Poverty
Derivation of the Current Poverty Measure – When the original poverty definition was
developed in 1964 by the Social Security Administration (SSA), it focused on family food
consumption. The U.S. Department of Agriculture (USDA) used its data about the nutritional
needs of children and adults to construct food plans for families. Within each food plan,
dollar amounts varied according to the total number of people in the family and the family's
composition, that is, the number of children within each family. The cheapest of these plans,
the Economy Food Plan, was designed to address the dietary needs of families on an austere
budget.
Since the USDA’s 1955 Food Consumption Survey showed that families of three or more
people across all income levels spent roughly one-third of their income on food, the SSA
multiplied the cost of the Economy Food Plan by three to obtain dollar figures for total
family income. These dollar figures, with some adjustments, later became the official poverty
thresholds. Since the Economy Food Plan budgets varied by family size and composition, so
too did the poverty thresholds. For two-person families, the thresholds were adjusted by
slightly higher factors because those households had higher fixed costs. Thresholds for
unrelated individuals were calculated as a fixed proportion of the corresponding thresholds
for two-person families.
The poverty thresholds are revised annually to allow for changes in the cost of living as
reflected in the Consumer Price Index for All Urban Consumers (CPI-U). The poverty
thresholds are the same for all parts of the country; they are not adjusted for regional, state, or
local variations in the cost of living.
Comparability – Because of differences in survey methodology (questionnaire design,
method of data collection, sample size, etc.), the poverty rate estimates obtained from
American Community Survey data may differ from those reported in the Current Population
Survey, Annual Social and Economic Supplement, and those reported in Census 2000.
Please refer to <http://www.census.gov/hhes/www/poverty/newguidance.html> for more
details.
2000 data are from the U.S. Census Bureau Decennial Census. Data for 2001 and after are from U.S. Census Bureau American Community Survey.
Poverty Status in the Past 12 Months
Poverty statistics in ACS products adhere to the standards specified by the Office of
Management and Budget in Statistical Policy Directive 14. The Census Bureau uses a set
of dollar value thresholds that vary by family size and composition to determine who is in
poverty. Further, poverty thresholds for people living alone or with nonrelatives
(unrelated individuals) vary by age (under 65 years or 65 years and older). The poverty
thresholds for two-person families also vary by the age of the householder. If a family’s
total income is less than the dollar value of the appropriate threshold, then that family and
every individual in it are considered to be in poverty. Similarly, if an unrelated
individual’s total income is less than the appropriate threshold, then that individual is
considered to be in poverty.
How the Census Bureau Determines Poverty Status
In determining the poverty status of families and unrelated individuals, the Census Bureau
uses thresholds (income cutoffs) arranged in a two-dimensional matrix. The matrix consists
of family size (from one person to nine or more people) cross-classified by presence and
number of family members under 18 years old (from no children present to eight or more
children present). Unrelated individuals and two-person families are further differentiated by
age of reference person (RP) (under 65 years old and 65 years old and over).
To determine a person's poverty status, one compares the person’s total family income in the
last 12 months with the poverty threshold appropriate for that person's family size and
composition (see example below). If the total income of that person's family is less than the
threshold appropriate for that family, then the person is considered “below the poverty level,”
together with every member of his or her family. If a person is not living with anyone related
by birth, marriage, or adoption, then the person's own income is compared with his or her
poverty threshold. The total number of people below the poverty level is the sum of people in
families and the number of unrelated individuals with incomes in the last 12 months below
the poverty threshold.
Since ACS is a continuous survey, people respond throughout the year. Because the income
questions specify a period covering the last 12 months, the appropriate poverty thresholds are
determined by multiplying the base-year poverty thresholds (1982) by the average of the
monthly inflation factors for the 12 months preceding the data collection. See the table below
titled “Poverty Thresholds in 1982, by Size of Family and Number of Related Children
Under 18 Years (Dollars),” for appropriate base thresholds. See the table “The 2008 Poverty
Factors” for the appropriate adjustment based on interview month.
For example, consider a family of three with one child under 18 years of age, interviewed in
July 2008 and reporting a total family income of $14,000 for the last 12 months (July 2007 to
June 2008). The base year (1982) threshold for such a family is $7,765, while the average of
the 12 inflation factors is 2.19359. Multiplying $7,765 by 2.19359 determines the appropriate
poverty threshold for this family type, which is $17,033. Comparing the family’s income of
$14,000 with the poverty threshold shows that the family and all people in the family are
considered to have been in poverty. The only difference for determining poverty status for
unrelated individuals is that the person’s individual total income is compared with the
threshold rather than the family’s income.
Individuals for Whom Poverty Status is Determined – Poverty status was determined for
all people except institutionalized people, people in military group quarters, people in college
dormitories, and unrelated individuals under 15 years old. These groups were excluded from
the numerator and denominator when calculating poverty rates.
Specified Poverty Levels – For various reasons, the official poverty definition does not
satisfy all the needs of data users. Therefore, some of the data reflect the number of people
below different percentages of the poverty thresholds. These specified poverty levels are
obtained by multiplying the official thresholds by the appropriate factor. Using the previous
example cited (a family of three with one related child under 18 years responding in July
2008), the dollar value of 125 percent of the poverty threshold was $ 21,291 ($ 17,033x
1.25).