Poor Math

Is there a better way to measure poverty? Yes.

By Georgia Levenson Keohane
Posted Wednesday, December 31, 2008 - 4:57pm

Not surprisingly in the midst of a long recession, poverty appears to be on the rise. In 2007, 37.3 million Americans, or one in eight, lived below the poverty line and nearly 18 percent of American children were poor. Since then, conditions have only deteriorated. Demand for food stamps has jumped 17 percent in the last year, food banks report a 30 percent rise in requests for emergency food assistance [1], and most states have seen their Medicaid rolls swell [2]. (The Kaiser Family Foundation estimates that each 1 percent gain in the unemployment rate adds approximately 1 million people to the Medicaid and State Children's Health Insurance Program rolls [3].)

And yet most people would have difficulty citing the official definition of poverty or how it is calculated. Just how do we define poverty in the United States? Archaically—and largely around food. The current federal poverty measure was developed in the 1960s by Mollie Orshansky, an economist at the Social Security Administration. Orshansky examined data from a 1955 Department of Agriculture study that outlined an "Economy Food Plan"—an assumed diet for economically lean times—and estimated that poor Americans spent approximately one-third of their after-tax money on food. Orshansky then devised a simple metric: families with income at least three times the annual cost of basic groceries cleared the poverty hurdle. The rest—families that fell below this threshold—were classified as poor.