Measuring Poverty

How does one measure poverty -- and what difference does it make?

Since the 1960s, the US Government has measured poverty based on the results of a 1955 study that showed that poor Americans spent roughly a third of their after-tax income on food.

Since then, the government has determined the poverty level by simply tripling the annual cost of groceries.

But even while being updated for inflation, that model has been criticized for being out of date. According to the federal Bureau of Labor Statistics, for example, today's families spend just one-eighth of their income on food (though this is clearly changing in recent inflationary months), with more money going to transportation, child care and housing.

And that says nothing about how the cost of living varies from city to city and state to state.

Given the high cost of living in New York City, the NYC government recently revised the way it measures poverty. The results are eye-opening.

The New York Times reports:

Under the new model, announced by Linda I. Gibbs, the city’s deputy mayor for health and human services... the poverty rate in New York City would increase to 23 percent of the population, compared with the official level of roughly 19 percent. Also, fewer people in the city would fall into the category of extreme poverty, partly because the new measure factors in government aid programs like housing assistance, food stamps and tax credits....

According to the current federal measure, fewer than one in five New Yorkers 65 or older are poor. But under the new model, that figure grows to one in three, largely because higher medical costs are taken into account....

Under the new calculus, the poverty threshold for a family of two adults and two children in New York City would be a $26,138 annual income compared with the official level of $20,444.

The change could affect local programs and policy decisions, like how the city cares for the elderly; city officials hope that the new model will be adopted by other cities and states, and will also start a national re-examination about the way poverty is gauged, according to the New York Times report.

The city’s formula was developed by its Center for Economic Opportunity and modeled on a proposal developed by the National Academy of Sciences.

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