Poverty & Safety Net
Article

Official Poverty Calculations fail to capture families’ true economic situations

Emily Campbell
Chief Executive Officer
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February 28, 2022
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It is rare that we can make a direct association between changes in policy and changes in poverty. Official poverty statistics simply aren’t designed in a way that allows us to connect the interventions that help families make ends meet with rises or falls in the number of individuals living in poverty.

 The 2020 experimental one-year estimates that were released several months ago indicated a large drop in Ohio’s poverty rate.

The first official mid-pandemic poverty data for counties and cities will come when the U.S. Census Bureau releases the much-delayed 2020 American Community Survey 5-Year estimates on March 17. The 2020 experimental one-year estimates that were released several months ago indicated a large drop in Ohio’s poverty rate. Chances are that we’ll also see a decrease in overall poverty for smaller geographies in the state, but we will have to wait and see if Cleveland remained the poorest large city in the country. And the impact of COVID-19 and the economic disruption the pandemic caused will already be dampened in the data by the fact that they are estimates covering 4 pre-pandemic years plus the norm-breaking 2020.

Supplemental Poverty Measures are superior to Official Poverty Measures

The Census Bureau provides poverty statistics using two different poverty calculations. Poverty data in the ACS follows the Official Poverty Measure (OPM) using “a set of money income thresholds that vary by family size and composition to determine who is in poverty.” Money income means pre-tax cash income. It does not include tax credits and noncash benefits such as SNAP, Medicaid health coverage, or housing subsidies. The official poverty measure is the same across the country regardless of cost of living, and is updated every year for inflation. There is general consensus that the OPM is an outdated measure and even the Census Bureau says that “Although the thresholds in some sense reflect a family’s needs, they are intended for use as a statistical yardstick, not as a complete description of what people and families need to live.”

 For the first time in history, poverty in 2020 was lower using the Supplemental Poverty Measure than the official poverty rate.

Recognizing the limitations, the Census Bureau also calculates the Supplemental Poverty Measure (SPM), which does take into account items other than cash income that impact a family’s ability to make ends meet, such as excess medical bills, food assistance like SNAP and free and reduced school lunch, and tax credits. The SPM has been published for a decade. For the first time in history, poverty in 2020 was lower using the SPM than the official poverty rate, likely a reflection of the significant government assistance that came to families in response to the COVID crisis. But the poverty statistics for Cleveland and other local areas won’t take all of those things into account.

Interpreting policy’s impact on poverty calculations

Under official poverty definitions, the additional unemployment insurance payments count, but SNAP emergency allotments don’t. Because of the complexity, it’s easy to misinterpret the impact of policy change on poverty numbers.  

Adopting the SPM as the method to calculate poverty would solve much of this problem. But changing government statistics is tricky, so much so that it became a plot line in Season 3 of the West Wing, which first aired in 2001.  

The unique circumstances of 2020 mean that switching now would show fewer people in poverty, and reflect a more accurate picture of families’ economic circumstances.  

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