Written By: Jennifer K. Rea, M.S., and Virginia Solis Zuiker, Ph.D.
Poverty has been examined through many lenses and has been described as being multidimensional and subjective, in that it encompasses all human essentials for living (Haveman, 2009). A universal goal for many policymakers is to improve the well-being of individuals and families who are in poverty, however identifying and measuring those who are poor or who have low levels of well-being is a difficult task (Stiglitz, Sen, & Fitoussi, 2009). In this article, the authors describe the historical and recent measures in which measuring poverty has evolved. Both a list of recommended readings about poverty and examples of public assistance programs and their benefits are provided for financial counselors, planners, educators, therapists, researchers, and policy makers who work with this population.
Poverty in Evolution: Historical to Contemporary Measurements More than fifty years ago, President Lyndon B. Johnson declared a War on Poverty during his State of the Union address in response to the national poverty rate of 19 percent (Boteach et al., 2014). One of the goals of Johnson’s War on Poverty was to reduce and eliminate poverty in the United States and yet fifty years later we still have individuals and families who are living in poverty (Council of Economic Advisers, 2014).
Mollie Orshansky, of the Social Security Administration, contributed to the creation of the official U.S. poverty measure in the early 1960s (Haveman, 2009). This measure recognizes families whose total annual income from government assistance and/ or through personal efforts falls below the official poverty threshold. The poverty thresholds are updated each year by the Census Bureau based on family size and ages of the family members and fluctuate with inflation (Haveman, 2009). The 2013 poverty threshold for a family of four was $23, 834 (United States Census Bureau, 2014).
The official U.S. poverty measure is also commonly referred to as an absolute measure of poverty which takes into account yearly adjustments for changes in prices of goods and services, but it does not take into account changes in living standards (Institute for Research on Poverty University of Wisconsin-Madison, 2014). The official U.S. poverty measure assumes that families may experience adversity in several ways, such as lack of education, housing, food, social contacts, security, and environmental amenities, however within the official U.S. poverty measure, only the lowest level of income matters in determining who is poor (Iceland, 2013). Authors have emphasized the criticisms that the official U.S. poverty measure has received for not taking into account the several factors that can affect a family’s economic well-being and for not having a modern view to the new definition of family (Institute for Research on Poverty University of Wisconsin-Madison, 2014; Iceland, 2013; United States Census Bureau, 2014; National Poverty Center University of Michigan, 2014).
To keep up with contemporary calls to improve the measurement of poverty through collaboration between and among disciplines and integration with government policies on individual and family financial resources, the Supplemental Poverty Measure (SPM) was developed in March 2010 (Census.gov, 2010). The SPM was created by a National Academy of Sciences poverty measurement panel that was collaborated through the U.S. Census Bureau (Census.gov, 2010) and it did not replace the official U.S. poverty measure, but provided an additional resource for measuring poverty. The formation of such a measure marks the first modification of the poverty measure since the 1960s (Short, 2014).
The SPM’s definition of a “family unit” has changed from the official U.S. poverty measure to include all individuals living at the same address, including co-resident unrelated children, individuals who are cared for by the family (e.g., foster children), in addition to any cohabiters and their children (Short, 2014). The SPM measures a family’s resources (total amount of income, plus the value of benefits available to purchase goods, minus nondiscretionary expenses) to today’s inflation rates and considers the fluctuation of income (Council of Economic Advisers, 2012). Family resources of cash income include wages and salaries, interest income, and cash welfare assistance as well as near-money benefits such as food assistance cards, housing subsidies, school breakfast and lunch subsidies, and the Earned Income Tax Credit (Council of Economic Advisers, 2012). Nondiscretionary costs are than subtracted within SPM and include child care and other work-related expenses, out-of-pocket healthcare costs, and child support payments.
Broadening the scope of identifying additional information on poverty has led to an increase in the amount of individuals and families who are considered to be living in poverty. Policymakers may see the Supplemental Poverty Measure as a double-edged-sword in that it includes more individuals and families who are poor, however additional funds will need to cover and support these people who were not counted as living in poverty by the official U.S. poverty measure, but are now considered to be in poverty using this measure. Financial professionals may find that both the official poverty measure and the SPM may be useful together. The information gained from both measures will assist financial professionals in determining whether or not their clients are eligible for public assistance programs.
Public Assistance Programs for Individuals and Families Public assistance programs are state or federally regulated resources for individuals and families who live at or below the poverty threshold. Public assistance programs include, cash assistance, child support, child care, energy or utility assistance, food assistance, medical assistance, and professional rehabilitation services.
These resources are beneficial for financial professionals and policy makers to review and integrate when working with families in poverty to discuss and incorporate into their family spending plans. Without these programs, several low-income households would have to choose between vital necessities, however due to the fact that each program has specific eligibility requirements, many individuals and families have the opportunity to temporarily use one or more of the programs to support themselves and their family members. These public assistance programs are “means-tested” or “incometested,” which means that an individual or family has to earn below a certain amount of money to qualify (Iceland, 2013).
