What is the real measure for poverty?

The federal poverty rate is a much used measure for setting social policy.  It is the basis for calculating eligibility for federal and state programs.  In discussions on health reform, the poverty rate is being used for establishing recommendations on providing subsidies to pay for health insurance and calculating the number of people who would require subsidies.

However, there is a growing concern that the current method for calculating poverty is wrong (Source: "On the level: Federal poverty standard doesn't translate well for today's families," The Columbus Dispatch, May 13, 2008).  Concerns with the current method for calculating poverty include: the basis for calculating need is dated; the income amount is pre-tax, which fails to account for the growing tax burden since the formula's inception; and cost of living varies across the country.

According to the National Center on Poverty in Children, "Failure to update the federal poverty level for changes in the cost of living means that people who are considered poor today by the official standard are worse off relative to everyone else than people considered poor when the poverty measure was established. The current federal poverty measure equals about 29 percent of median household income, whereas in the 1960s, the poverty level was nearly 50 percent of the median" (Source: "How is poverty measured in the United States?", National Center on Poverty in Children)

The National Academy of Sciences (NAS) reviewed the poverty formula in the 1990s and issued a series of recommended changes to it. According to Patricia Ruggles of NAS, "Under the NAS approach, a market basket of basic goods including food, clothing, shelter, and a small allowance for other needs would serve as the basis for a new set of poverty thresholds.  Unlike our official thresholds, these thresholds would be adjusted for differences in costs of living in different parts of the country.  The method for adjusting for differences in family sizes would also be updated to reflect today’s family needs.  Finally, these thresholds would be updated periodically as people’s consumption patterns—and thus, their ideas about what constitute “basic needs”—changed over time" (Source: "Testimony Before the Subcommittee on Income Security and Family Support of the House Committee on Ways and Means," April 1, 2007).  She adds that this proposed formula would increase the income threshold for poverty, though this increase would be less than other several other suggested formula changes.

This topic may be part of what is discussed at Ohio's first Poverty Summit, which will be held on May 28th (Source: "Poverty Summit to tackle needs in Ohio," The Columbus Dispatch, May 13, 2008).  Governor Strickland, who will be speaking at the conference, may announce the formation of poverty task force to examine the issues related to poverty in Ohio.