From La Follette School of Public Affairs News

New U.S. measurement expands understanding of poverty

December 15, 2011

Professor Tim Smeeding has joined other economists in praising the Census Bureau’s release of poverty numbers based on an alternative measure.

“It’s about time we started counting the effects of popular noncash and tax-related public programs on poverty,” Smeeding says of the Supplemental Poverty Measure, which brings federal poverty measurement into the 21st century by counting resources such as food assistance and refundable tax credits. It also allows for work-related expenditures and out-of-pocket medical expenses that are not counted in the official measure of the economic status of individuals and families.

In-depth interview with IRP Director Tim Smeeding

“Redefining ‘Poverty’” on the WisconsinEye independent network, November 15, 2011

Smeeding is IRP director and member of the La Follette School faculty. He talked with Steve Walters of the WisconsinEye network in an in-depth interview to explore what analysts are learning from the Supplemental Poverty Measure, to explain the differences between the original and new supplemental poverty measures, and to bring that perspective home to Wisconsin and discuss solutions.

“The solution to poverty is a job,” says Smeeding, noting that the work-based safety net was a positive step forward from “welfare”—for able-bodied adults. However, finding better employment is tough when the national unemployment rate remains very high, 8.6 percent in November. Wisconsin had an October unemployment rate below the national average at 7.7 percent. The Wisconsin Department of Workforce Development reported on November 17 that the state lost an estimated 9,300 private-sector jobs in October, the fourth consecutive month of job losses.

The numbers released in November came two months after the Census Bureau’s annual poverty report based on the official poverty measure received a lot of media attention. That report indicated that the U.S. poverty rate rose from 14.3 percent in 2009 to 15.2 percent in 2010.

When in-kind public benefits and modern-life expenses are counted, the poverty rate goes up: 16 percent of Americans are poor under the new measure.

A look at select groups shows that, under the Supplemental Poverty Measure, a lower percentage of children live in poverty (18.2 percent) than the official measure (22.5 percent); however, people age 18 to 64 saw a rise, from 13.7 percent under the official measure to 15.2 percent with the supplemental measure. Older adults saw the biggest increase, from 9 percent under the official measure to 15.9 percent. Analysts attribute the difference among the elderly rates to the out-of-pocket medical expenses that only the new supplemental measure counts.

The Supplemental Poverty Measure follows recommendations made by a panel of National Academy of Sciences scholars and other experts, including Smeeding, La Follette School economist Barbara Wolfe and other University of Wisconsin–Madison professors affiliated with Institute for Research on Poverty. Wolfe recently presented a paper at a National Academy of Sciences meeting to discuss how to better include health-care risks in measures of poverty.

The official federal measure was developed in the 1960s and counts only pretax income and cash assistance as resources and sets thresholds at the cost of a minimally adequate diet in the 1960s, adjusted for inflation. Although the Supplemental Poverty Measure does not replace the official measure, it can help analysts better understand the prevalence of poverty overall and among selected demographic groups.

Smeeding and an IRP team that included 2010 La Follette School alum Joanna Marks developed the Wisconsin Poverty Measure to monitor the economic well-being of low-income Wisconsinites by county and multicounty areas. The new data quantify for policymakers the effectiveness of the state’s programs that assist low-wage working families.

Under the Wisconsin Poverty Measure, 11.5 percent of the state’s population was poor in 2009 – nearly identical to the 2008 level. Meanwhile, the official federal poverty rate for Wisconsin jumped from 10.2 percent to 12.3 percent.

Antipoverty programs ease pain of recession, Wisconsin Poverty Measure finds, June 14, 2011, La Follette School News

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