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What is poverty? Definition and Measurement
What is poverty definition and measurement.
How is poverty measured in the United States? The two federal poverty measures in the U.S.
Each year, the U.S. Census Bureau counts people in poverty with two measures. Both the official and supplemental poverty measures are based on estimates of the level of income needed to cover basic needs. Those who live in households with earnings below those incomes are considered to be in poverty.
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Collective poverty, concentrated collective poverty, case poverty.
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poverty , the state of one who lacks a usual or socially acceptable amount of money or material possessions. Poverty is said to exist when people lack the means to satisfy their basic needs. In this context , the identification of poor people first requires a determination of what constitutes basic needs. These may be defined as narrowly as “those necessary for survival” or as broadly as “those reflecting the prevailing standard of living in the community.” The first criterion would cover only those people near the borderline of starvation or death from exposure; the second would extend to people whose nutrition, housing, and clothing, though adequate to preserve life, do not measure up to those of the population as a whole. The problem of definition is further compounded by the noneconomic connotations that the word poverty has acquired. Poverty has been associated, for example, with poor health, low levels of education or skills, an inability or an unwillingness to work, high rates of disruptive or disorderly behaviour, and improvidence. While these attributes have often been found to exist with poverty, their inclusion in a definition of poverty would tend to obscure the relation between them and the inability to provide for one’s basic needs. Whatever definition one uses, authorities and laypersons alike commonly assume that the effects of poverty are harmful to both individuals and society.
Although poverty is a phenomenon as old as human history, its significance has changed over time. Under traditional (i.e., nonindustrialized) modes of economic production, widespread poverty had been accepted as inevitable. The total output of goods and services, even if equally distributed, would still have been insufficient to give the entire population a comfortable standard of living by prevailing standards. With the economic productivity that resulted from industrialization , however, this ceased to be the case—especially in the world’s most industrialized countries , where national outputs were sufficient to raise the entire population to a comfortable level if the necessary redistribution could be arranged without adversely affecting output.
Several types of poverty may be distinguished depending on such factors as time or duration (long- or short-term or cyclical) and distribution (widespread, concentrated, individual).
(Read Indira Gandhi’s 1975 Britannica essay on global underprivilege.)
Cyclical poverty refers to poverty that may be widespread throughout a population, but the occurrence itself is of limited duration. In nonindustrial societies (present and past), this sort of inability to provide for one’s basic needs rests mainly upon temporary food shortages caused by natural phenomena or poor agricultural planning. Prices would rise because of scarcities of food, which brought widespread, albeit temporary, misery.
In industrialized societies the chief cyclical cause of poverty is fluctuations in the business cycle , with mass unemployment during periods of depression or serious recession . Throughout the 19th and early 20th centuries, the industrialized nations of the world experienced business panics and recessions that temporarily enlarged the numbers of the poor. The United States’ experience in the Great Depression of the 1930s, though unique in some of its features, exemplifies this kind of poverty. And until the Great Depression, poverty resulting from business fluctuations was accepted as an inevitable consequence of a natural process of market regulation . Relief was granted to the unemployed to tide them over until the business cycle again entered an upswing. The experiences of the Great Depression inspired a generation of economists such as John Maynard Keynes , who sought solutions to the problems caused by extreme swings in the business cycle. Since the Great Depression, governments in nearly all advanced industrial societies have adopted economic policies that attempt to limit the ill effects of economic fluctuation. In this sense, governments play an active role in poverty alleviation by increasing spending as a means of stimulating the economy. Part of this spending comes in the form of direct assistance to the unemployed, either through unemployment compensation , welfare, and other subsidies or by employment on public-works projects. Although business depressions affect all segments of society, the impact is most severe on people of the lowest socioeconomic strata because they have fewer marginal resources than those of a higher strata.
In contrast to cyclical poverty, which is temporary, widespread or “ collective ” poverty involves a relatively permanent insufficiency of means to secure basic needs—a condition that may be so general as to describe the average level of life in a society or that may be concentrated in relatively large groups in an otherwise prosperous society. Both generalized and concentrated collective poverty may be transmitted from generation to generation, parents passing their poverty on to their children.
Collective poverty is relatively general and lasting in parts of Asia, the Middle East , most of Africa, and parts of South America and Central America . Life for the bulk of the population in these regions is at a minimal level. Nutritional deficiencies cause disease seldom seen by doctors in the highly developed countries. Low life expectancy , high levels of infant mortality, and poor health characterize life in these societies.
