Why Are We Still Relying On An Outdated Poverty Level?

In a country where alarming numbers of people are living in poverty, it seems like it would be critically important to use an accurate metric for assessing poverty, both for the purpose of keeping statistics and for developing benefits that serve the needs of low-income people. Yet, the United States is relying on an extremely outdated mechanism for calculating poverty, which causes direct harm across the country on a daily basis. Why would the country rely on this? And what would a more updated version look like?

The poverty level in the US is based on one thing: a subsistence food package. It takes the price of basic necessities like milk and bread and uses that to extrapolate the cost of living. This creates a benchmark; if people are making less than the cost of living, they’re living in poverty. If they’re making more, they’re above the line. How much more determines where they fit into the larger scheme of things and whether they might be eligible for partial benefits; for example, some programs offer financial assistance to people making 133% of the federal poverty level. One of the reasons they do that, of course, is because the level doesn’t work.

When this system for measuring poverty was developed in the 1950s and 1960s, the United States was an extremely different place economically. Using food to measure the cost of living may have made sense, but that’s not the case today, because now, families face a host of complex costs that aren’t accounted for simply by looking at a commodity basket of foods. The price of bread, in other words, has little to do with whether someone can afford to stay alive.

Housing is eating up a growing percentage of incomes in the United States, especially for people on the lower end of the income scale. Housing in the 1950s and 1960s was cheaper, even after adjustments for inflation; it’s not just that a dollar went further in those days, in other words, but that real estate is simply more expensive. Consequently, whether buying or renting, people need to spend more to get comparable housing, yet housing costs aren’t included in the poverty level.

Likewise, medical expenses have skyrocketed. So have costs for things like childcare, commuting, and other facts of life that weren’t as much of a concern when the poverty level was developed. For that matter, entirely new classes of expenses have arisen and they aren’t factored for at all either; credit card and student loan debt, for example, can be a critical part of an individual’s cost of living, yet they show up nowhere on poverty level calculations. There is no way to account for them, and thus you end up with people who are, on the surface, making plenty of money, but who are actually broke.

They aren’t poor by government standards, but they live like people making much less than them because so much of their income is going to housing, debt servicing, and medical expenses. When these costs aren’t accounted for in poverty level calculations, it means they can’t access services like government health care, income-based repayment and forbearance for loans, or low-income housing that would cut their expenses and allow them to start developing a savings so they could theoretically get out of the financial pit they’ve fallen into.

Forced into might be a better turn of phrase, because a number of systems in the US collide to keep people in a state of enforced poverty. These systems interact with each other to wrap around young people in particular, who are struggling with an economy where they have a number of obstacles and few helping hands. Contrast the experiences of my father and I; both of us came from poor backgrounds, both of us went to college. One of us went on to graduate school and the other did not, because one of us graduated with no debt, lived in an era when housing was cheap and accessible, and had access to benefits to help him succeed in school. Adjusted for inflation, we made approximately the same amount of money in our first years as college graduates, yet I’m flailing financially when he was doing just fine. There’s something wrong with this picture.

There are two primary reasons why the United States does not want to adjust the poverty level, despite internal agitation from government agencies concerned about the situation, as well as advocates on the outside.

The first, of course, is that it would make the government look bad. Overnight, huge numbers of people in the United States would suddenly become poor. Certainly no Presidential Administration wants to be behind the wheel for that one, and the United States doesn’t want to undermine its global position. Suddenly revealing an increased number of residents living in poverty would reduce the nation’s standing on the global stage, and the US is very concerned with image.

Secondly, of course, it would require a massive reworking of government benefits. The US is already struggling with budget problems on a federal, state, and local level. Changing the poverty guidelines would result in a flood of new applications for benefits from people who should have been accessing them all along, and it would cause a leap in expenses that the government is not equipped to deal with. In no small part because it ate into a lot of these funds for other purposes instead of working on building them up to prepare for this eventually inevitable transition; at some point, we are going to have to admit that there are more people living in poverty than the US wants to talk about, and we’re going to need to address their needs.

And that adjustment is going to have to involve a comprehensive overhaul of the way we look at the cost of living, including not only multiple factors (food, housing, debt, healthcare expenses) but also location, another key issue. It costs more to live in San Francisco than Akron, and that means we need more precise regional breakdowns to adequately determine how much people need to sustain a decent standard of living where they are.