Poverty Rate Declines

The nation’s poverty rate was 15.5 percent in 2013, down from 16.0 percent in 2012, according to the supplemental poverty measure released today by the U.S. Census Bureau. The 2013 rate was higher than the official measure of 14.5 percent, but similarly declined from the corresponding rate in 2012. Meanwhile, 48.7 million were below the poverty line in 2013 according to the supplemental poverty measure, not statistically different from the number in 2012. In 2013, 45.3 million were poor using the official definition released last month in Income and Poverty in the United States: 2013. These findings are contained in the Census Bureau report The Supplemental Poverty Measure: 2013, released with support from the Bureau of Labor Statistics and describing research showing different ways of measuring poverty in the United States. The supplemental poverty measure serves as an additional indicator of economic well-being and provides a deeper understanding of economic conditions and policy effects. Unlike the official poverty rate, the supplemental poverty measure takes into account the impact of different benefits and necessary expenses on the resources available to families, as well as geographic differences in housing costs. For example, the measure adds refundable tax credits to cash income, which reduces the supplemental poverty rate for all people by nearly three percentage points (18.4 percent to 15.5 percent). For children, the supplemental poverty rate of 16.4 percent would rise to 22.8 percent if refundable tax credits were excluded.  “The supplemental poverty measure is an important tool that helps policymakers and the public judge the effectiveness of social safety-net programs in a way that the official poverty measure cannot,” said Kathleen Short, a Census Bureau economist and the report’s author. “It also helps us track how necessary expenses, such as paying taxes or work-related and medical-out-of-pocket expenses, affect the economic well-being of all families.” The supplemental poverty measure deducts various necessary expenses from income; these include medical out-of-pocket expenses, income and payroll taxes, child care expenses and work-related expenses. These expenses reduce income available for purchasing essential basic goods, including food, clothing, shelter and utilities and a small additional amount to allow for other needs. Deducting medical out-of-pocket expenses increases the supplemental poverty rate by 3.6 percentage points. Without accounting for medical out-of-pocket expenses, the number of people living below the poverty line would have been 37.5 million rather than the 48.7 million people classified as poor with the supplemental poverty measure. Without adding Social Security benefits to income, the supplemental poverty rate overall would have been 8.6 percentage points higher (or 24.1 percent rather than 15.5 percent). People 65 and older had a supplemental poverty rate of 14.6 percent, equating to 6.5 million. Excluding Social Security would leave the majority of this population (52.6 percent or 23.4 million) in poverty. The supplemental poverty measure’s poverty thresholds vary by geography, family size, and if a family pays a mortgage, rents or owns their home free and clear. For example, among the lowest thresholds for families with two adults and two children, about $18,000, were those for homeowners without a mortgage living outside metropolitan areas in Alabama, Arkansas, Georgia, Iowa, Kentucky, Louisiana, Missouri, Mississippi, North Dakota, Oklahoma, South Dakota, Tennessee and West Virginia. Among the highest for this family type were those for homeowners with a mortgage in the San Jose-Sunnyvale-Santa Clara, Calif.; San Francisco-Oakland-Fremont, Calif.; Santa Cruz-Watsonville, Calif.; and Honolulu, Hawaii, metropolitan statistical areas, around $35,000. The $23,624 official poverty threshold for a family of four was the same no matter where a family lives. Estimates for States The differences between the official and supplemental poverty measures varied considerably by state. The supplemental rates were higher than the official statewide poverty rates in the District of Columbia and 13 states: Alaska, California, Connecticut, Florida, Hawaii, Illinois, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York and Virginia. For another 26 states, supplemental rates were lower than the official statewide poverty rates. The states were Alabama, Arkansas, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, West Virginia, Wisconsin and Wyoming. Rates in the remaining 11 states were not statistically different using the two measures. Comparing Poverty Rates for Different Demographic Groups The supplemental poverty measure can show the effects of tax and transfer policies on various subgroups, unlike the current official poverty measure. According to the report: Including tax credits and noncash benefits results in lower poverty rates for some groups. For instance, the supplemental poverty rate was lower for children than the official rate: 16.4 percent compared with 20.4 percent. Subtracting necessary expenses from income results in higher poverty rates for other groups. The supplemental poverty rate for those 65 and older was 14.6 percent compared with only 9.5 percent using the official measure. Medical out-of-pocket expenses were a significant element for this group. Even though supplemental poverty rates were lower than the official rates for children and higher for those 65 and older, the rates for children were still higher than the rates for both 18- to 64-year-olds and people 65 and older. Supplemental poverty rates were higher than the official measure for all race groups and for Hispanics, with one exception: blacks, whose 24.7 percent supplemental poverty rate was lower than the official rate of 27.3 percent. Supplemental poverty rates differed by region primarily because the supplemental poverty measure has thresholds that vary geographically. The rates were higher than official rates for the Northeast and West, and not statistically different from the official measure in the South and Midwest. These results reflect differences in housing costs, which are not captured by the official poverty measure. Background The supplemental poverty measure is an effort to take into account many of the government programs designed to assist low-income families and individuals that were not included in thecurrent official poverty measure, released Sept. 16. While the official poverty measure includes only pretax money income, the supplemental measure adds the value of in-kind benefits, such as the Supplemental Nutrition Assistance Program, school lunches, housing assistance and refundable tax credits. Additionally, the supplemental poverty measure deducts necessary expenses for critical goods and services from income. Expenses that are deducted include taxes, child care and commuting expenses, out-of-pocket medical expenses and child support paid to another household. Today’s report compares 2013 supplemental poverty estimates to 2013 official poverty estimates for numerous demographic groups at the national level. In addition, the report presents supplemental poverty estimates for states using three-year averages. At the national level, the report also compares 2012 supplemental poverty estimates with 2013 estimates. There has been a continuing debate about the best approach to measure income and poverty in the United States since the publication of the first official U.S. poverty estimates in 1964. In 2009, an interagency group asked the Census Bureau, in cooperation with the Bureau of Labor Statistics, to develop a new, supplemental measure to allow for an improved understanding of the economic well-being of American families and the way that federal policies affect those living in poverty. The measures presented in this report used the 2014 Current Population Survey Annual Social and Economic Supplement with income information that referred to calendar year 2013 to estimate supplemental poverty measure resources, including the value of various in-kind benefits beyond cash income. (The official poverty measure is based solely on cash income.) -X-