“It’s about time we started counting the effects of popular noncash and tax-related public programs on poverty,” Professor Tim Smeeding said of the Census Bureau’s November release of new poverty numbers based on an alternative federal measure, the Supplemental Poverty Measure (SPM).
Smeeding joins many other economists in praising the SPM for bringing poverty measurement into the 21st century by counting resources such as food assistance and refundable tax credits and making allowances for necessary expenditures such as work-related expenses and out-of-pocket medical expenses that are not counted in the official measure of the economic status of individuals and families. The SPM follows recommendations made by a panel of National Academy of Sciences scholars and other experts, which included Smeeding and several other UW professors who are affiliates of the UW Institute for Research on Poverty (IRP).
A model similar to the SPM, the Wisconsin Poverty Measure, was developed by a team headed by Smeeding, IRP Director and Arts & Sciences Distinguished Professor at the La Follette School of Public Affairs. It monitors the economic well-being of low-income Wisconsinites by county and multicounty areas. The new data quantify for policymakers the effectiveness of the state’s programs that assist low-wage working families.
Percent of People in Poverty by Different Measures: 2010
The official measure was developed in the 1960s and counts only pretax income and cash assistance as resources and sets thresholds at the cost of a minimally adequate diet in the 1960s, adjusted for inflation. The SPM, although it does not replace the official measure, is seen as a research tool that helps analysts better understand the prevalence of poverty overall and among selected demographic groups, such as children and the elderly.
The new numbers released last week come two months after the Bureau’s annual poverty report based on the official poverty measure received a lot of media attention. That report indicated that the U.S. poverty rate rose from 14.3 percent in 2009 to 15.2 percent in 2010.
So what happens to the poverty rate when in-kind public benefits and modern-life expenses are counted?
Bottom line: it goes up; 16 percent of Americans are poor under the new measure compared to 15.2 percent under the old, and still-official, measure.
Looking at select groups shows that, under the SPM, a lower percentage of children are living in poverty (18.2 percent under the SPM) than the official measure (22.5 percent); however, adults age 18 to 64 see a rise, from 13.7 percent under the official measure to 15.2 percent with the SPM; and the elderly saw the biggest increase, from 9 percent under the official measure to 15.9 percent under the SPM. Analysts attribute the difference among the elderly rates to the out-of-pocket medical expenses that are counted only by the SPM.
Smeeding sat down recently with Steve Walters of the WisconsinEye network in an in-depth interview to explore what analysts are learning from the Supplemental Poverty Measure, to explain the differences between the original and new supplemental poverty measures, and to bring that perspective home to Wisconsin and discuss solutions.
“The solution to poverty is a job,” says Smeeding, noting that the work-based safety net was a positive step forward from “welfare”—for able-bodied adults. However, this is tough when the national unemployment rate remains very high, 8.6 percent in November. In Wisconsin, where the October unemployment rate is below the national average at 7.7 percent, the Department of Workforce Development (DWD) reported on November 17 that the state lost an estimated 9,300 private-sector jobs in October, in the fourth consecutive month of job losses.
Learn more:
- In-depth interview with IRP Director Tim Smeeding: “Redefining ‘Poverty’” on the WisconsinEye independent network, November 15, 2011
- Census Bureau report citing the new Supplemental Poverty Measure statistics: Short, Kathleen. U.S. Census Bureau, Current Population Reports, P60-241, The Research Supplemental Poverty Measure: 2010. U.S. Government Printing Office, Washington, D.C. November 2011.
- Census Bureau report citing the 2010 official poverty statistics: DeNavas-Walt, Carmen, Bernadette D. Proctor, and Jessica C. Smith. U.S. Census Bureau, Current Population Reports, P60-239, Income, Poverty, and Health Insurance Coverage in the United States: 2010. U.S. Government Printing Office, Washington, D.C. September 2011.
- Institute for Research on Poverty annual report on Wisconsin poverty:
- Marks, Joanna Y., Julia B. Isaacs, Timothy M. Smeeding, and Katherine A. Thornton. Wisconsin Poverty Report: Were Antipoverty Policies Effective in 2009? May 2011.
- Wisconsin Department of Workforce Development jobs press release: “October Jobs, Unemployment Numbers Announced for State.”http://dwd.wisconsin.gov/dwd/newsreleases/2011/unemployment/111117_october_state.pdf