Collective poverty is usually related to economic underdevelopment. The total resources of many developing nations in Africa, Asia, and South and Central America would be insufficient to support the population adequately even if they were equally divided among all of the citizens. Proposed remedies are twofold: (1) expansion of the gross national product (GNP) through improved agriculture or industrialization, or both, and (2) population limitation. Thus far, both population control and induced economic development in many countries have proved difficult, controversial, and at times inconclusive or disappointing in their results.
An increase of the GNP does not necessarily lead to an improved standard of living for the population at large, for a number of reasons. The most important reason is that, in many developing countries, the population grows even faster than the economy does, with no net reduction in poverty as a result. This increased population growth stems primarily from lowered infant mortality rates made possible by improved sanitary and disease-control measures. Unless such lowered rates eventually result in women bearing fewer children, the result is a sharp acceleration in population growth. To reduce birth rates, some developing countries have undertaken nationally administered family-planning programs, with varying results. Many developing nations are also characterized by a long-standing system of unequal distribution of wealth —a system likely to continue despite marked increases in the GNP. Some authorities have observed the tendency for a large portion of any increase to be siphoned off by persons who are already wealthy, while others claim that increases in GNP will always trickle down to the part of the population living at the subsistence level.
In many industrialized, relatively affluent countries, particular demographic groups are vulnerable to long-term poverty. In city ghettos , in regions bypassed or abandoned by industry, and in areas where agriculture or industry is inefficient and cannot compete profitably, there are found victims of concentrated collective poverty. These people, like those afflicted with generalized poverty, have higher mortality rates, poor health, low educational levels, and so forth when compared with the more affluent segments of society. Their chief economic traits are unemployment and underemployment, unskilled occupations, and job instability. Efforts at amelioration focus on ways to bring the deprived groups into the mainstream of economic life by attracting new industry, promoting small business, introducing improved agricultural methods, and raising the level of skills of the employable members of the society.
Similar to collective poverty in relative permanence but different from it in terms of distribution, case poverty refers to the inability of an individual or family to secure basic needs even in social surroundings of general prosperity. This inability is generally related to the lack of some basic attribute that would permit the individual to maintain himself or herself. Such persons may, for example, be blind, physically or emotionally disabled , or chronically ill. Physical and mental handicaps are usually regarded sympathetically, as being beyond the control of the people who suffer from them. Efforts to ameliorate poverty due to physical causes focus on education, sheltered employment, and, if needed, economic maintenance.
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How the Census Bureau Measures Poverty
Following the Office of Management and Budget's (OMB) Statistical Policy Directive 14, the Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty. If a family's total income is less than the family's threshold, then that family and every individual in it is considered in poverty. The official poverty thresholds do not vary geographically, but they are updated for inflation using the Consumer Price Index (CPI-U). The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).
For historical information, see the History of the Poverty Measure page in the About section of the Poverty subtopic site.
Money Income: Income Used to Compute Poverty Status
The income used to compute poverty status includes (before taxes):
- Unemployment compensation
- Workers' compensation
- Social Security
- Supplemental Security Income
- Public assistance
- Veterans' payments
- Survivor benefits
- Pension or retirement income
- Income from estates
- Educational assistance
- Child support
- Assistance from outside the household
- Other miscellaneous sources
Money income does not include:
- Capital gains or losses
- Noncash benefits (e.g. food stamps and housing subsidies)
- Tax credits
Poverty Thresholds: Measure of Need
Poverty thresholds are the dollar amounts used to determine poverty status.
The Census Bureau assigns each person or family one out of 48 possible poverty thresholds.
- Thresholds vary by the size of the family and age of the members.
- The same thresholds are used throughout the United States (they do not vary geographically).
- Thresholds are updated annually for inflation using the Consumer Price Index for All Urban Consumers (CPI-U).
- Although the thresholds in some sense reflect a family’s needs, they are intended for use as a statistical yardstick, not as a complete description of what people and families need to live.
To calculate total family income, the incomes of all related family members that live together are added up to determine poverty status. If an individual or group of individuals (such as housemates) are not living with family members, their own individual income is compared with their individual poverty threshold.
Thus, all family members have the same poverty status, and some families may be composed of single unrelated individuals.
If total family income:
- Is less than the poverty threshold for that family - that family and everyone in it is considered to be in poverty.
- Equals or is greater than the poverty threshold - the family is not considered to be in poverty.
