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Policy Points from Iowa Fiscal Partners

Posts tagged poverty

Dumbing down definition of poverty

Posted June 11th, 2019 to Blog

If you wanted to reduce the number of people defined as being in poverty, without reducing poverty itself, what might you do? You could always mess with the numbers.

The Center on Budget and Policy Priorities has a solid report out today showing how a Trump administration proposal would do just that. Authors Arloc Sherman and Paul van de Water examine the administration’s proposed alternative to the way cost-of-living adjustments are made to the official poverty guidelines.

The first problem, of course, is that the official poverty guidelines have almost nothing to do with the cost of living. They are an outdated formula — they are a half-century old while, not surprisingly, families’ spending needs have changed. We have shown this regularly at the Iowa Policy Project with our Cost of Living in Iowa research.

Here is what our report, by Peter Fisher and Natalie Veldhouse, noted last year:

Cost of Living Threshold Is More Accurate than Federal Poverty Guideline

Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. However, the federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago. The calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food. Omitted entirely from the guideline, child care is a far greater expense for families today…. Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago.

Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 above shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines. In fact, family supporting income even with public or employer provided health insurance ranges from 1.1 to 3.0 times the federal poverty guideline for the 10 family types discussed in this report. Most families actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs. Even with public health insurance, the family supporting income exceeds twice the poverty level in all cases except the two-parent family with one worker.

Because the guidelines do matter in the computation of eligibility for work-support programs, it is essential that they are not eroded further to disadvantage low-income families. As the CBPP authors note, not only is the poverty line itself too low to reflect basic needs, but the annual cost-of-living adjustment, the Consumer Price Index for All Urban Consumers (CPI-U), also is flawed:

Prices have been rising faster than the CPI-U does for the broad categories of goods and services that dominate poorer households’ spending. The poorest fifth of households devote twice as large a share of spending to rent as the typical household, for example, and the cost of rent rose 31 percent from 2008 to 2018, compared to 17 percent for the overall CPI-U. In addition, recent studies find that low-income households may face more rapidly rising prices than high-income households even for the same types of goods, possibly because low-income households have fewer choices about where and how to shop.

The Trump plan would make that worse, substituting another cost-adjustment measure that slows the pace of upward adjustments in the poverty guidelines. The plan would magically declare that some people below the current poverty line are no longer poor.

Messing with the numbers is never an answer to identifying the challenges one might address with better public policy. Seriously analyzing the relevant ones is essential.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org

Number of Poor Iowans Remains High, Income Growth Not Widely Shared

IOWA CITY, Iowa (September 18, 2014) — More Iowans remained in poverty four years after the recession than before, new data from the Census Bureau showed Thursday. 

The American Community Survey (ACS) indicated that 12.7 percent of Iowans — about 379,127 people — were in poverty in 2013, up from 11 percent in 2007, the year the last recession started.

“Nearly 1 in 8 Iowans were living in poverty in 2013, that’s less than $24,000 a year for a family of four and $12,000 a year for an individual. These new Census numbers highlight the fact that many people have not yet recovered from the recession and shows the need to do more to help struggling Iowans afford basics like decent housing, nutritious food, transportation and reliable child care,” said David Osterberg, founding director of the Iowa Policy Project, part of the Iowa Fiscal Partnership. 

In the region, Minnesota had the lowest poverty rate of 11.2 percent, while Illinois had the highest at 14.7 percent. Wisconsin was at 13.5 percent and Nebraska at 13.2 percent. But Iowa is still below the national rate of 15.8 percent. 

Other Key points for Iowa from the release of the 2013 ACS data:

  • Iowa’s poverty rate of 12.7 percent compared with 11 percent in 2007 and 9.7 percent in 2001. There was no change from the 2012 poverty rate of 12.7 percent
  • Child poverty was 15.7 percent in 2013 (about 111,119 children), up from 13.1 percent in 2007 and 12 percent in 2001.
  • Median income was $52,229 in 2013, changing little from the 2001 inflation-adjusted dollars, but dropping from $53,132 in 2007.

The median annual income in Iowa adjusted for inflation increased slightly between 2012 and 2013 but is down about $900 in real dollars since the start of the recession. Yet, other sources show that incomes at the top have grown and the gap between the top and bottom and top and middle have widened. 

“In addition to successful public policies like SNAP (food aid) and the Earned Income Tax Credit, increasing the federal minimum wage would be a step in the right direction to bring more Iowans out of poverty, ” said Heather Gibney, research associate at the Iowa Policy Project. “Making it a little easier for people to move up the economic ladder not only helps struggling families but also makes our economy stronger for all of us.”

 

IFP News: Income Down, Poverty Up Since ’07

Iowans in slow recovery from Great Recession

PDF of this release

IOWA CITY, Iowa — More Iowans remained in poverty three years after the recession, new data from the Census Bureau showed Thursday.

The American Community Survey (ACS) indicated 12.7 percent of Iowans — about 377,500 people — were in poverty in 2012, up from 11 percent in 2007, the year the last recession started.

“These are the signs we have been seeing across the board in our research,” said David Osterberg, founding director of the Iowa Policy Project, part of the Iowa Fiscal Partnership. “Whether you’re looking at jobs, or income, or poverty, or food insecurity, we simply have not caught up with where we were before the Great Recession.”

Other key points for Iowa from the release of 2012 ACS data:

•       Iowa’s poverty rate of 12.7 percent compared with 11 percent in 2007 and 9.7 percent in 2001. The change from 2011 — a drop of 0.1 of a percentage point — was not statistically significant.

•       Child poverty was 15.6 percent in 2012 (about 110,200 children), up from 13.1 percent in 2007 and 12 percent in 2001.

•       Median income was $50,957 in 2012, changing little from 2001 in inflation-adjusted dollars, but it dropped from $52,371 in 2007.

“Public policy needs to give people the tools to lift themselves out of poverty, and at the same time boost the economy,” said Charles Bruner, executive director of the Child & Family Policy Center, also part of the Iowa Fiscal Partnership. “We have those kinds of tools in place — such as SNAP, or Food Stamps — but many of those same tools are under assault in Congress.”

In the U.S. House, lawmakers Thursday debated legislation that would cut SNAP benefits to an estimated 3.8 million beneficiaries.

“Look at these numbers today,” Osterberg said. “How can we see over 100,000 kids in Iowa in poverty and not realize this is a problem that needs to be addressed?”

Reports from the Iowa Fiscal Partnership are at www.iowafiscal.org.

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Note: A simple comparison of the Current Population Survey and the American Community Survey is available at http://www.census.gov/hhes/www/poverty/about/datasources/factsheet.html.