If we want to fight poverty, the first step is to measure it.  Otherwise, we can’t know the scope of the problem, or where to focus our energies. 

But measuring poverty is easier said than done, not only because the data on low-income families is spotty, but also because there are so many conflicting ideas about what it means to be poor.

Of course, there is an official US definition of poverty, based on federal guidelines first established in 1965 largely through the work of Mollie Orshansky (pictured here).  At that time, typical families spent about a third of their money on food—so federal researchers defined the poverty line as a rock-bottom monthly food budget, multiplied by three.  It was crude, but the best available measure at the time.

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  • Since then, though, the government has simply adjusted the poverty line upwards for inflation every year — ignoring the fact that food prices have gradually fallen in real terms, while housing, health care, and child care costs skyrocketed.  Fast forward 46 years, and the federal poverty line has become almost meaningless—it’s no longer grounded in the real-world cost of living.  In fact, most experts and anti-poverty advocates think that the poverty standard is too low:  you can be well above the poverty line and still be too poor to afford what society considers basic necessities. But the poverty line still drives government programs and services—meaning that some people who genuinely need help aren’t eligible, because they’re not considered “poor.”

    Diana Pierce of Wider Opportunity for Woman (WOW) developed an alternative to the federal poverty guidelines: a “self-sufficiency” standard that measures “how much income a family of a certain composition in a given place needs to adequately meet their basic needs—without public or private assistance.” Unlike the federal measures, the self-sufficiency standard recognizes that different regions have very-different costs of living—and uses real-life data to calculate how much money a family actually needs to get by.

    The University of Washington just released the latest self-sufficiency standards for Washington State.  According to their findings, a Seattle family of one adult and one preschooler needs $40,485 annually—nearly three times the current “poverty” level. Across the Sound in Kitsap County (excluding Bainbridge Island), the same family would have to earn $32,866. In the east part of King County—Bellevue, Issaquah, North Bend—the family would need to earn $48,060. By comparison, half of King County families earn less than $65,000—suggesting that there are quite a few families who fall below the self-sufficiency standard.

    To reach “self sufficiency,” a single King County wage earner needs to earn at least $23.11 per hour—three times the minimum wage—to pay for basic family needs.  Clearly, even a small family is expensive—and the federal poverty level just doesn’t cut it as a tool to determine where people might need help.

    Housing costs weigh heavily in self-sufficiency calculations.  A “self-sufficient” family of one adult and a preschool child in Seattle spends about 30 percent of its income, or $963 per month, on housing.  In contrast, a single “self-sufficient” adult spends 51 percent of her monthly income, or $796 per month, while a family with several children would pay 21 percent of their monthly income, or $1362.

    These numbers show not only the weakness in the federal poverty lines, but also in the standard measure of housing affordability.  The “housing cost-income ratio,” the most widely used measure of affordability, assumes that housing should be no more than 30 percent of a household’s budget.  In reality, the share of income devoted to housing varies widely, from 21 percent to 51 percent, based on family size.

    So the self-sufficiency numbers point toward a new definition not only of poverty, but also of housing affordability:  ideally, both should be based on how much things actually cost, rather than arbitrary or outdated standards.  We’ve also been looking at alternatives to traditional measures of housing affordability including the residual income model of housing affordability but we’ll look at that in a separate post.  

    Underlying any measure of poverty is the question of when government and society should intervene to prevent families from suffering from the impacts of being poor. If we agree that intervention is necessary then establishing the threshold of that ought to be based on the best economics, not arbitrary lines.