The Census Bureau’s upcoming annual poverty report has been distorted by an outdated measure of poverty, according to testimony at a recent congressional hearing.
“We need a poverty measurement for 2007, not 1963,” said Rep. Jim McDermott, Washington Democrat and chairman of the House Ways and Means subcommittee on income security and family support.
The bureau will issue its report on Aug. 28.
A more realistic measure is needed, Mr. McDermott said, “so we can fully understand how many Americans are denied access to a reasonable standard of living and so we can target resources to those most in need.”
But changing such a fundamental — and politically charged — measure is tricky, specialists said at the Aug. 1 subcommittee hearing.
The official poverty measure — created in the 1960s — was based on food expenditures, said Patricia Ruggles, an economist with the National Research Council of the National Academies.
At that time, a thrifty household spent about one-third of its budget on food, she said. Mollie Orshansky, an economist with the Social Security Administration, multiplied food expenditures by three, according to household size, to find the approximate levels or thresholds of a household’s basic needs.
People whose gross cash incomes don’t meet the official threshold for basic needs — 37 million, or 12.6 percent of the population in 2005 — are considered to be living in poverty.
But this measure “has become increasingly outdated,” University of Maryland sociology professor John Iceland said. “Today, people spend closer to one-sixth or one-seventh of their income on food rather than one-third,” while housing, health care and child care expenses have all escalated, he said.
Specialists told the House panel that while gross income might have been a good financial yardstick in the 1960s, that’s no longer the case: Taxes take a big bite out of incomes. As much as $804 billion in income is unreported. Even low-income families receive uncounted support from the Earned Income Tax Credit, housing and child care subsidies, food stamps, free or reduced-price school lunches and Medicaid.
A 1995 recommendation to revise the poverty measure from the National Academy of Sciences Panel on Poverty and Family Assistance was applauded by several specialists at the House hearing. The new method would cover food, clothing, shelter and utilities, plus adjust for regional housing costs.
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