Defining Poverty

Before we can measure poverty, we must first create an accurate definition of it. Although that may seem obvious and self-evident, the New York State government, however, has been disconnected when attempting to do so. There have been additions, revisions, deletions, alterations, and re-revisions to existing measure system that dates back to the 1960’s. Is poverty based solely on housing? Sufficient dieting? Education? Clothing? Utilities?

 

Well, according to the United States Department of Agriculture of the early 1960’s, poverty should be defined only on the ability to provide food for oneself and one’s family. This threshold they created was named the “Economy Food Plan,” which suggested that one third of a family’s total income was used for food alone, and therefore could be multiplied by three to cover all additional needs. You can immediately see the problem with this threshold: it does not take into account the external and supplementary needs of the family accurately enough. Although this may have been enough for a family over half a century ago, today, it is useless: food a family needs is now less than one-seventh of their total spending; today, housing is the most expensive item in a family’s budget. Also, the policies did not take into account the amount of government assistance. While it is true that during the days of the 1960’s there was less government assistance, that is no longer accurate: today there is more help than ever, which comes in the form of Earned Income Tax Credit and Food Stamps. Furthermore, you can see that this official measure provided by the US Department of Agriculture in the early 1960’s is no longer suitable to today’s current situation.

 

In 1995, seeing the issues, Congress requested that the National Academy of Sciences (NAS) issue recommendations in order to revise the measures taken to define poverty. Alternative to the prior official measure, NAS threshold reflects the need for clothing, shelter, and utilities as well as food. In order to estimate this, NAS studied multiple families and their respective spending on said necessities. Then, NAS added more general expenses, such as personal care, household supplies, and non-work-related transportation. Also, NAS allowed for variable housing costs based on geographical differences. In addition to all of the costs NAS considered, NAS also kept in mind the government assistance that created important additional family resources. Finally, NAS also calculated MOOP (medical out of pocket expense), cost of childcare, and transportation to and from work. Though this threshold is the most expansive one thus far, the government did not pay it any attention until 2008, thirteen years after it was conducted.

 

Finally, in March of 2010, the Obama Administration created a Supplemental Poverty Measure (SPM) based off the work and research of NAS. The first report on poverty to use this new measurement system was made in 2011. However, three years early, the New York City Center for Economic Opportunity (CEO) was created and implemented by 2008. This New York City specific measurement adhered to the advice of the NAS thresholds and the guidelines of the Interagency Working Group, an assembly that was then also used for the SPM.

 

Obviously if the CEO’s only change was the way it measured poverty, then the CEO poverty rate would simply be higher than the official rate. That is not necessarily the case, however. The CEO also re-measures income rates and applies any ratio necessary in the redefinition of poverty. After taking a look at these graphs, it is clear that the CEO method of not only defining, but also measuring, poverty is more accurate and therefore more useful in the end. (More illustrative graphs can be found on the Looking Beyond section of Poverty Demographics)