Voices of the Near Poor

When the Census Bureau this month released a new measure of poverty, meant to better count disposable income, it began altering the portrait of national need.

The new method, called the Supplemental Poverty Measure, was designed to add in many of the things the old measure ignored, like the hundreds of billions the needy receive in food stamps and tax credits. At the same time, it subtracted the similarly large sums lost to taxes, medical care and work expenses.

One surprising difference with the new measure, outlined in an article today, was the 51 million people with incomes less than 50 percent above the poverty line. That category, sometimes called “near poor,” was 76 percent higher than the official account, which was published in September. (The portion of people under the poverty line, meanwhile, increased by just 5 percent in the new measure.)

About a fifth of the people who appear near poor in the new measure are lifted out of poverty by benefits the old measure ignores, like food stamps and tax credits. But more than half were pulled down into near poverty from higher income levels by taxes, medical costs and work expenses like child care and gas. Taken together with people under the poverty line, a full third of Americans – or about 100 million people – live in poverty or in the economically vulnerable area just above it.

In Washington and its suburbs, the near poor are people with incomes between $31,693 and $47,539 for a family of four with a mortgage. Reporters talked to people in the Washington area this week with incomes in this category. They spoke of the knife-edge quality of their lives, in which one unexpected bill could knock them off balance. Many owned the usual trappings of middle-class life – cars, houses, cellphones and air-conditioners. But payments on those possessions were juggled, often unsuccessfully, depending on the unpredictable tides of their incomes. None saw themselves as poor. Most saw themselves as part of the middle class. But they focused on how hard they had to struggle to remain there.

Here are some of their stories:

Debra Jeje earned about $31,000 last year as a secretary in an emergency room in a hospital in Washington. She struggles to pay her bills, which come to about $2,300 a month, including groceries. She sells Mary Kay make-up for extra income. Gas, health insurance premiums and taxes put Ms. Jeje just above poverty line.

“What stresses me out most is payday,” said Ms. Jeje, who is 50 and has one son living with her. “I don’t have any extra money left over. My salary is less than my bills.”

Her job, she said, pays too little.

“We’re on the front lines,” she said. “There’s stress and headaches and ups and downs in the emergency room. You really feel that you’re worth more.”

Bille Allison, a health care worker with two children, earns $39,000 a year drawing blood at a doctor’s office in Maryland. She qualified for the earned income tax credit last year, bringing her income to $42,000. But work expenses dragged her down. She pays $500 a month for day care for her 4-year-old daughter, $100 a month for bus and train fare to get to work, and $200 a month for health insurance – bringing her income down to about $32,000. Some months she is able to save enough for game tokens and a meal at Chuck E. Cheese for her daughter. Other months she can only afford to pay half her bills. She was turned away from the food stamps office because her income was too high.

“I tried everything, and it’s like, nope, you make too much,” said Ms. Allison, who is 42 and divorced. “They tell you you have to work to get help, but then you work, and you still can’t get help.”

Jennifer Bangura works at Georgetown University Hospital as a cashier. Together with her husband, a driver for a catering company, their family income is just under $50,000, enough to pay a mortgage of $800 on a house she purchased in 1992. But after taxes, medical costs and the gas to get to work, they slip into the category of near poor. Their situation has been made worse by a second mortgage, taken out several years ago to raise money for their daughter’s college tuition. The monthly payment shot up to $2,200, an amount she says is now untenable.

“It’s killing me,” said Ms. Bangura, who is 50 and originally from Jamaica. She said she has been making payments for years and that “to lose it now would tear me apart.”

Jessie Adams, a floor refinisher and his wife, a secretary, together earn about $49,000 – too much to qualify for the earned income tax credit and food stamps, but too little to live without worrying about finances. Taxes and monthly subway commuting costs bring them down into the area of near poor. They own electronics – two flat-screen TVs and an Xbox game console for their 10-year-old – but cannot afford a car or a down payment on a house. Mr. Adams has not taken his family out on a weekend for five months.

“It shouldn’t be like this,” he said. “Two people working full time in the house, we should be able to save, to take a vacation. But it ain’t like that. It just ain’t like that.”

