Based on food comprising about a third of the average family’s budget, the U.S. government set the poverty threshold in 1963 by multiplying the cost of an economy or nutritionally adequate food plan by three.
Dozens of government programs use that figure, adjusted for inflation, to help determine eligibility for services to low-income families. The poverty line guides access to the Supplemental Nutrition Assistance Program (formerly Food Stamps), the National School Lunch Program, certain parts of Medicaid, and some prescription drug coverage under Medicaid.
In an interview with 24/7 Wall St., Elise Gould, senior economist with Economic Policy Institute, said that one of the biggest weaknesses of the U.S. system is “that [the official poverty rate] is one threshold across the entire country when we know that the cost of living does vary greatly.”
The supplemental poverty measure, which is not used to determine government program eligibility, takes into account the effects of anti-poverty programs like these. The measure also accounts for local housing costs and other expenses such as out-of-pocket medical expenses.
The states where the supplemental poverty rates are highest compared to the official rate therefore tend to have varying combinations of higher housing costs, higher medical expenses, and other generally high costs of living. On the other end of the spectrum, in cases where the supplemental poverty rates are lower than the official rate, there tend to be low housing costs and greater portions of the population benefiting from the earned income tax credit (EITC), for example.
Even with the relatively flawed official poverty rate, anti-poverty programs in the United States remain extremely successful. Social Security keeps millions of elderly Americans and plenty of prime age adults and children out of poverty every year. But as Gould noted, even the SPM leaves out of the equation certain costs such as childcare, and conditions in the United States are not exactly improving. With the ongoing long-term rise of income inequality and continued wage stagnation, “the safety net has had to work even harder.”
Using data from historical tax returns, Economists Emmanuel Saez and Thomas Piketty revealed in 2013 that the accumulation of income at the top in the United States was higher than at any time since the Gilded Age.
To identify the states where poverty is worse and better than you think, 24/7 Wall St. reviewed states where the supplemental poverty rate (SPM) was highest compared to the official poverty rate. We also reviewed states where the SPM was lower than the official rate. These data are three year averages through 2016 from the U.S. Census Bureau’s Current Population Survey. The Supplemental Poverty Measure extends the official poverty measure by taking into account the effects of many of the government programs designed to assist low-income families and individuals that are not included in the official poverty measure.
We also reviewed various data from the Census’ 2016 American Community Survey, including median household income, poverty rates, health insurance coverage rates, and the percentages of each state’s population 65 years and over. 2015 Regional price parities, or cost of living, came from the Bureau of Economic Analysis. September and 2016 annual average unemployment rates came from the Bureau of Economic Analysis.
The sample used in both measures excludes many individuals who might otherwise be considered in poverty. For example, people who are homeless and not living in shelters, and people in prisons, long-term care hospitals, nursing homes and other institutions are not counted.