15.1 Drawing the Poverty Line

Measuring poverty is crucial for understanding economic well-being and shaping policies. The poverty line, set by the U.S. Census Bureau, determines who's considered poor and eligible for assistance. It's based on family size and adjusted yearly for inflation.

Poverty rates vary across demographics, with children and minorities often facing higher rates. Education levels strongly impact poverty risk. While the income-based measure provides a clear threshold, it has limitations in capturing the full picture of poverty and living standards.

Measuring Poverty

Poverty Line Calculation and Implications

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• Poverty line minimum income level needed to secure necessities for life
  • Determined by U.S. Census Bureau
  • Varies based on family size and composition (larger families higher threshold)
• Calculation based on cost of minimum food diet in 1963
  • Multiplied by three to account for other expenses (housing, clothing, transportation)
  • Adjusted annually for inflation using Consumer Price Index (CPI) to maintain purchasing power
• Implications determine eligibility for government assistance programs
  • Medicaid, Supplemental Nutrition Assistance Program (SNAP), housing assistance, Temporary Assistance for Needy Families (TANF)
  • Used as benchmark for assessing nation's economic well-being (higher poverty rate indicates more economic hardship)
  • Influences public policy decisions related to poverty alleviation (funding for assistance programs, minimum wage laws)

Poverty Rate Trends Across Demographics

• Overall U.S. poverty rate 11.4% in 2020
  • Represents 37.2 million people living below poverty line
• Poverty rates vary by age group
  • Children under 18 highest at 16.1% (11.6 million children)
  • Adults aged 18-64 at 10.4% (21.2 million adults)
  • Adults 65 and older lowest at 9.0% (4.9 million seniors)
• Poverty rates differ by race and ethnicity
  • Non-Hispanic Whites lowest at 7.3% (14.2 million people)
  • Hispanics at 17.0% (9.8 million people)
  • African Americans highest at 19.5% (8.1 million people)
  • Asians at 8.1% (1.9 million people)
• Educational attainment impacts poverty rates for adults 25 and older
  • Less than high school diploma highest at 24.7% (5.4 million adults)
  • High school diploma or equivalent at 12.7% (9.3 million adults)
  • Some college or associate's degree at 8.4% (6.9 million adults)
  • Bachelor's degree or higher lowest at 4.0% (4.1 million adults)

Strengths and Limitations of Income-Based Poverty Measure

• Strengths provide clear, quantifiable threshold for determining poverty status
  • Allows for comparisons across different demographic groups (age, race, education level)
  • Enables comparisons across geographic areas (states, counties, cities)
  • Helps policymakers target assistance programs to those most in need (eligibility based on income)
• Limitations do not account for non-cash benefits
  • SNAP, Medicaid, housing assistance not included in income calculation
  • These benefits can significantly improve living standards for low-income families
  • Does not consider regional variations in cost of living (higher in urban areas)
  • Fails to capture multi-dimensional nature of poverty
    • Other factors impact well-being (health, education, housing quality, access to services)
  • Based on outdated assumptions about family expenditures from 1963
    • Food now constitutes smaller share of family budgets (housing, healthcare larger)
  • Does not account for impact of taxes and tax credits on disposable income
    • Earned Income Tax Credit (EITC), Child Tax Credit (CTC) can boost income for working families