People Whose Poverty Status Cannot Be Determined
Poverty status cannot be determined for people in:
- Institutional group quarters (such as prisons or nursing homes)
- College dormitories
- Military barracks
- Living situations without conventional housing (and who are not in shelters)
Additionally, poverty status cannot be determined for unrelated individuals under age 15 (such as foster children) because income questions are asked of people age 15 and older and, if someone is under age 15 and not living with a family member, we do not know their income. Since we cannot determine their poverty status, they are excluded from the “poverty universe” (table totals).
Family A has five members: two children, one mother, one father, and one great-aunt.
Step 1: Determine the family’s poverty threshold for that year
The family’s 2022 poverty threshold (below) is $35,801.
Step 2: Calculate the total family income for the same year
Suppose the members’ incomes in 2022 were:
- Child 1: $0
- Child 2: $0
- Mother: $13,000
- Father: $12,500
- Great-aunt: $11,000
Thus, Family A’s total income for 2022 was $36,500.
Step 3: Compare the family’s total income with the poverty threshold
The total family income divided by the poverty threshold is called the Ratio of Income to Poverty.
Income / Threshold = $36,500 / $35,801 = 1.02
The difference in dollars between family income and the family’s poverty threshold is called the Income Deficit (for families in poverty) or Income Surplus (for families above poverty).
Income – Threshold = $36,500 - $35,801 = $699
Since Family A’s total income was greater than their poverty threshold, they are considered not “in poverty” according to the official definition.
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What Is Poverty?
Understanding poverty, aspects of poverty, discrimination and poverty, how poverty is measured, how to reduce poverty.
- Poverty FAQs
The Bottom Line
What's Poverty? Meaning, Causes, and How to Measure
James Chen, CMT is an expert trader, investment adviser, and global market strategist.
Investopedia / Laura Porter
The term poverty refers to the state or condition in which people or communities lack the financial resources and essentials for a minimum standard of living . As such, their basic human needs cannot be met. Poverty-stricken people and families may go without proper housing, clean water, healthy food, and medical attention. Each nation may have its own criteria for determining the poverty line and counting how many of its people live in poverty. It's important to remember that poverty is a socioeconomic condition that is the result of multiple factors—not just income. These factors include race, sexual identity, sexual orientation, and little to no access to education, among others.
- Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.
- Poverty-stricken people and families might go without proper housing, clean water, healthy food, and medical attention.
- Poverty is an individual concern as well as a broader social problem.
- Welfare programs are used by governments to help alleviate poverty.
- Poverty is the result of multiple factors, not simply income.
Poverty refers to the lack of adequate financial resources such that individuals, households, and entire communities don't have the means to subsist or acquire the basic necessities for a flourishing life. This means being so poor as to struggle to obtain food, clothing, shelter, and medicines.
Poverty is both an individual concern as well as a broader social problem. On the individual or household level, not being able to make ends meet can lead to a range of physical and mental issues. At the societal level, high poverty rates can be a damper on economic growth and be associated with problems like crime, unemployment , urban decay, education, and poor health.
Governments often put social welfare programs in place to help lift individuals, families, and communities out of poverty. Some countries have stronger welfare states (social safety nets) than others. The U.S., for instance, tends to be much more individualistic and shuns welfare programs. European countries, in comparison, have a much broader range of welfare programs and support for those in need.
Poverty in the U.S.
Poverty status in the United States is assigned to people who do not meet a certain income threshold, which is set by the Department of Health and Human Services (HHS) . Poverty rates in the United States, or the percentage of the U.S. population living in poverty, are calculated by the U.S. Census Bureau .
When measuring poverty, the U.S. Census Bureau excludes the following people:
- Institutionalized people
- People living in military quarters
- People living in college dormitories
- Individuals under the age of 15
According to the latest Census, 37.9 million people in the U.S. lived in poverty in 2021, up from 37.2 million in 2020.
Each year, the Census Bureau updates its poverty threshold statistics. The table below shows the 2022 income thresholds for those in poverty. Each column represents the number of people living in a household under the age of 18.
- In 2022, the poverty income threshold for a family of four with two children under the age of 18 is $27,750 per year.
- In 2022, for two people over age 65 with no children under 18, the poverty threshold comes in at $18,310 per year.
- We can see that the income level for the poverty threshold increases for families with more children under age 18.
