Friday, September 04, 2009

Changing the poverty measurement methodology

The method to measure poverty in the U.S. is very outdated. An alternative method to measure poverty has long been advocated by academics, and is only now being taken seriously by the US government. President Obama has said he would like the government Census to use the method as part of a poverty reduction plan.

The new methodology takes into account other expenditures a family has to make like health, transportation and other essentials. It also counts non-income assistance such as food stamps and medicare. The old method only used food as an expenditure and cash as income.

We have a look today at how the new methodt would effect poverty rates in the U.S.. It would mean a huge increase for the elderly, while a small drop for single mothers. From this Associated Press story, reporter Hope Yen crunches the numbers.

The overall official poverty rate would increase, from 12.5 percent to 15.3 percent, for a total of 45.7 million people, according to rough calculations by the Census Bureau. Data on all segments, not only the elderly, would be affected:
_ The rate for children under 18 in poverty would decline slightly, to 17.9 percent.

_ Single mothers and their children, who disproportionately receive food stamps, would see declines in the rates of poverty because noncash aid would be taken into account. Low-income people who are working could see increases in poverty rates, a reflection of transportation and child-care costs.

_ Cities with higher costs of living, such as New York, Chicago and San Francisco, would see higher poverty rates, while more rural areas in the Midwest and South might see declines.

_ The rate for extreme poverty, defined as income falling below 50 percent of the poverty line, would decrease due to housing and other noncash benefits.

_ Immigrant poverty rates would go up, due to transportation costs and lower participation in government aid programs.

The changes have been discussed quietly for years in academic circles, and both Democrats and Republicans agree that the decades-old White House formula, which is based on a 1955 cost of an emergency food diet, is outdated.

The current calculation sets the poverty level at three times the annual cost of groceries. For a family of four that is $21,203. That calculation does not factor in rising medical, transportation, child care and housing expenses or geographical variations in living costs. Nor does the current formula consider noncash aid when calculating income, despite the recent expansion of food stamps and tax credits in the federal economic stimulus and other government programs. The result: The poverty rate has varied little from its current 12.5 percent.

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