Victor Juhasz
This story is part of the Prospect’s series on how the next president can make progress without new legislation. Read all of our Day One Agenda articles here.
It’s often cited that four out of ten Americans do not have enough savings to weather a $400 expense in an emergency. That statistic has taken on deeper meaning as Americans simultaneously experienced the same emergency, the coronavirus pandemic. Smaller, personal emergencies were born from it: health problems, job loss, the death of a loved one. Like the virus, these emergencies were more likely to harm people who are already marginalized by race and class.
Unemployment skyrocketed and is climbing again as COVID-19 surges; more than 20 million people are currently receiving unemployment insurance. It’s likely that more than 50 million people have experienced not knowing where their next meal will come from. And more than eight million Americans fell below the poverty line.
But understanding that last statistic is dependent on what we mean when we say “poverty,” and what exactly is the poverty “line.” Unfortunately, our understanding of economic deprivation is limited by a poverty threshold that is seriously flawed.
The Official Poverty Measure (OPM), based on an outdated calculation designed 60 years ago, is absurdly low. Based merely on income, the measure doesn’t take into account geography, the cost of expenses like child care and housing, or noncash benefits like tax credits. Today, the federal poverty threshold for a family of three is $20,578.
In a reflection of the limits of the measure, federal and state programs often use different interpretations of the OPM to define eligibility for anti-poverty programs. For instance, eligibility for the Supplemental Nutrition Assistance Program (SNAP, commonly called food stamps) is based on gross income at or below 130 percent of the federal poverty guidelines (the programmatic guidelines are derived from the official measure). And in 2011, the Obama administration introduced the Supplemental Poverty Measure, which recognizes regional cost of living and some program benefits, to complement—not replace—the poor absolute measure that is the OPM.
We’ve known that the OPM is a bad measure for some time, yet politics and inertia have kept it intact. But on day one, the incoming Biden administration can drop the OPM entirely and alter poverty measurement so that it better reflects need in the United States—and also lay the groundwork to meaningfully tackle it.
WHILE A DEBATE over the poverty thresholds may seem like a conundrum reserved for statisticians and academics, the way that we measure poverty almost certainly has an effect on how we understand poverty, and thus anti-poverty policies. Surveys consistently point to a higher number than instituted by the OPM when the public is asked to themselves measure the lowest amount of money a family needs to make ends meet.
Underestimating poverty contributes to a “narrative that we accept as a way to create policies around deservingness,” says Anne Price, president of the Insight Center for Community Economic Development. After all, most people experience periods of economic distress at some point. But if only 10.5 percent of Americans are officially in poverty, that maligns economic insecurity as something uncommon—suggesting that the people who fall under that line did it to themselves, rather than suggesting that many, many Americans live paycheck to paycheck, no matter how hard they work.
Some advocacy organizations have developed their own measurements for poverty in the U.S. The Poor People’s Campaign (PPC), for example, is motivated by data showing that 140 million people are poor or low-income—that’s 43.3 percent of the population. The calculation is easy—it’s anyone living at less than 200 percent of the Supplemental Poverty Measure. It includes the approximately 40 million people living under the traditional threshold, as well as about 100 million people who are just above it.
Because the current poverty measure only reflects income, it effectively erases the working poor. The PPC calculation “shifted the landscape of who we’re talking about” when we talk about poverty, says Shailly Gupta Barnes, policy director for the Kairos Center and the Poor People's Campaign. “Now we’re including low-wage workers who are working multiple jobs, living in their cars, can’t afford to pay for heat, electricity, and the medications their families need—it includes this broad swath of people who just aren’t talked about unless they slip into poverty,” she says, recalling the statistic that eight million people “slipped” into poverty because of the pandemic. But with the PPC thresholds, those eight million “were already part of our 140 million. They were already living in precarious condition[s].”
Not having an accurate poverty measure is likely part of the reason we don’t have a higher minimum wage or stronger worker protections, and “makes us out to seem like we have a much larger welfare state than we really do,” says Shawn Fremstad, senior policy fellow at the Center for Economic and Policy Research and author of a thorough Century Foundation paper on altering the poverty line to better reflect reality.
Based merely on income, the Official Poverty Measure doesn’t take into account geography, the cost of expenses like child care and housing, or noncash benefits like tax credits.