The poverty thresholds, as well as the number of under-18 children in a home, are important because they help determine how government aid can be allocated, such as food assistance and medical care. The measurement for those in poverty uses pretax income or income before taxes are taken out by the Internal Revenue Service (IRS) .
Poverty has decreased in developed countries since the Industrial Revolution . Increased production reduced the cost of goods, making them more affordable, while advancements in agriculture increased crop yields , as well as food production.
The international poverty line is a monetary threshold under which an individual is considered to be living in poverty. This figure is calculated by taking the poverty threshold from each country—given the value of the goods needed to sustain one adult—and converting it into U.S. dollars. The current international poverty line is $2.15 per day.
Many people around the globe still struggle to make ends meet. According to the World Bank , an estimated 719 million people lived in extreme poverty—defined as surviving on less than the $2.15 per day line—by the end of 2020.
It's estimated that more than 40% of the world's population lives in poverty, with the United States scoring the highest among developed nations. According to a report from Frontiers, communities of color are more susceptible to poverty because of "racist notions of racial inferiority and frequent denial of the structural forms of racism and classism" globally and within the U.S.
COVID-19 was responsible for plunging roughly 100 million more people into extreme poverty, according to the World Bank.
Poverty and Children
The impact of poverty on children is substantial. Children who grow up in poverty typically suffer from severe and frequent health problems; infants born into poverty have an increased chance of low birth weight, which can lead to physical and mental disabilities.
In certain developing countries, poverty-stricken infants are nine times more likely to die in their first month compared to babies born in high-income countries. Those who live may have hearing and vision problems.
Children in poverty tend to miss more school due to sickness and endure more stress at home. Homelessness is particularly hard on children because they often have little to no access to healthcare and lack proper nutrition, which often results in frequent health issues.
What Causes Poverty?
Poverty is a difficult cycle to break and often passes from one generation to the next. It is often determined by socioeconomic status, ethnicity, gender, and geography. Many people are born into poverty and have little hope of overcoming it. Others may fall into poverty because of negative economic conditions, natural disasters , or surging living costs, as well as drug addiction, depression, and mental health issues.
Access to good schools, healthcare, electricity, clean drinking water, and other critical services remains elusive for many and is often determined by socioeconomic status, gender, ethnicity, and geography. Other root causes of poverty include:
- Limited to no job growth
- Poor infrastructure
- Conflict and war
- High cost of living
- Social barriers
- Lack of government support
For those able to move out of poverty, progress is often temporary. Economic shocks, food insecurity, and climate change threaten their gains and may force them back into poverty.
Typical consequences of poverty include alcohol and substance abuse, little to no access to education, poor housing and living conditions, and increased levels of disease. Heightened poverty is likely to cause increased tensions in society as inequality increases. These issues often lead to rising crime rates in communities affected by poverty.
As noted above, poverty isn't simply related to income levels. In fact, there are a number of factors that can push people into or below the poverty line. Discrimination is just one of those issues. Put simply, people are prevented from living with and enjoying certain rights because of who they are. Here's why.
In some cases, governments may put certain laws and regulations that prevent certain individuals or communities from accessing services, such as healthcare, education, or social services. They may also be denied access to the labor market and/or housing, which can prevent them from reaching a suitable standard of living. In other cases, deep-rooted societal beliefs can isolate individuals, families, and entire communities.
Some of the most common groups of people who may experience this type of discrimination include (but aren't limited to):
- People living with HIV/AIDS
- Black, Indigenous, and People of Color
- Women, including single mothers
- Members of the LGBTQ+ community
According to statistics from the Williams Institute at the UCLA School of Law, 21% of gay men experience poverty while 23% of lesbians are affected. The school found that same-sex couples are more likely to live in poverty than other couples and children of LGBTQ+ couples are particularly vulnerable. Black same-sex couples are twice as likely to live in poverty than other Black couples.
Poverty is commonly measured using income thresholds in many countries, including the United States. Centralized bodies like the Census Bureau collect data and update the information on an annual basis based on inflation . This information, which is reported through the Consumer Price Index for All Urban Consumers (CPI-U) , generally includes income thresholds compiled from different sizes and types of families/households. Each family member in a household that falls under the threshold is considered to be in poverty, according to the Census Bureau.
Certain types of individuals are not included in the count as their level of poverty cannot be determined. These groups include:
- People within certain group settings like prisons and nursing homes
- Individuals living in military barracks
- Those living in college dorms
- People under the age of 15 whose income cannot be determined
Keep in mind that using income thresholds is just one way that countries measure poverty. But there are other ways to determine who lives above and below the poverty line. Some countries may use an absolute figure like the one used by the World Bank. As noted above, the organization determined that people who live below the $2.15-per-day limit are in poverty.
