The official poverty measure has been criticized for decades for being outdated, insensitive to geographic differences in cost of living, and unable to account for the expenses and government benefits that raise or lower a household’s available resources.  Responding to these concerns, the Census Bureau has created a new method for estimating poverty: the Supplemental Poverty Measure (SPM).  The SPM was used to calculate poverty rates for 2010 using the 2011 Current Population (CPS) Survey Annual Social and Economic Supplement (ASEC). The SPM incorporates many innovations to the measurement of poverty, including adjusting for geographic differences in cost of living, and adjusting income for a variety of benefits and expenses.  The SPM thresholds are based on out-of-pocket spending on food, clothing, shelter, and utilities. Benefits counted as income include Supplemental Nutritional Assistance (SNAP), National School Lunch Program, Supplementary Nutrition Program for Women, Infants, and Children (WIC), Low-Income Home Energy Assistance (LIHEAP), and housing subsidies.  Expenses subtracted from income include taxes, work related expenses, child care costs, child support paid, and medical out-of-pocket expenses.

 

Actual 2010 poverty thresholds were higher for the SPM compared to the official poverty threshold.  For a two adult, two child family the official threshold was $22,113 in 2010, compared to $24,343 for the SPM (not accounting for housing status).  Estimated poverty rates with the SPM fell for children but rose for adults, particularly those ages 65 and older.

 

The difference in poverty rates between the old and new measure may seem relatively minor: from 15.2% under the official measure to 16.0% under the SPM.  Much of the change at the lower end of the income scale comes from movement from severe poverty (less than 50% of the poverty threshold) to just under the poverty level (from 50% to 99.9% of the poverty threshold).  This may be as expected, as the very poor are most likely to qualify for assistance programs that help stave off severe hunger and homelessness, but whose benefits are not large enough to lift families out of poverty.  A striking finding in comparing the SPM to the official poverty measure is the large number of families who seemed financially secure, but who under the SPM are much closer to the poverty line than previously estimated.  Under the official measure, 35.8% had incomes four times the poverty line or higher.  With the SPM, we see that about half as many (17.3%) have incomes four times the poverty line or higher.

 

The SPM is currently being used only as an alternative measure of poverty in the United States, while the official poverty measure remains in place to guide program eligibility and funding distribution.  The SPM shows us that the percentage of individuals just above the poverty line (100 to 199% of the poverty line) is much larger than the official poverty measure tells us: 31.8% rather than 18.8%.  Many of these individuals live in families with a working adult but without any source of health coverage.  Many have spend a larger proportion of their income on housing, child care and out-of-pocket medical expenses.  These are the families for whom a slight increase in earned income results in the loss of food or housing assistance under current eligibility guidelines.  The much higher number of people falling into the near-poor category under the SPM should serve as a red flag that poverty is a looming reality for millions of families who must balance the high cost of housing, health care and child care each month against uncertain wages in a difficult economy.  Many of these families are categorically excluded from assistance programs based on present income guidelines.