The Sharp Increase in the Food Stamps Program

Casey B. Mulligan is an economics professor at the University of Chicago.

The poor economy is not the only reason that safety-net programs are spending more. The food stamp program is another example of a safety-net program that is significantly more costly than it was before the recession began.

Today’s Economist

Perspectives from expert contributors.

The Department of Agriculture’s food stamp program, now known as the Supplemental Nutrition Assistance Program, or SNAP, provides money to low-income households for the purpose of buying food, often in conjunction with cash assistance programs. Adjusting for inflation, the program spent more than twice as much in 2010 as it did in 2007, before the recession began.

Perspectives from expert contributors.

The Department of Agriculture found that the food-stamp spending increase “is likely attributable to the deterioration of the economy, expansions in SNAP eligibility, and continued outreach efforts.” Of particular relevance for the SNAP program is the fact that the poverty rate increased 18 percent, to 153 per thousand in 2010 from 130 per thousand Americans in 2007.

At least two eligibility expansions have occurred since the recession began: work requirements were lifted from April 1, 2009, through Sept. 30, 2010, and monthly income limits were 10 percent higher in the 2010 fiscal year than they were in the 2007 fiscal year, an increase about twice the rate of inflation over that period.

In addition, the American Recovery and Reinvestment Act increased maximum benefits by 13.6 percent, and the minimum benefit increased in October 2008. Increasingly, potential program participants have been given the opportunity to apply for benefits on the Internet.

The declining economy alone, under the previous rules, would have raised the spending on food stamps by 18 percent. But the revised provisions, enacted largely in response to the recession, are responsible for a greater share of the increase. The following table breaks down the program’s spending growth into three components: deterioration of the economy, relaxed eligibility rules and increased maximum benefits.

The top row of the table is actual program spending for 2007 and 2010, adjusting for inflation and population. The second row of the table estimates the program’s hypothetical spending growth with 2007 eligibility rules, by assuming that real spending per capita increased since 2007 only in proportion to increases in the poverty rate, plus the 13.6 percent benefit increase of the American Recovery and Reinvestment Act. The last row assumes that real spending per capita increased only with the poverty rate. Under either scenario, the hypothetical spending increases are significant but well less than half of the actual spending increases.

Over all, the table suggests that most growth in spending on SNAP is due to changes in eligibility rules and increases in payments per eligible person. The program’s spending would certainly have grown if benefit rules had remained as they were in 2007, but much less than it actually did. And those more generous provisions are now likely to be here to stay, even if the conditions that prompted them abate.

What Percentage Lives in Poverty?

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.

Do poor people represent the bottom 16 percent of the population or the bottom 15 percent? The answer matters more than you might think.

Today’s Economist

Perspectives from expert contributors.

The difficulty of measuring economic well-being helps explain why it’s hard for people to figure out what economic percentile they belong to or which public policies would best serve their interests.

Perspectives from expert contributors.

A difference of one percentage point in the overall poverty rate is no big deal. But the new Supplemental Poverty Measure, or S.P.M., developed by the Census Bureau, which yields the slightly higher overall estimate, shows lower rates of poverty among children and higher rates among the elderly than the traditional measure. An estimate based on a measure similar to the S.P.M. suggests that poverty has increased less over time.

The S.P.M. goes beyond consideration of money income to estimate the value of such in-kind transfers as food stamps, net taxes paid to government (taxes paid less the value of tax credits received), and medical and work-related expenses (such as child care and commuting costs). It also employs a new standard of need, linked to what low-income families actually spend.

Children are the beneficiaries of more of the in-kind transfers measured by the S.P.M. than people over age 65 and have fewer out-of-pocket medical expenses. As a result, they look less susceptible to poverty under the new measure than the traditional one, especially compared with older adults. Safety net programs such as food stamps expanded during the Great Recession.

Any income-based measure that takes such transfers into account is likely to show a smaller increase in poverty resulting from the recession than one that does not. Indeed, a good measure of poverty should register the impact of major public policies.

Unfortunately, the S.P.M. suffers some painful limitations. Like the traditional poverty measure, it understates the relative economic well-being of older adults because it ignores the value of their wealth – which doesn’t count as income although it can reduce or help cover their living expenses.

