well as continuing advancements in and enforcement of labor laws, such as greater employer responsibility to franchise and contract workers, and making it easier for workers to form unions and new alliances will improve working conditions, wages, and benefits.
If we want progress, we have to be clear about our goals. Not only should we work to ensure that Americans don’t live in destitution, we should make policy decisions that help families achieve meaningful economic security. Affording the basics, and weathering life’s uncertainties, is a goal for all of us, and it’s one we can achieve.