Building a Better Measure of Poverty Rates

States don't really know how many of their residents are poor.  The current federal poverty measure uses a forty-year old, widely criticized methodology.  It neither accounts for many of the resources poor families receive from the government, such as Food Stamps and the EITC, nor does it, conversely, factor in many additional expenses the poor face that are not accounted for in the federal measure, such as transportation costs, child care and local costs of living.  To address these problems, New York City has established a new set of measures of what income a family needs to provide for basic necessities.  Instead of the $16,242 that the federal government assumes a parent and two children can live on, the new NYC measure assumes the family needs at least $21,702 not to be poor.

While the new measure, developed by the city's Center for Economic Opportunity (CEO), does not immediately change current funding for local programs, it has led to a few preliminary findings that will help policymakers better understand the dynamics of poverty:

  • The NYC poverty rate using the new measure is 23%, opposed to 18.9% using the federal rate.
  • Under the new measure, fewer people are living in extreme poverty (below 50% of the threshold), just 6.5% compared to 7.4% under the official measure. 
  • Under the new measure, the poverty rate for the elderly increases significantly, from 18.1% under the federal measure to 32% under the new one.

"If we are serious about fighting poverty, we also have to start getting serious about accurately measuring poverty,”? said New York City Mayor Michael Bloomberg.  "We can’t devise effective strategies for tackling poverty until we understand its full dimensions.”?   Inspired by New York City's example, the U.S. Congress is holding hearings on July 17th on "Establishing a Modern Poverty Measure" to examine what needs to be done nationally to better measure poverty rates.

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