Also, some low-income families simply can’t afford expenditures on health and go untreated. They are not necessarily better off than similar families who spend money on health, though the S.P.M. might make them appear so.

Shawn Fremstad of the Center for Economic and Policy Priorities effectively details these shortcomings. But like others who acknowledge the S.P.M.’s limitations, including Arloc Sherman of the Center for Budget and Policy Priorities and Heidi Hartmann of the Institute for Women’s Policy Research, he agrees that it provides important new information.

Much depends on how researchers, journalists and public policy makers interpret the measure and how they explain the difficulties of measuring economic well-being.

The in-kind benefits that people receive from government go far beyond those measured in the S.P.M. and include big-ticket items such as spending on public education and Medicare expenditures. Tax benefits range from implicit tax subsidies for employer-provided health insurance to the mortgage-interest tax deduction.

The value of these benefits to individual families is not measured in any comprehensive survey. Both in-kind and tax benefits to the poor are more politically visible, and they phase out rapidly as family income increases above the poverty line, where both federal income and Social Security taxes begin to bite harder.

This differential visibility probably intensifies political resentments that some middle-income working families feel toward the poor.

Yet taking net taxes and work-related expenditures into account shows many families closer to the poverty line than they would otherwise seem. Using the traditional income-based measure, about 36 percent of Americans lived in families with income more than four times the poverty level in 2010. Using the S.P.M. measure of economic well-being, the size of that top group declines to 17 percent.

Major government transfers and benefits are directed at different age groups. As a result, age-based politics now greatly complicates political alignments based on class. Most individuals enjoy large transfers from the government as children (through public education) and as retirees (Social Security and Medicare) paying net taxes only as working-age adults. As a result, voters are often confronted by choices that might help them now but hurt them later, benefit their children or harm their parents.

We are now a demographically diverse population with enormous variation across households in the extent of time devoted to the care of dependents, whether children, individuals with health or disability problems, or the frail elderly. Yet we don’t factor either the costs or the benefits of this work time into estimates of family living standards.

When differences across income groups are extreme and increasing over time — as between the bottom 99 percent and the top 1 percent – they can trump these complexities.

But any political movement that aims to unify American voters must devise strategies to improve their standard of living. Such strategies should be informed by serious efforts to go beyond conventional measures of family income to develop more comprehensive measures of economic well-being.

More on Calculating Poverty

Poverty researchers have been debating alternatives to the traditional poverty rate for years. So it’s not surprising that some people wondered why we chose the particular method that we used for today’s article about poverty.

Under guidelines established by National Academy of Sciences, the Census Bureau publishes eight alternative methods of calculating poverty. They are broadly similar. All take a fuller accounting of economic well-being than the official poverty measure does. They include benefits the official measure ignores, like food stamps and tax credits. And they subtract taxes, work expenses and out-of-pocket medical costs, which the official measure does not.

They differ in part by the way they account for inflation, with four using the Consumer Price Index and four using the Consumer Expenditure Survey.

One of the questions we wanted to ask was whether an alternative measure — by including many billions in increased safety-net spending — gave a different view from the official count of how much poverty has risen since prerecession days.

That question cannot be answered with the measures in the Consumer Expenditure Survey because of a change in its methodology in 2007, contaminating comparisons with earlier years. Therefore, under guidance from the Census Bureau, we chose the Consumer Price Index measure that most closely approximates a new alternative the bureau will release on Monday — the Supplemental Poverty Measure.

Our analysis of that measure showed the number of poor people had risen by 4.6 million people since 2006 — not by 9.7 million people as the official Census count reported in September.

Shawn Fremstad of the Center for Economic and Policy Research notes that the Supplemental Poverty Measure, being released on Monday, uses the Consumer Expenditure Survey and therefore differs from the method we used. That is true. But the Consumer Expenditure Survey measures cannot be used for prerecession comparisons. We used the next best thing — a measure that, like the measure coming Monday, includes a fuller account of income and expenses and adjusts for differences in costs of living.

