The New Poverty Measure

The poverty rate has long needed an update. The way the United States officially defines poverty has not changed since the methodology was developed in the early 1960s. At that time, the average household devoted one-third of its budget to food. The poverty threshold was set at three times the food spending required for a minimum diet and has remained unchanged since then except for annual cost-of-living adjustments.

The world has changed, however. The average household devotes a much smaller share of its budget to food and much more to housing, transportation, health care, and child care. The poverty population is still officially defined by its cash income, although many of the poor receive food stamps, housing subsidies, tax credits, and other benefits.

For years the National Academy of Sciences, the Census Bureau, and the Bureau of Labor Statistics have been working to create an updated measure of poverty. Now they have, and the result is called the Supplemental Poverty Measure (SPM). How much does the modernized measure change the count of the poor? Actually, not much--which is somewhat reassuring. The percentage of people in poverty in 2010 climbs from the official 15.2 percent to a slightly higher 16.0 percent. The number of poor climbs from 46.6 million to 49.1 million. The 2010 poverty threshold for a four-person family with two adults and two children increases from $22,113 to $24,343.

Perhaps the most interesting change is this: blacks are no longer the poorest Americans. Their poverty rate in 2010 falls from the official 27.5 percent to 25.4 percent--a decline of more than 2 percentage points. Meanwhile, the Hispanic poverty rate climbs from the official 26.7 percent to 28.2 percent, making Hispanics the poorest Americans.

Because defining poverty is fraught with political drama, the SPM is not now and for the foreseeable future will not be the official poverty measure. According to the Census Bureau, "the SPM will be an additional macroeconomic statistic providing further understanding of economic conditions and trends."

Source: Census Bureau, The Research Supplemental Poverty Measure: 2010