The United Nations and the World Bank are major advocates of reducing world poverty. The World Bank has an ambitious target of reducing poverty to less than 3% of the global population by 2030. Some of the actionable plans to eliminate poverty include the following:
- Installing wells that provide access to clean drinking water
- Educating farmers on how to produce more food
- Constructing shelter for those in need
- Building schools to educate disadvantaged communities
- Providing enhanced access to better healthcare services by building medical clinics and hospitals
For poverty to be eradicated as the World Bank sets out to do, communities, governments, and corporations need to collaborate to implement strategies that improve living conditions for the world’s poor. Among these strategies may include boosting socioeconomic conditions, fighting and eliminating systemic racism, establishing minimum wages that align with the cost of living, providing paid leave, and promoting pay equity among other things.
What Countries Have the Highest Poverty Rates?
The countries with the highest poverty rates include Equatorial Guinea (76.8%), South Sudan (76.4%), Madagascar (70.7%), Guinea Bissau (69.3%), and Eritrea (69.0%).
Which States Have the Highest Poverty Rates?
The states with the highest poverty rates were Mississippi (18.7%), Louisiana (17.8%), New Mexico (16.8%), West Virginia (15.8%), and Arkansas (15.2%).
There is no single source of poverty. Poverty is often determined by socioeconomic status, ethnicity, gender, and geography. Many people are born into poverty and have little hope of overcoming it, while others may fall into this situation due to negative economic conditions, natural disasters, or surging living costs—as well as drug addiction, depression, and other mental health issues. Conflict and geopolitical unrest can also lead to poverty as families are displaced.
How Is Poverty Measured?
Like many other countries, poverty in the U.S. is measured by a set of income thresholds that vary by family size and composition. These thresholds are supplied by the Census Bureau and are updated annually to account for inflation, as measured by the Consumer Price Index for All Urban Consumers. Other countries do not use an absolute threshold, but instead a relative level of income below which the poverty line is established. For instance, a country may say that the bottom 10% of all earners constitute those in poverty.
According to the latest figures supplied by the U.S. Census Bureau, the states with the highest poverty rates are Mississippi, Louisiana, and New Mexico.
How Can Poverty Be Solved?
The answer to this question is complicated and nuanced. If it were easy or obvious, poverty would no longer be such a big issue. Social welfare programs and private philanthropy are ways to provide for those in poverty, along with access to essentials like clean water, good food, and adequate healthcare. However, more is needed. Programs that encourage impoverished individuals to obtain skills, jobs, and education are also important as a longer-term cure.
Poverty is defined as the state or condition where people and communities cannot meet a minimum standard of living because they lack the proper resources. These include (but aren't limited to) financial resources, basic healthcare and education, clean drinking water, and infrastructure. Living in the socioeconomic condition of poverty is a result of multiple factors not simply including race, sexual identity, sexual orientation, and access to education, among others. Organizations like the United Nations and the World Bank, which say that poverty will continue to grow well beyond 2030, urge nations to fight poverty by implementing policies and regulations that can drastically improve the quality of living for all communities.
U.S. Department of Health & Human Services. " Poverty Guidelines ."
U.S. Census Bureau. " Poverty - Surveys & Programs ."
U.S. Census Bureau. " How the Census Bureau Measures Poverty ."
United States Census Bureau. " Income, Poverty and Health Insurance Coverage in the United States: 2021 ."
U.S. Census Bureau. " Income and Poverty in the United States: 2020 ."
U.S. Census Bureau. " Poverty Thresholds ."
U.S. Department of Health & Human Services. " Programs that Use the Poverty Guidelines as a Part of Eligibility Determination ."
The World Bank. " Fact Sheet: An Adjustment to Global Poverty Lines ."
The World Bank. " Global Progress in Reducing Extreme Poverty Grinds to a Halt ."
Frontiers. " Poverty, Racism, and the Public Health Crisis in America ."
The World Bank. " Poverty ."
National Library of Medicine. " Distribution and Determinants of Low Birth Weight in Developing Countries ."
The World Bank. " A Child Under 15 Dies Every Five Seconds Around the World – UN Report ."
UNICEF. " Levels and Trends in Child Mortality ."
