The federal poverty measure deeply affects our understanding of who is poor. And there is a great deal of disagreement about how to properly measure poverty. The official U.S. poverty measure was devised in the early 1960s by Mollie Orshansky, an economist working at the Social Security Administration. The measure is based largely on how much it costs to feed a family. At the time, experts estimated that food accounted for one-third of a family's expenses, so the poverty rate is essentially the cost of food for a family, times three. The figure is updated annually for inflation. Today, a mother with two children who makes less than about $17,000 a year is counted as poor. The official poverty rate declined from a high of 22.4 percent in 1959 (the first year of the data set) to a low of 11.1 percent in 1973. As of 2008, 13.2 percent of Americans were officially counted as poor. Read more about the poverty rate and what levels of income count people as poor.
At best, the official measure offers a quick, convenient benchmark. But its flaws are well documented. For instance, the dollar figures that go into the official measure are low since the calculation doesn't take into account changes in relative living standards since the early 1960s. At the same time, the official measure ignores important resources targeted at the poor, such as tax credits and food stamps. According to the Census Bureau, if the cash value of food stamps were added to family resources in 2007 some 1.7 million people would have moved from below the poverty line to above it. (The number of people in poverty in 2007 was 37.3 million.) Including the value of the federal-earned income tax credit to the measure would have cut the number of children in poverty by 2.4 million that same year.
Government statisticians and scholars have long critiqued the poverty measure and proposed alternatives. One of the best known set of recommendations comes from a 1995 report by the National Academy of Sciences. The Census Bureau publishes alternative measures of poverty, including ones based on the NAS report. For example, in 2008 the NAS poverty rate was 16.9 percent. That's 3.7 percentage points higher than the official number. The Obama administration announced in March, 2010 that it would develop a supplemental poverty measure to complement, but not replace, the existing official figure. The measure will tap into the insights of the 1995 NAS report, as well as draw on scholarly research in the subsequent 15 years. The new comprehensive measure is expected to be released in the fall of 2011.
Who is poor has changed dramatically in the post World War II era. Thanks largely to Social Security and Medicare, the poverty rate for the elderly declined from 35.2 percent in 1959 to a low of 9.7 percent first reached in 1999. The poverty rate for seniors went back down to 9.7 percent in 2008 after a slight increase for part of the 2000s. However, while poverty among seniors is relatively low, the poor are increasingly young people. This has a lot to do with the rise of single parent families. The poverty rate for children under 6 has risen significantly since the 1960s, from a low of 15.3 percent in 1969 (the first year of official data breaking out young children) to 21.3 percent in 2008. See a list of historical poverty tables.
Millions of Americans are among the "working poor." They have jobs, yet earn so little that they live below the poverty line. Even more families are among the "near poor." These families have incomes above the poverty line, but may be just one setback away from becoming poor - a dead car engine or a bout of flu might quickly put them under the poverty line. The number of working poor families has swelled over the past two decades as welfare policies have shifted from income support to workfare. The recession has affected all segments of the population, but its effects have been most dire for those who were already economically vulnerable. Read a report about the working poor from the Brookings Institution.
Extreme poverty is a measure that captures the percentage of people living on an annual income less than half the poverty level. For a typical family of four that would mean living on less than about $11,000 a year. This is poverty in its most old-fashioned sense, an extremely tough existence where it's hard to simply have enough to eat, let alone find adequate shelter. The Census Bureau's latest figures show 5.7 percent of Americans live in extreme poverty, just shy of the 1983 peak of 5.9 percent. Perhaps most disturbing, 8.5 percent of children live in extreme poverty, up from 7.8 percent in 2007. The rise in children living in extreme poverty accounts for most of the increase in the overall child poverty rate. See a state-by-state comparison of extreme poverty among children.