Understanding Poverty Measures and the Call to Update Them

By Kolesnikova, Natalia; Liu, Yang | Regional Economist, July 2012 | Go to article overview

Understanding Poverty Measures and the Call to Update Them


Kolesnikova, Natalia, Liu, Yang, Regional Economist


Poverty means different things in different regions. The World Bank often defines living on less than $2 per day per person as the main poverty indicator in developing countries.1 The European Union considers 60 percent of the national median disposable income after social transfers as the threshold of being at risk for poverty.2

In the United States, individuals whose family income is less than the official poverty threshold are in poverty. The threshold itself depends on the size of the family, as well as the number of those in the family who are under 18 or are at least 65. For example, in 2010 a family of two adults with two children under 18 was living in poverty if its annual income was below $22,113; a family of four adults was living in poverty if its annual income was below $22,491.

As the table shows, the poverty rate in the United States rose to 15.3 percent in 2010, up 4 percentage points from a decade earlier.3 In the Eighth Federal Reserve District, which is served by the Federal Reserve Bank of St. Louis, all seven states and major metropolitan areas saw a similar trend-the poverty rate rose between 3.6 percentage points and 6.5 percentage points from 2000 to 2010. The increase was even bigger for the population under 18 years old.

Does the increase in the poverty rate mean more Americans fall short of a desired standard of living? Or does the increase mean more people lack the resources necessary for basic needs? To be able to answer these questions, we need a better understanding of poverty threshold.

History of U.S. Poverty Gauges

The official U.S. poverty measures are based on studies conducted by Social Security Administration economist Mollie Orshansky. In the 1960s, Orshansky created a poverty threshold using the cost of the Department of Agriculture's economical food plan. Orshansky assumed that U.S. families spent a third of their income on food and, thus, she used three as the multiplier to obtain the poverty threshold. It indicates the minimal monetary income required to pay for basic needs. If a family's total pretax monetary income is below the poverty threshold, then the family has inadequate resources for day-to-day necessities; every member in the family is considered in poverty.

In 1969, the U.S. government adopted this poverty threshold as the official statistical definition of poverty. The poverty threshold is used, for example, to estimate the number of Americans living in poverty. The U.S. Department of Health and Human Services uses a somewhat simplified version of Orshansky's poverty threshold as the official poverty guidelines.4 The poverty guidelines are commonly used for government administrative purposes, such as determining the eligibility for public assistance programs.

Limits of the Official Measures

For decades, the poverty measures have been criticized for their limitations. Complaints include that these measures are outdated, provide incomplete information and are not location-specific.

In addition, the U.S. economy has changed significantly since the 1960s, and the standard of living has been substantially improved. Yet the methodology behind the poverty threshold has remained unchanged. The 1960s economical food plan was "designed for temporary and emergency use when funds are low." 5 The nutrition offered by this plan no longer reflects what is considered to be adequate nutrition for Americans in the 2010s. As American families spend a much smaller portion (about one-eighth) of their income on food than they did 45 years ago, Orshansky's assumption and multiplier of three used for calculating the poverty threshold also have become outdated.6

The fact that the poverty threshold does not take into account other living costs and social benefits also raises some concerns. Poor families spend a substantial portion of income on clothing, shelter, utilities and out-of-pocket medical expenses. The official poverty measures are likely underestimating the true poverty level because they do not reflect such costs. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Understanding Poverty Measures and the Call to Update Them
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.