City Limits, July 21, 2008: City’s Poor Look Different Through New Assessment

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By Neil deMause

The new poverty measure unveiled by city officials at the recent NAACP convention presents New York City with a yardstick not just to count the city’s poor, but also to gauge the effect of anti-poverty measures and gain new perspective on New York’s residents including the realization that poverty among the elderly and the employed is significantly worse than previously recognized.

The question now, say both city officials and poverty experts, is how the new statistic will be incorporated into city policies.

Poverty experts have long decried the official federal “poverty line,” which is used for calculating eligibility for programs ranging from Medicaid to WIC. First conceived in the 1960s by a Social Security Administration statistician named Mollie Orshansky, in more recent years it’s come to seem hopelessly outdated. Noting that an Agriculture Department survey had estimated that the average American family spent about one-third of its income on food, Orshansky simply took the cost of a subsistence “food basket,” tripled it, and families earning below that amount were deemed officially poor.

Since then, “the world has changed a lot,” Deputy Mayor Linda I. Gibbs told a briefing at the NAACP gathering filling in for Mayor Bloomberg, who was grounded at LaGuardia by bad weather, and unable to attend as some household costs have fallen and others risen. Food, for example, made up one-third of all household costs 40 years ago, but is now down to about one-eighth. Housing and transportation, meanwhile, combine to make up nearly half of all family expenditures today.

To reflect this new reality, city researcher Mark Levitan a longtime policy analyst with the Community Service Society who was brought on board the mayor’s new Center for Economic Opportunity last year led a team that devised a new measurement, based on recommendations presented to Congress by the National Academy of Sciences in 1995. The new measure first tallies up the average cost of a range of expenses, including food, shelter (which is regionally adjusted for local housing costs), clothing, and other essentials. If a household’s income including that from aid programs like food stamps, the earned income tax credit, and housing subsidies, none of which were counted under the old measure minus the costs of child care, transportation, and out-of-pocket medical expenses, is less than 80 percent of the median expenses for these basic needs, that family is designated as poor.

The resulting poverty line is significantly higher than the old. For a family of four, for example, under the existing federal definition it was $20,444 in 2006, the year that the CEO studied; under the new measure, it is $26,138. Under the new measure, the official city poverty rate would jump from 18.9 percent of the city’s population to 23 percent. The share of the population living below 150 percent of poverty leaps even more dramatically, from 27.8 percent to 44.3 percent.

The demographic breakdown of poverty also changes. Children living with single-parent families see their poverty rate drop slightly (from 44.4 percent to 41.6 percent), and those in two-parent families remains almost level (17.2 percent, up from 16.5 percent), reflecting, according to Gibbs, the success of aid programs targeted at poor children. The proportion of poor elderly, meanwhile, jumps from 18.1 percent to 32 percent largely, explained Gibbs, as a result of deducting medical expenses from available income. The number of working poor families also rises dramatically, from 27.6 percent to 36 percent, a reflection of the fact that more low-wage earners fall below the new, higher income standard.

“This is not surprising to us at all,” says Nancy Cauthen, deputy director of the National Center for Children in Poverty (NCCP) at Columbia University█¬s Mailman School of Public Health, which calculates its own Basic Needs Budgets as an attempt to more accurately measure poverty. “When you take benefits into account, the people we are targeting benefits to are doing better.” In contrast, the large number of working poor reflects the presence of “benefit cliffs,” where families that earn just enough to no longer qualify for benefits nonetheless are unable to pull themselves out of poverty.

Gibbs stressed that the new measure won’t have an immediate effect on programs, since eligibility standards are set by the state and federal governments, not the city. Rather, she said the intent is to spark national discussion, while also moving to “feed this immediately into local programs policy decisions,” specifically citing senior services as an example.

“We know that wages have not kept up with inflation, and that for folks that are working at the lowest end of the income scale, those wages are not enough to satisfy their basic needs,” said Gibbs. The mayor’s initial Commission on Economic Opportunity, she noted, focused on “making work pay” as one of its policy recommendations. “It shouldn’t be that you are working full-time and you can’t have your basic needs met.”

The city’s new poverty measure is likely to fuel national debate about scrapping the 40-year-old poverty line, or at least supplementing it with additional data. Last Thursday, the U.S. House Ways and Means Committee held hearings into a bill by U.S. Rep. Jim McDermott (D-WA) that would direct the Census Bureau to adopt an NAS-style poverty measure alongside the current one.

Mark Greenberg, director of the Poverty and Prosperity program for the Center for American Progress, says that this would come in useful during upcoming debates over changes to federal earned income tax credit and child tax credit, since “under the existing measure, if the earned income tax credit is expanded, it has no effect on the measure of poverty.”

Prospects for adopting the new standard are potentially even brighter on the New York state level, where the issue is less likely to become bogged down in debates over how it would redistribute resources. The state uses the federal poverty rate to determine eligibility for numerous programs, including school lunches, says state Senator Liz Krueger, an Upper East Side Democrat and former poverty advocate who has long supported an updated measure of need. Changing state funding formulas, she hopes, will be easier than changing federal ones, because “we don’t have to deal with 49 other states complaining about New York” getting more money.

Greenberg says these new measures would “provide a significantly improved way to measure poverty over what we have now,” adding, “I think it takes some courage for a city to use a better measure that winds up concluding that a larger share of its residents are poor, and they ought to be commended for doing that.” While historical census data isn’t available to compare current city poverty under the new measure with, say, the same calculation for the start of Bloomberg’s term, the mayor’s office says it will issue a more detailed report on the 2006 figures later this summer, as well as a report later in the year comparing city poverty rates from 2005 through 2007.

Members of Community Voices Heard, a grassroots antipoverty group, welcome the new formula, but remain focused on what tangible outcomes accrue. “It’s an improvement if this measure is taken seriously and additional services are created to address the extreme poverty in the city and even the poverty of those previously not considered poor,” Ketny Jean-Francois, a CVH board member, said in a statement. “It’s great that the CEO invested in creating a new poverty measure; now let’s see them invest in some REAL programs to combat the poverty!”

“This measure also needs to be aggressively promoted at the federal level so that it can impact government programs that serve the millions of people living in poverty across the country who are not currently seen as poor because of an over 40-year-old measurement,” Jean-Francois continued. Presidential aspirant Sen. Barack Obama apparently had a similar thought, endorsing the Bloomberg administration’s effort as a step in the right direction.

Cauthen has quibbles about the specific methodology of the CEO measure she worries that calling $26,000 the “poverty line” for a family of four is misleading, since that’s after deducting transportation, child care, and medical expenses: “You need to have $26,000 left over to pay for food, clothing, shelter, and a few other things.” Her organization’s Basic Needs Budget, in contrast, calculates that for a New York City family of four with a preschooler, their basic needs budget is $65,000 with $20,000 of that going for child care.

Still, Cauthen joins other poverty researchers in calling the new measure “a huge advance” over the old poverty line. “We need a much better poverty measure, and I think this fits the bill. But if we care about expanding the middle class, we need to go beyond a basic needs budget, and look at: What do you need to send a child for college? If you’re going to put something in the bank for a rainy day? If you’re going to be prepared for a medical crisis? A revised poverty measure is long overdue and welcome, but it should be just the beginning.”

– Neil deMause

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