UCLA School of Law Williams Institute. " New Patterns of Poverty in the Lesbian, Gay, and Bisexual Community ."
The World Bank. " Ending Extreme Poverty ."
World Population Review. " Poverty Rate by Country 2023 ."
USDA. " Poverty ."
U.S. Census Bureau. " Percentage of People in Poverty by State Using 2- and 3-Year Averages: 2017-2018 and 2019-2020 ."
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How is poverty measured?
Poverty is measured in the United States by comparing a person’s or family’s income to a set poverty threshold or minimum amount of income needed to cover basic needs. People whose income falls under their threshold are considered poor.
The U.S. Census Bureau is the government agency in charge of measuring poverty. To do so, it uses two main measures, the official poverty measure and the Supplemental Poverty Measure, both of which are described in this FAQ.
Official Poverty Measure
The Census Bureau determines poverty status by using an official poverty measure (OPM) that compares pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963 and adjusted for family size.
The OPM uses calculations of these three elements—income, threshold, and family—to estimate what percentage of the population is poor.
The official poverty estimates are drawn from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC), which is conducted in February, March, and April with a sample of approximately 100,000 addresses per year.
In 2016, the most recent year for which data are available, the OPM national poverty rate was 12.7 percent. There were 40.6 million people in poverty.
The CPS ASEC questionnaire asks about income from more than 50 sources and records up to 27 different income amounts. Income is defined by the OPM to include, before taxes, the following sources:
- Unemployment and workers’ compensation
- Social Security
- Supplemental Security Income
- Public assistance
- Veterans’ payments
- Pension or retirement income
- Child support
- Educational assistance
- Other miscellaneous sources
The OPM does not include as income noncash government benefits such as Supplemental Nutrition Assistance Program (SNAP) benefits and housing assistance.
Poverty thresholds, the minimum income needed to avoid poverty, are updated annually for inflation using the Consumer Price Index , and adjusted for family size, composition, and age of householder.
OPM thresholds do not vary geographically.* In 2016, the OPM poverty threshold for a family of four was $24,339.
Poverty thresholds serve different purposes, including tracking poverty over time, comparing poverty across different demographic groups, and as the starting point for determining eligibility for a range of federal assistance programs.
(To learn more about using the poverty thresholds, or their administrative counterpoint, the poverty guidelines, for determining program eligibility, see FAQ: What are poverty thresholds and poverty guidelines? )
* The Census Bureau cautions that the thresholds should be interpreted as a “statistical yardstick” rather than as a complete accounting of how much income people need to live. They were intended to define and quantify poverty in America and to record changes in the number of persons and families in poverty and their characteristics over time.
Family is defined by the OPM as a group of two people or more (one of whom is the householder) related by birth, marriage, or adoption who reside together. All such people (including related subfamily members) are considered as members of one family.
In 1959, when the official government poverty series began, poverty was estimated at 22 percent. Before that time, unofficial estimates by researchers found a poverty rate in 1914 of 66 percent; 78 percent in 1932; 32 percent in 1947; and 24 percent in 1958.**
Figure 1 shows more recent poverty rates, in 1968, 1990, and 2016, by age, race, and Hispanic origin, using the OPM.
Figure 1. Official U.S. poverty rates in 1968, 1990, and 2016 show variation by age and racial/ethnic group and over time
** R. D. Plotnick, E. Smolensky, E. Evenhouse, and S. Reilly, “The Twentieth-Century Record of Inequality and Poverty in the United States,” in The Cambridge Economic History of the United States, Vol. 3, eds. S. L. Engerman and R. E. Gallman (Cambridge: Cambridge University Press, 2000), 249-299; G. Fisher, “Estimates of the Poverty Population under the Current Official Definition for Years before 1959,” mimeograph, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, 1986.
The Census Bureau releases the results of their analysis using the OPM every year in a report called Income and Poverty in the United States . The report includes charts and tables on information such as the following:
- household income by race and Hispanic origin, age of household head, nativity, region, residence, income inequality, and earnings and work experience;
- poverty estimates by race and Hispanic origin, age, sex, nativity, region, residence, work experience, disability status, educational attainment, and family type; and
- depth of poverty, ratio of income to poverty, income deficit, shared households, and estimates using alternative and experimental poverty measures.
To learn more about the official poverty measure, see the Census Bureau discussion, “How the Census Bureau Measures Poverty,” and the infographic, “ How Census Measures Poverty .”
