New data show fewer children, more seniors in poverty
Monday, November 7th, 2011
Numbers released today (pdf) by the Census Bureau paint a fresh and complex picture of poverty in America. For the first time, the figures count the impact of benefits like food stamps, tax credits and housing assistance. And for the first time, the data reflect not just income but spending, factoring in medical expenses and child-care costs.
Under the new measure, the number of children in poverty is lower than under the traditional poverty calculations. The number of seniors in poverty is higher.
At a time when many benefit programs are facing deep cuts, the data shows that the social safety net is having a big impact, particularly for children. And it shows that for seniors, the economic situation may be far more dire than previously understood.
“The main driving force behind this measure was to give policy makers a handle on the effectiveness of policies,” says Kathleen Short, a researcher at the Census Bureau and the author of the new report.
The new numbers reflect many “policies that are aimed at the people whose incomes are at the bottom end of the income distribution. The official measure simply did not include a lot of those programs.”
What the data show
According to the new data, more people overall are in poverty than under the official measure, both as a percentage of the population and in raw numbers. But among specific age groups, differences emerge. For children, the new measure lowers the poverty rate by more than 4 percentage points. Among the elderly, the poverty rate rises by almost 7 percentage points.
“In the past we've certainly seen that story that the elderly are not as poor as children. But it's often because the benefits that are not included in the official measure are targeted at families with children,” Short says.
Seniors tend to have incomes just above the official poverty line, Short says, while households with children are more likely to be below the official poverty measure. The supplemental measure counts benefits that lift children up, and counts expenses that drop seniors into poverty.
Because so many seniors are living on the precipice of poverty, “anything you subtract from their income is likely to bring them below the line,” she adds.
The main drain on seniors' income is medical costs. Once they are subtracted from their income, the poverty rate for seniors skyrockets. Without counting out-of-pocket medical costs, just 8.6 percent of seniors are in poverty. But once those costs are factored in, the poverty rate for seniors rises to 15.9 percent. That's because the new measure doesn't do much to change how much money the elderly are taking in, since Social Security benefits are already counted under the official measure. The income seniors have doesn't change much under the supplemental calculations, but the demands on their income are more clearly reflected.
For households with children, the new measure generally lifts their income significantly, while only slightly raising their expenses. Low-income families can get thousands of dollars through the Earned Income Tax Credit, which is counted under the supplemental measure, but not under the official poverty calculations. Without the credit, 22.4 percent of children are living in poverty, according to the new data. With the credit, that number drops to 18.2 percent. Food stamps also have a big impact for children: Without the food assistance, the poverty rate for children rises by 3 percent.
There are racial and regional differences as well. The poverty rates for non-Hispanic whites, Asians and Hispanics are all higher under the supplemental measure than under the official poverty rates, while those for blacks are lower. The poverty rates in the Northeast and West rise under the supplemental measure and fall in the South and West.
Comparing old and new poverty rates
The official poverty measure, first developed in the 1960s, simply takes an estimate of spending on food and multiplies it by three. The official measure takes into account only cash income, pre-tax, which means that any non-cash benefits, or any post-tax spending, gets left out. (See our earlier story on the history of the poverty line.)
The new measure is far more nuanced. The supplemental measure includes a wide range of in-kind government benefits that can functionally raise household income, including the Earned Income Tax Credit, heating and housing assistance, WIC benefits for women and young children and food stamps. It also takes into account factors that can drop household income, including payroll taxes, child care and commuting expenses, and perhaps most significantly, out-of-pocket medical expenses.
The alternative measure also has a new, broader definition of a household unit, counting essentially all people who share an address. The official measure counts only “people who are related by either birth, marriage or adoption,” Short says. The new definition accounts for households where families are doubled-up — a group whose numbers rose significantly since the recession began, according to earlier Census data.
It also means people who are unmarried but living together, for example, now count as one household unit. “We are now taking account of the fact that people who identify themselves as unmarried partners are likely to be sharing resources,” Short says.
The expanded household unit may explain why fewer African-Americans are below the poverty line under the supplemental measure, since “they are more likely to be in the new units,” Short notes, and the larger households may include people who are bringing in income.
While the supplemental measure is currently for research purposes only, the data is certain to be dragged into fights around cuts to public benefits and social programs. The calculation itself is also likely to be scrutinized, says Ron Haskins, a senior fellow at the Brookings Institution.
“We're not at the end of the trail for sure. There are going to be objections to the measure,” Haskins says.
But, he adds, “I would say today is a good day.”