Danny Wesneat at the Seattle Times ($10 an hour with 2 kids? IRS pounces) has found a truly compelling story about poverty and how society and government often fail to understand and adequately measure poverty. Westneat writes about a woman with two kids making ends meet in Seattle on $18,992 a year. Impossible, the IRS figured, given what it actually costs a family to live in the city. So they conducted an audit of the family’s finances. The story lays out the challenge of measuring, reducing and preventing poverty in stark personal terms.
What does it mean to be poor? Over the summer, I wrote in a post called “A Poor Measure of Poverty” about the struggle poverty advocates have had for decades trying to quantify at what point a person is poor and when they’re “poor enough” to need assistance. I also wrote about housing and the residual income model as an alternative to the 30 percent Housing Cost Income Ratio that defines whether housing is affordable or not.
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There is a growing sense of dissatisfaction with current measures of poverty and affordability because too often the current measures define some people out of poverty who are truly struggling and would truly benefit from help. The current poverty level is based on a hypothetical food budget. Anything under that level of income—in 2008 for example the poverty level for the family in the article would have been about $17,346—is considered poverty. But more often than not, local governments and agencies end up defining poverty as 150 or 200 percent of “the poverty level,” because “poverty” income, just as the IRS concluded, is set way too low. Part of the problem is that poverty metrics don’t consider local prices and what it actually costs to survive day to day.
Similarly, the current housing affordability standard doesn’t take into account the cost of necessities in addition to housing costs. The residual income model (here is an article by Michael Stone on the residual income approach) tries to address this by determining housing affordability based on whether a household has enough income left over after paying for housing to take care of other critical items like food, energy, and health care.
In my previous posts I mentioned the idea of a socially acceptable standard of living measure. The best examples of this work I have found come from the United Kingdom’s Joseph Rowntree Foundation and the work of Diana Pierce, who created the Self Sufficiency Standard for the University of Washington’s Center for Women’s Welfare. These measures get a lot closer to helping us understand what “poor” means.
Why does measurement of poverty and affordability matter? Because policy makers, developers, and housing and sustainability advocates are all asking the question “is it affordable to live in dense, compact communities?” and if it isn’t “why not, and how can we make it affordable?” The sense has been that it is too expensive for poor families to live in the city, forcing them into unsustainable compromises in housing, work, and childcare (not to mention transportation costs that arise when they work far from home).
Westneat’s article outlines the biggest obstacle to efforts to shift away from highly standardized measures based on ratios or set levels of income. Understanding and measuring poverty comes down to something that is really hard to pin down: defining a measurable but socially acceptable minimum standard of living. How poor is poor enough to qualify for subsidies or tax relief? And how uncomfortable does a family have to be before we help them?
In Westneat’s story, the family in question made compromises like living with relatives which, according to Pierce’s standard means the family has fallen below the level that could be considered self-sufficient. But the family’s housing is clearly affordable (the mom is paying 26 percent of her income toward rent) and they are “making it” on what many wouldn’t consider livable at all, hovering just above the poverty line. But part of what makes it work for them is the relief they get from the Earned Income Tax Credit, a program designed for families like this one. Many families are living in Seattle and other big cities (some perhaps in legal or illegal accessory dwelling units) only by making just these kinds of compromises. Are these compromises a bad thing or should they be encouraged?
In an ironic—some might say Kafkaesque–twist, the IRS looked at the numbers for the household in the article and decided—just like poverty advocates might—that this family couldn’t possibly survive in the city on $18,000 per year. But the IRS concluded that the family must be hiding additional income, rather than adjusting its basic assumptions about poverty. Poverty and housing advocates would certainly argue that the family in Westneat’s story needs assistance to get their own home and that the woman should be given opportunities to get training to improve her potential earnings. Others will say “leave them alone, that is exactly what the Earned Income Tax Credit is for.”
In any event, the numbers don’t help us with Westneat’s case study.
The answer to the question of “what is a measurable and socially acceptable minimum standard of living?” depends on how we judge, as a society and culture, what poverty and self sufficiency look like and what government and non-profit agencies should do when they intervene. The best intentioned efforts to redefine affordability or poverty will always run into the values of the culture, which are harder to change than even the oldest metric of income or spending.
The family in the article might be doing just fine and perhaps might even be an model of how tools like the tax credit and permitting accessory dwelling units might work together to make living in compact communities affordable. The real challenge for government and for advocates is to decide, usually for others, what falls into the category of basic need versus something that would make life more comfortable but isn’t necessary. Setting this kind of standard is far more difficult than quantifying income based on regional costs for goods, services and housing.