Poverty

How Poverty Is Determined

The U.S. Census Bureau uses a set of dollar-value thresholds that vary by family size and composition to determine who is poor. The poverty thresholds are used primarily for statistical purposes; for example, estimating the number of persons in poverty and tabulating them by type of residence, race, and other social, economic, and demographic characteristics. Relying on several official estimates of low-budget food plans, economist Mollie Orshansky, working for the Social Security Administration, developed the poverty thresholds in 1963 and 1964. The poverty thresholds became official in August 1969 when the Bureau of the Budget issued a memorandum that directed all federal branch agencies to use revised estimates as issued by the U.S. Census Bureau for statistical purposes.

Poverty thresholds are distinguished from poverty guidelines, which are issued by the Department of Health and Human Services (HHS) for administrative purposes such as determining whether a [Page 1041]person or family is financially eligible for assistance or services under certain federal programs; for example, Temporary Assistance for Needy Families (TANF) or the Supplemental Nutrition Assistance Program (SNAP).

Based on family size and number of children under 18 years of age, in 2011, the lowest U.S. Census Bureau poverty threshold was set at $10,788 for a family of one person 65 years and older, with the highest threshold at $50,059 for a family of nine or more people with only one related child under 18 years of age. If a family's total income is less than the applicable threshold, then that family and every individual in it are considered in poverty. To account for inflation, the consumer price index (CPI-U) is used to update these thresholds annually. The official poverty definition uses money income before taxes and tax credits; it excludes capital gains and noncash benefits such as those from SNAP, formerly known as food stamps, and housing assistance. For example, imagine two families, A and B, each of which has five people living at home: three children (two under 18 years of age and the third 20 years of age with a part-time job while earning a degree), their mother, and their grandmother with income from cleaning other people's homes. family A's and family B's poverty threshold in 2011 was $27,517. Because their total family income, $29,000, was higher than their threshold ($27,517), family A would not be considered in poverty; however, because their total family income, $27,000, fell below the same threshold, family B would be considered in poverty.

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