It seems the entire world has been confused by the Census and understandable so. This past week saw dueling quotes on the number of people in poverty in the press. There are actually two major measures of poverty for 2010 and the experimental, research measure was released this week. This supplemental poverty measure shows there are more people in poverty, 49.1 million, than the official tally, 46.2 million. The official poverty rate is shown below.
The reason the Census created an alternative poverty measure is the official one, as we all know, doesn't capture the true state of poverty and poor. In other words, if one wants to keep the official poverty rate down, make sure you don't count a lot of expenses required to survive. Below is a quote from the supplemental poverty measure:
The current poverty thresholds do not adjust for rising levels and standards of living that have occurred since 1965. The official thresholds were approximately equal to half of median income in 1963–64. By 1992, one half median income had increased to more than 120 percent of the official threshold.
The official poverty measure doesn't take into account medical costs, the costs of maintaining a job, couples who are not married, child support, geographical differences in cost of living, tax credits and government supplements to income.
The official poverty threshold for a family of 4 is $22,113. The supplemental measure takes into account if one owns their home, has a mortgage or rents. When not accounting for housing status, the supplemental poverty threshold for a family of 4 is $24,343.
The 2010 official poverty rate is 15.1% whereas the alternative, supplemental measure gives a poverty rate of 16%, or 2.5 million more people. In 2009, the official poverty rate was 14.3% and he supplemental poverty rate was 15.3%. By any measure, America has become more poor.
Now, where all of the confusion came about in the press are the definitions of low income. The official poverty report defines low income as double the poverty threshold.
The Associated Press came out blazing with the headline 1 in 2 Americans are poor or low income. That starling statistic threw other Journalists who bother to check their numbers into a tizzy. In turn they issued their own articles, poverty figures questioned, it's really 1 in 3 Americans are poor or low income.
Both press reports are right and wrong, but few seem to realize why that's so. Here's what happened. The Associated Press is quoting the supplemental poverty measure. The Journalists who went and fact checked were quoted the official poverty measures. To make matters just a little more confusing, the supplemental updated the official poverty threshold percentages to include people living in households who are not counted by the official poverty methods. The below table illustrates the difference.
While the supplemental goes into different income levels depending upon all sorts of conditions, very roughly, for a family of four, the difference between the two poverty thresholds is $2230. So, look at the definition of low income, or twice the poverty threshold, the difference between the two rates should be about $4460. The official low income level would become $44,226, while the supplemental low income level would be $48,686. This is for your classic two adult, two kids family.
Now, look at these low income levels and compare that with the median wage, which is not the same as income. The 2010 wage levels tell us over 50% of working people are making less than $27,454 a year. Are you surprised that most of America is not counted as low income? Me too.
The two graphs above show the number of people, or workers in each yearly wage bracket. What you see is the working poor. The largest number of workers, over 16% don't even make $5k a year. Over 25% of all wage earnings are not even pulling $10k a year. Most people are simply not making a living wage and this is how one can get half of America is poor or low income.
Even more telling is the 2010 median income, which runs higher than just wages and salaries. For everyone, including the rich, singles with no kids, families, everyone, the median income for 2010 was $49,445.
Frankly, I think the supplemental poverty measure is more on the money. or lack thereof it. The fact median income and income twice the poverty threshold are so close, tells us half of America is truly in the poor house.