The official poverty rate — the share of Americans whose incomes fall below a certain threshold — is one of the most widely-cited measures of the health of the U.S. economy. Developed in 1963, poverty status is a way of determining eligibility for certain federal assistance programs. While an important measure, the official poverty threshold has flaws, both as a tool for determining eligibility for government subsidies, and as a statistical tool for understanding the prevalence of serious financial hardship in a given area.
The poverty line varies depending on the number of people in a household. The income threshold is $12,140 for an individual and $25,100 for a family of four in the contiguous 48 states.
Perhaps the most significant shortcoming of the official poverty rate is its failure to account for regional differences in cost of living. From New York City to San Francisco, and from Fargo, North Dakota to the Mississippi Delta, the poverty line is the same. Meanwhile, costs of living can vary by as much as 32% from one state to another, and by even more from city to city.
The official poverty rate also does not account for certain government programs intended to help the poor. Such programs include Medicaid, public housing, and SNAP – formerly known as food stamps. The poverty rate is further skewed by not factoring in income from other sources, like capital gains.
First published by the U.S. Census Bureau in 2011, the Supplemental Poverty Measure, or SPM, accounts for these variables and more. For this reason, many argue the SPM is a more accurate way to determine the extent to which Americans in any given region are struggling financially. Not surprisingly, the SPM often tells a very different story than the official poverty rate.
Nationwide, 12.9% of the population, or 41.2 million Americans, live below the poverty line. However, according to the more nuanced SPM, 14.1% of the population, or 45.3 million Americans, are facing serious financial hardship — a difference of 4.1 million people.
24/7 Wall St. calculated the difference between the official poverty rate and the SPM to identify the states where poverty is worse than you think.
In many high-income states with seemingly healthy economies, a far larger share of residents are struggling financially than the official poverty rate suggests. Meanwhile, in states where large shares of residents are living on poverty-level incomes, federal assistance programs appear to be meaningfully reducing financial hardship.