Researchers and policymakers have long called for changes to the official poverty measure for a number of reasons. However, in spite of its shortcomings, detailed below, its salience in policymaking is noted by the economists Bruce D. Meyer and James X. Sullivan:
Few economic indicators are more closely watched or more important for policy than the official poverty rate. The poverty rate is often cited by policymakers, researchers, and advocates who are evaluating social programs that account for more than half a trillion dollars in government spending.
Principal criticisms of the OPM include:
- Its “headcount” approach identifies only the share of people who fall below the poverty threshold, but does not measure the depth of economic need;
- It does not reflect modern expenses and resources, by excluding significant draws on income such as taxes, work expenses, and out-of-pocket medical expenses, and excluding potentially sizable resources such as in-kind benefits (e.g., food assistance);
- It does not vary by geographic differences in cost of living within the contiguous United States despite huge variation;
- It is not adjusted for changes in the standard of living over time; and
- Its strict definition of measurement units—“family”—as persons living in the same household who are related by birth, marriage, or adoption does not reflect the nature of many households today, including those made up of cohabitors, unmarried partners with children from previous relationships, and foster children.
While the official measure remains the official national poverty statistic, the Census Bureau has been estimating poverty using a number of experimental measures as well, since the mid-1990s. See Poverty: Experimental Measures on the Census Bureau’s website for more about these approaches.
The most recent and prominent experimental measure, the Supplemental Poverty Measure—a work-in-progress that supplements but does not replace the official measure—is discussed below.
Supplemental Poverty Measure
The Census Bureau introduced the Supplemental Poverty Measure or SPM in 2010 to provide an alternative view of poverty in the United States that better reflects life in the 21st century, including contemporary social and economic realities and government policy.
As its name suggests, the SPM supplements but does not replace the official poverty measure, which remains the nation’s source for official poverty statistics and for determining means-tested program eligibility.
In a side-by-side comparison of the official poverty measure and the SPM, the Census Bureau notes their differences in measurement units, poverty threshold, threshold adjustments (e.g., by family size), updating thresholds, and what counts as resources, summarized in Table 3 below.
Source: L. Fox, “The Supplemental Poverty Measure: 2016,” Current Population Reports P60-261 (RV), Revised September 2017.
Note: “Family” as defined by the Census Bureau is “a group of two people or more (one of whom is the householder) related by birth, marriage, or adoption and residing together; all such people (including related subfamily members) are considered as members of one family.”
A comparison of official and SPM poverty rates in 2016 for the total population and among three age groups: under age 18, adults ages 18 to 64, and elders age 65 and over, is shown in Figure 2.
For most groups, SPM poverty rates were higher than official poverty rates; children are an exception with 15.2 percent poor using the SPM and 18.0 percent poor using the official measure. Analysts attribute the lower SPM child poverty rate largely to the measure’s inclusion of noncash benefits such as Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) benefits.
The much higher SPM poverty rates for people age 65 and older—14.5 percent vs. 9.3 percent using the OPM—partially reflect that the official thresholds are set lower for families with householders in this age group, while the SPM thresholds do not vary by age.
In addition, the SPM rate is higher for people age 65 and older because it includes out-of-pocket medical expenditures, which are typically high for the elderly, whereas the official measure does not take them into account.
Figure 2. Poverty rates using OPM and SPM measures for total population and by age group, 2016, show a higher OPM child poverty rate and higher SPM elderly poverty rates.
The U.S. Census Bureau defines “deep poverty” as living in a household with a total cash income below 50 percent of its poverty threshold. According to the Census Bureau, in 2016 18.5 million people lived in deep poverty. Those in deep poverty represented 5.8 percent of the total population and 45.6 percent of those in poverty. Read more
poverty, the state of one who lacks a usual or socially acceptable amount of money or material possessions. Poverty is said to exist when people lack the means to satisfy their basic needs. In this context, the identification of poor people first requires a determination of what constitutes basic needs.
Poverty thresholds are the dollar amounts used to determine poverty status. The Census Bureau assigns each person or family one out of 48 possible poverty thresholds. Thresholds vary by the size of the family and age of the members. The same thresholds are used throughout the United States (they do not vary geographically).
How is poverty measured? Poverty is measured in the United States by comparing a person’s or family’s income to a set poverty threshold or minimum amount of income needed to cover basic needs. People whose income falls under their threshold are considered poor. The U.S. Census Bureau is the government agency in charge of measuring poverty.