Temporary Aid to Needy Families (TANF). The TANF program is a block grant (a grant from the central government that a local authority can use to distribute a wide range of services) through the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Office of Family Assistance, 2014). The four purposes of the TANF program are (1) provide assistance for care of children in their own homes; (2) reduce reliance on parents by promoting job training; (3) prevent and reduce unprepared pregnancies; and (4) encourage the formation and maintenance of two-parent families (Office of Family Assistance, 2014).
SNAP/Food Stamps. The Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program (FSP) was created in 1939 to reduce the millions of Americans struggling to feed themselves and their families (Institute for Research on Poverty University of Wisconsin-Madison, 2014). SNAP offers nutrition assistance to 28 million people and assists them in purchasing nutritious food.
National School Lunch Program (NSLP). NSLP operates in nonprofit private and public schools as well as child care organizations (Institute for Research on Poverty University of Wisconsin-Madison, 2014). NSLP offers nutritionally balanced, low-cost or free lunches to children each school day. The program was established under the National School Lunch Act, signed by President Harry Truman in 1946 (United States Department of Agriculture Food and Nutrition Service, 2014).
Women, Infants, and Children (WIC). In 1974, the federally funded program, WIC was established and has been administered by the Food and Nutrition Service of the U.S. Department of Agriculture (United States Department of Agriculture Food and Nutrition Service, 2014). WIC is a supplemental nutrition program for eligible families with women who are pregnant or breastfeeding, or have young children (United States Department of Agriculture Food and Nutrition Service, 2014). WIC is beneficial in providing nutrition education, specifically offering nutritional parenting and child development advice as well as breastfeeding support. WIC also assists qualified families in purchasing healthy foods to eat well and be healthy.
Emergency Food Assistance Program (TEFAP). TEFAP is also a federally funded program that offers supplemental food to the diets of low-income individuals and families, including the elderly (United States Department of Agriculture Food and Nutrition Service, 2014). Support by TEFAP includes providing emergency food and nutrition assistance at no cost as well as administrative funds to state programs who directly work with low-income individuals and families to provide them with food and nutritional aid.
Housing Assistance. In 1937, the U.S. Public Housing Authority administered the U.S. Housing Act of 1937 (United States Department of Housing and Urban Development, 2014). This act was created to assist lower income families in need of housing by authorizing loans to local housing agencies to lower rent costs in public housing as well as provide vouchers for rental assistance to families seeking housing in the rental market (United States Department of Housing and Urban Development, 2014).
Low Income Home Energy Assistance Program (LIHEAP). Since its beginning in 1981, LIHEAP has grown into an extensively supported, highly effective program that provides temporary relief to low-income individuals and families (LIHEAP.org, 2014). Originally, LIHEAP was created to address high heating costs in the Northeast region of the U.S., however in 1984 Congress expanded the program to provide short-term heating and cooling assistance throughout all regions of the country (LIHEAP.org, 2014).
Taxes and Tax Credits. The Earned Income Tax Credit (EITC) was enacted in the early 1970s by President Gerald Ford through the Tax Reduction Act of 1975 (National Low Income Housing Coalition, 2014). EITC is a subsidy for people in employment who have low- to moderateincome and is beneficial as it temporarily reduces the amount of taxes paid by lowand middle-income families with children (National Low Income Housing Coalition, 2014). The amount of tax credit received is work-oriented and based on money earned. The Child Tax Credit was endorsed as part of the Taxpayer Relief Act of 1997 (National Low Income Housing Coalition, 2014). This credit was created to allow low-income families to reduce their federal income tax by up to $1,000 per each eligible child under the age of 17 (National Low Income Housing Coalition, 2014).
Nondiscretionary Expenses. Nondiscretionary expenses are costs that come out-of-pocket and are not measured with the official U.S. poverty measure (Short, 2014). Nondiscretionary expenses include, but are not limited to, medical, work and child care costs. The SPM subtracts medical out-of-pocket expenses from an individual or family’s income, as well as their work and child care expenses. Each of these costs can directly impact individual or family threshold. Medical outof-pocket, child care, and work expenses are important to consider when creating a family’s spending plan. Without these costs, the family’s finances can plummet, thus there are no means of economic support from the government and an increased risk of moving into poverty.
Identifying and measuring who is poor is an evolving task, and the demands for collaboration and integration with government policies on the need for individual and family financial resources are stronger now than ever before. The Supplemental Poverty Measure—through its effective connection amongst policy and family support—is answering these demands. Individuals and families are better able to receive assistance whether it’s financial, nutritional or simply help with the heating bill. Thus, they become more aware of the resources available and have the ability to take a more active role in their overall well-being. Counselors are more effective as they become knowledgeable about these programs and are able to share them with their low-income clientele.
As advancements continue in research, training, practice, and policy, the Supplemental Poverty Measure will serve as a measure that can be improved upon. Increased studies that are driven to investigate the desires and benefits of these programs is needed to confirm the effectiveness of the SPM and thus to inform policies at local and national levels. With more evidence, administrators and taxpayers will be(come) more supportive of the SPM and this will further fuel efforts in reducing or eliminating poverty.
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Jennifer Rea and Virginia Solis Zuiker are with University of Minnesota, Department of Family Social Science.