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6 Hardships in America There are numerous problems with the poverty threshold methodology. First, the assumption that families spend one-third of their income on food is outdated. Over time, the relative prices of the items that families consume have changed considerably, and families now spend more of their income on housing, health care, and transportation than they used to and less on food. In addition, even poor families now spend more on certain items, like child care, due to the increased number of mothers in the labor force. As a result of these changes, on average, families now spend less than one-fifth of their income on food (Bernstein, Brocht, and Spade-Aguilar 2000). Second, the official poverty thresholds have fallen in relative terms. The failure to increase the poverty thresholds as real incomes have grown means that those who fall below the poverty line are worse off relative to the median family now than they were 30 years ago. When the poverty thresholds were first introduced, the threshold for a family of four—$16,530 in 1998 dollars— was 42% of the median income for that family size. By 1998, because of real growth in median family income, that value had fallen to 35.4% (Bernstein, Brocht, and Spade-Aguilar 2000). There are also numerous other concerns about the adequacy of the poverty thresholds. For example, the poverty thresholds use a pre-tax definition of income and a post-tax definition of expenses, fail to account for geographic differences, exclude non-cash government benefits (such as food stamps, housing subsidies, free or reduced school lunches for children, and energy assistance) in the definition of resources, do not account for differences in child care and medical care expenses among families, and use inadequate equivalence scales (a mathematical formula for adjusting poverty thresholds for differences in family size and composition). In the early 1990s, Congress, acknowledging that the current thresholds were inadequate, commissioned the National Research Council of the National Academy of Sciences to research the saliency of the thresholds and to propose alternatives. The council recommended basing the thresholds on the median expenditures of two-adult, two-child families on food, clothing, shelter, and utilities, plus a small amount for other incidentals. The council’s other recommendations included changes to the equivalence scales; geographic adjustments to the thresholds; the addition of the value of non-cash government assistance (such as food stamps, housing subsidies, school lunches, and energy assistance) to the measure of income; and the subtraction of expenses such as taxes, costs associated with working (such as child care), and medical expenses (Citro and Michael 1995). In analyses using “experimental poverty measures” based on the council’s recommendations, the Census Bureau found that the percentage of people in poverty in 1998 increased from 12.7% under the current measure to a high of 15.4% under the experimental measures (depending on which version was used); also, using the experimental measures resulted in a lower rate of poverty for children and a higher rate of poverty for the elderly, compared to the current
Hardships in America 7 measures (Short, Iceland, and Garner 1999). The analysis also found lower poverty rates for female-headed households and higher poverty rates for married couples. Subsequent research found a higher rate of poverty than under the current measure among families in which adult members worked full time (Iceland 2000). 1.2 Basic family budgets Basic family budgets measure the income a family requires to afford basic needs for a safe and decent standard of living. The family budget method differs significantly from the poverty thresholds in that it tabulates the costs of every major budget item a family needs, including housing, child care, health care, food, transportation and taxes, based on the composition of the family and where the family lives. The family budget method assumes that income comes from employment, and so it makes no assumptions about whether the family receives government assistance. Family budgets do, however, allow a determination of the amount of post-tax income a family needs. Family budgets have a number of advantages over the poverty thresholds for evaluating the ability of a family to afford a safe and decent standard of living. First, family budgets are specific to a particular family type in a particular locality. Thus, for a family with two parents and one child under 6 in Minneapolis, the family budget method tabulates costs in Minneapolis, including local child care costs. Family budgets assume that all adults work; therefore, they account for child care costs that are specific to the child’s age. Basic family budgets are geographically specific for as many budget items as possible. In the U.S., the cost of living varies by region due to differences in local economies. For some budget items, such as food, there is no reliable data source for local costs. But for the items that vary the most by region, such as housing and child care, the use of locally specific data in basic family budgets makes them an accurate reflection of the costs faced by families. The poverty thresholds are based on equivalence scales and do not account for geographic differences in the cost of living. Instead of tabulating the costs of goods and services needed based on the expenses of different family members, the poverty thresholds use a family of three as a basis and are multiplied by a scaled number to determine the threshold for different family types. Thus, the family budget methodology allows a more specific tabulation of a family’s actual costs than do the poverty thresholds. The family budget method also enables a discussion of the value of subsidies that families receive. Since the family budget measures costs, not income, subsidies can simply be subtracted from a family’s costs. For example, to analyze the effects of child care subsidies, the value of these subsidies can be subtracted from total child care costs. Thus, the income a family needs declines in proportion to the value of the subsidy. Similarly, taxes (and tax credits, such as the Earned Income Tax Credit) are tabulated into the income amount necessary to cover the family budget. For
Page 1 and 2: HARDSHIPS IN AMERICA The Real Story
Page 3 and 4: Table of contents Executive Summary
Page 5 and 6: Hardships in America 1 Executive su
Page 7 and 8: Hardships in America 3 Introduction
Page 9: Hardships in America 5 Chapter 1 Fa
Page 13 and 14: Hardships in America 9 prepared at
Page 15 and 16: Hardships in America 11 poverty lin
Page 17 and 18: Hardships in America 13 TABLE 3 Sha
Page 19 and 20: Hardships in America 15 compared to
Page 21 and 22: Hardships in America 17 TABLE 5 (co
Page 23 and 24: Hardships in America 19 Chapter 2 T
Page 25 and 26: specific and invasive nature of the
Page 27 and 28: Hardships in America 23 TABLE 6 (co
Page 29 and 30: Hardships in America 25 2.3.3 Insuf
Page 31 and 32: Hardships in America 27 and SIPP),
Page 33 and 34: Hardships in America 29 TABLE 7 Pro
Page 35 and 36: Hardships in America 31 TABLE 9 Pro
Page 37 and 38: Hardships in America 33 white famil
Page 39 and 40: Hardships in America 35 TABLE 11 Pr
Page 41 and 42: Hardships in America 37 more immedi
Page 43 and 44: Hardships in America 39 FIGURE D He
Page 45 and 46: Hardships in America 41 hardship. E
Page 47 and 48: Hardships in America 43 · Pay equi
Page 49 and 50: Hardships in America 45 of eligible
Page 51 and 52: Hardships in America 47 income fami
Page 53 and 54: Hardships in America 49 Conclusion
Page 55 and 56: Hardships in America 51 When the st
Page 57 and 58: Hardships in America 53 wages, and
Page 59 and 60: Hardships in America 55 share resou
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Hardships in America 57 the core wa
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Hardships in America 59 person or f
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Hardships in America 61 TABLE A2.1
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Hardships in America 63 necessary m
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Hardships in America 65 TABLE A3.2
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Hardships in America 67 Appendix F
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Hardships in America 69 10. Tests o
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Hardships in America 71 Citro, Cons
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TABLE A4.1 Basic family budgets for
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Across the country, millions of ful
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