USDA Poverty Line

THE OFFICIAL measures of poverty for the United States are now compiled and reported by the U.S. Census Bureau. They originate from research conducted in the early 1960s by Mollie Orshansky, an economist at the Social Security Administration. Though Orshansky was not attempting to develop general poverty thresholds, her results appeared just as the government sought a way to measure poverty as a part of President Lyndon B. Johnson's War on Poverty in 1964. The poverty thresholds are based on the guidelines of the U.S. Department of Agriculture (USDA) for a minimal diet needed to obtain proper nutrients during times of emergency.

The purpose of the USDA poverty line is to determine whether or not a family's income is so low as to be inadequate. Income used in this determination includes job earnings, government welfare, social insurance programs, pensions, interest, dividends, rents, and other cash sources. Benefits that are provided in-kind by the government, such as food stamps or housing subsidies, are not counted. Capital gains or losses are also not included in the calculation.

On the other hand, taxes are not deducted from income, including payroll taxes, potential income taxes, and the possibility of an Earned-Income Tax Credit for those with low incomes. The incomes of all family members living together are then summed and compared with a poverty threshold.

[Page 1128]Poverty thresholds vary according to the number of family members, the number of related children included in the family, and the age of the household head in one- or two-person households. Poverty thresholds do not grow as quickly as the number of people in a family, because it is thought that people living together can enjoy lower costs through shared housing and other benefits. For instance, in 2004, the poverty threshold for a single person under age 65 was $9,827, while the threshold for a two-person household with no children and a household head under age 65 was only 29 percent larger at $12,649. For comparison, the poverty threshold for a family of four, two of whom are children, was $19,157 in 2004. Each year, the poverty thresholds are adjusted for inflation.

Orshansky developed the methodology for these thresholds in the early 1960s. She used the USDA analysis of the nutritional requirements needed for minimal survival during times of duress in order to calculate the cost of such a food budget. Then, she used the USDA's 1955 Household Food Consumption Survey to determine the percentage of people's household budgets that is spent on food, which she calculated as about one-third. Thus, the poverty threshold is determined as three times the cost of the minimal food budget.

Criticisms of the USDA poverty lines include that they are too low, since people were not expected to be able to survive on the minimal food budget for an extended period. Also, these thresholds are still based on survey data from the 1950s and have not been updated to reflect changing diet or improved living standards. Because incomes have generally grown faster than prices, those with incomes equal to the poverty threshold are falling further behind the rest of the population. The poverty thresholds also do not indicate how close or far people are from the poverty line.

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