Economists long have criticized the official poverty rate as inadequate. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have actually shrunk to a much smaller share, more like one-seventh.
The official formula also fails to account for other expenses such as out-of-pocket medical care, child care and commuting, and it does not consider noncash government aid, such as food stamps and tax credits, when calculating income.
In reaction to some of the criticism, the government in 2010 asked the Census Bureau to develop a new measure, based partly on recommendations made by the National Academy of Sciences. It released national numbers based on that formula for the first time last year. This year’s release features a 50-state breakdown on poverty, prompted in part by local officials such as New York City Mayor Michael Bloomberg who have argued that the official measure does not take into account urban costs of living and that larger cities may get less federal money as a result.
The goal is to help lawmakers to better gauge the effectiveness of anti-poverty programs, although it does not replace the Census Bureau’s official poverty formula.
Among the findings:
—If it weren’t for Social Security payments, the poverty rate would rise to 54.1 percent for people 65 and older and 24.4 percent for all age groups.
—Without refundable tax credits such as the earned income tax credit, child poverty would rise from 18.1 percent to 24.4 percent.
—Without food stamps, the overall poverty rate would increase from 16.1 percent to 17.6 percent.
‘‘These figures are timely given the looming expiration of two key measures that account for part of these programs’ large antipoverty impact: federal emergency unemployment insurance and improvements in refundable tax credits’’ such as the Earned Income Tax Credit, said Arloc Sherman, a senior researcher at the Center for Budget and Policy Priorities, a liberal-leaning think-tank. ‘‘Letting these measures expire at year’s end could push large numbers of families into poverty.’’
Census report: http://www.census.gov/prod/2012pubs/p60-244.pdf