The current poverty measure, as I’ve previously written in the Prospect, was somewhat the result of chance. In 1963, an economist in the Social Security Administration, Mollie Orshansky, published a paper on economic instability and hunger around the same time that the federal government was searching for a way to measure poverty. Orshansky’s work measured deprivation by multiplying the cost of the government’s economy food plan by three, as back then people typically spent about a third of their incomes on food. We still use that measure, adjusted only for inflation, and not adjusted for changes in consumption habits, household makeups, living standards, median income, or even food budgeting (food is now about a tenth of a family’s budget).
A Biden administration can immediately alter how poverty is measured by directing the Office of Management and Budget (OMB) to amend Statistical Policy Directive No. 14, cease use of the OPM, and then adopt a new measure. Fremstad argues that OMB can—and should—drop the flawed measure even without an immediate replacement. (This would likely require that the Official Poverty Measure still be used to develop guidelines for program eligibility unless or until new measures are adopted. The administration could also do that by executive action, though it may be trickier. More on that later.)
Biden, in a 2019 speech to the Poor People’s Campaign, used their 140 million statistic when talking about the number of poor people in the U.S. (and was then fact-checked by The Washington Post, in a good illustration of how semantics of words like “poverty” and “poor” often win out over low-income people’s real experiences). If Biden is serious about addressing poverty, changing the measure would show that the administration is committed to confronting the extent of deprivation.
But what would a new measurement look like?
“All poverty is,” says David Brady, professor at the University of California, Riverside, “is a shortage of resources relative to needs.” The question, then, is “How do you measure resources [and] how do you measure needs?”
The simplest measure would be a relative one—something like half of median income. Fremstad says no matter what measure we decide to adopt, we should make a relative measure public, if only to compare ourselves with other countries. The U.S. is included in the Organisation for Economic Co-operation and Development’s (OECD) measure of relative poverty (half of median income), but the U.S. doesn’t announce its publication like the poverty statistics are announced each year—perhaps because its poverty rate is among the highest of OECD countries, at 17.8 percent.
We could also measure poverty using a multidimensional measure, which would allow us to look beyond income and at other measures of deprivation. Estimating different dimensions of poverty could help us focus our efforts on certain problems—like housing access, for example—when they become most urgent.
So many groups have already developed their own measures to show the extent of poverty in the U.S. that developing a new one will look more like choosing from a host of options than taking several years to create something entirely new. A new measure, with a higher income threshold, can include geographical differences and outline the resources necessary to take care of a family—housing, child care, health care costs.
Some anti-poverty advocates, like Fremstad and Gupta Barnes, have recently been developing language to call on the Biden administration to develop such a measure. Besides ensuring that the poverty measure is more expansive, they want the administration to inform the measure with input from the public—including people who have experienced financial hardship.
Whatever measure the administration chooses to develop, Brady and Gupta Barnes both say that Biden should act quickly, because ultimately, the numbers aren’t going to be pretty. A better measure will certainly reveal more poverty in the U.S. If Biden waits, he could be erroneously blamed for what looks like a decline in living standards.
If he did it on day one? That’s all Trump.
The incoming Biden administration doesn’t need Congress in order to adopt a new measure, to start turning the page on the current narrative of economic instability.
Changing the OPM does not necessarily mean that we would immediately expand public-assistance programs that use the OPM to determine eligibility for programs like Medicaid or nutrition assistance. The poverty guidelines developed by the Department of Health and Human Services in order to define eligibility for programs like SNAP or Temporary Assistance for Needy Families (TANF) are derived from the OPM, but are different. The HHS programmatic measure as well as allocations of federal funding based on the OPM are statutory.
But advocates like Fremstad believe that the administration could and should also increase the programmatic guidelines via executive action. While dropping the OPM could signal, says Fremstad, that the country is now rethinking how to measure poverty—and perhaps Congress should be acting too—an OMB rule or regulatory change to expand the programmatic guidelines would be the ultimate signal. Fremstad says these increases should be modest, so they’re not “counterproductive” and too politically charged. But the administration could be “much bolder on the statistical side,” he says.
The incoming Biden administration doesn’t need Congress in order to adopt a new measure, not only to get the numbers right, but to start turning the page on the current narrative of economic instability. Admitting that current statistics grossly underestimate the number of people who face dire economic circumstances in the U.S. will be tough, as it goes against the story we tell ourselves about the United States as a land of prosperity and opportunity. It would indicate that people may be poor not because of their own choices, but because of systems of low-wage labor and discrimination.
Equipped with a better understanding of need in the U.S., we’ll be more prepared to tackle big, systemic policy issues that are the consequences of poverty, like health care and housing. If we want to end poverty, we have to define it first.