It’s worth noting that since the methodological change occurred, both sets of alternative measures show poverty rising more modestly than the official measure does. From 2007 to 2010, poverty rose 2.6 percentage points by official count; 0.8 points on average by the four Consumer Expenditure Survey measures, and 0.9 points by the four Consumer Price Index measures. That bolsters our finding that alternative measures show poverty rising less than the official numbers suggest. It’s also worth noting that our findings echo those by researchers in Wisconsin and New York City, who also found safety net programs doing more than the official numbers show to restrain poverty growth.

By official count, there are 46.2 million Americans in poverty. Many experts think the Supplemental Poverty Measure may produce a slightly higher count, as our article noted. That is a different question from whether safety net programs have done more than the official count shows in restraining its growth.

Calculating Poverty

To preview how the Census Bureau’s new Supplemental Poverty Measure may change the portrait of poverty, The New York Times consulted multiple alternate measures that researchers have quietly published in recent years.

They included a 2009 version of the Supplemental Poverty Measure, as well as four of eight alternate measures the Census has published, incorporating recommendations from the National Academy of Sciences.

They also included studies from the University of Wisconsin and from officials in New York City, along with three state analyses by Sheila Zedlewski and colleagues at the Urban Institute.

While there are differences in the calculations, all go beyond the official measure by counting benefits like food stamps, work expenses, taxes, and the cost of living.

In addition, The Times did an in-depth analysis of one experimental data set (known as MSI-GA-CPI). It is the Census measure that comes closest to the new Supplemental Measure, while also providing a methodologically consistent look back at prerecession years.

That produced a number of interesting figures that our article length could not accommodate.

Among children, it showed poverty rates falling to 15 percent, from 22 percent, in the official count. That removes about 5.2 million children from poverty. That drop is broadly consistent with what the Urban Institute researchers found in Massachusetts, Illinois and Georgia — an average decline in child poverty of about 24 percent.

It also falls sharply for women ages 25 to 39 — many of them mothers. Many safety net programs, particularly the Earned Income Tax Credit, focus on families with children.

Among elderly, The Times’s examination of the Census data showed poverty rates rising to 13.8 percent, from 9 percent, by the official count. The 2009 Supplemental Poverty Measure and the Urban Institute studies found broadly similar climbs.

Some experts found this possibly portentous — a complication in the generally accepted story that poverty among the elderly has been on a long-term decline. Irwin Garfinkel of Columbia University said his own studies of alternate poverty measures showed that the figure had been climbing for a decade. “We’ve been slipping backwards and we didn’t know that before,’’ he said.

But others, including Bruce Meyer of the University of Chicago, cautioned that it could be a statistical anomaly. Many elderly people use retirement savings but do not report that money as income. And measures of consumption among the elderly, these experts say, have not shown a rising level of hardship.

In The Times analysis, poverty rates in rural America drop sharply, to 10.9 percent from 16.4 percent in the official count, most likely reflecting the lower cost of living. But they rise in metropolitan areas, to 14.9 percent from 13.9 percent. While poverty rises in the Northeast and West, it falls in the South and Midwest, by a total of about six million people.

The Times study found poverty dropping sharply among blacks, falling by 6.7 percentage points to 20.6 percent. Most other studies have also showed significant declines among blacks, which could reflect either that they receive relatively more benefits or live in relatively low-cost locations.

The Times study found poverty growing among Asians, as did all the others. It found poverty declining among Latinos, though by a much smaller amount than it declined among blacks. Some other studies have found Latino poverty rates rising. One possibility is that Asian and Latino immigrants have a harder time getting access to benefits. Another is that differences between the official and alternate studies reflect where people happen to live, perhaps disproportionately in high-cost areas.

What elements of the new measure lift people from poverty? The Times examined the characteristics of those Americans considered poor by the official count, but not poor by the alternate. About 70 percent lived in households that received food stamps a year. A third lived in households with housing subsidies and 19 percent lived in households that received the earned income tax credit.

A caveat: this data is not the same as what the Census Bureau will release on Monday, which among other things uses a different cost-of-living adjustment. But while the numbers may vary, the general trends are likely to remain the same.