What are poverty thresholds and poverty guidelines?

Each fall, typically in September, the U.S. Census Bureau issues a public report on the level of poverty in the previous year and trends in the level and composition of the poor over time. The "poverty report" receives widespread media attention because it provides the latest official statistics on income and poverty in the United States. It provides estimates of how many people are poor; the poverty rate, or percentage of people who are below the poverty threshold; and how poverty is distributed by age, race, ethnicity, region, and family type. The report also includes real median incomes and earnings, the level of income inequality, and poverty rates by sex.

Individuals or families are "poor" if their annual pretax cash income falls below a dollar amount, or poverty threshold, that the Census Bureau determines using a federal measure of poverty that is recalculated each year. The Bureau's most recent report covers 2015 and was issued in September 2016 as Income and Poverty in the United States: 2015, drawing from the Current Population Survey Annual Social and Economic Supplement. In addition to this national report, the Census Bureau also releases information on poverty for states, counties, and other geographic divisions drawing from the American Community Survey.[1]

Since 1965, there have been two slightly different versions of the federal poverty measure: poverty thresholds, which are more detailed and primarily used for statistical purposes such as the annual poverty report; and poverty guidelines, which are a simplified version of the thresholds, primarily used for administrative purposes such as determining public program eligibility.

What are poverty thresholds?

The poverty thresholds are the original version of the federal poverty measure, which was developed by Mollie Orshansky of the Social Security Administration in the 1960s. [2] Updated each year by the Census Bureau, the thresholds are used to define and quantify poverty in America, and thereby provide a yardstick for progress or regress in antipoverty efforts, and in that sense the measure serves the nation well.

Values of the poverty thresholds for the years since 1980 for families of different sizes are available on the Census Bureau's website. The most recent values of the poverty thresholds are provided in the table below.

U.S. Census Bureau Poverty Thresholds, 2015
Size of Family Unit Poverty Threshold
One person (unrelated individual) $12,082
  Under age 65 12,331
  Age 65 or older 11,367
Two people 15,391
  Householder under age 65 15,952
  Householder age 65 or older 14,342
Three people 18,871
Three people with two related children 19,096
Four people 24,257
Four people with two related children 24,036
Five people 28,741
Five people with two related children 28,995
Six people 32,542
Six people with two related children 33,342
Seven people 36,998
Seven people with two related children 38,421
Eight people 41,029
Eight people with two related children 43,230
Nine people or more 49,177
Source: U.S. Census Bureau, Poverty Thresholds for 2015 by Size of Family and Number of Related Children Under 18 Years, released in September 2016.

What are poverty guidelines?

The poverty guidelines are the other version of the federal poverty measure. They, too, are issued every year, generally in the winter, but by the U.S. Department of Health and Human Services (DHHS) in the Federal Register. The guidelines are a simplification of the poverty thresholds created for administrative use, such as determining financial eligibility for certain federal programs. They are adjusted for families of different sizes and by geographic location (with different guidelines for the 48 contiguous states and the District of Columbia; Alaska; and Hawaii).

When using the poverty guidelines to set eligibility criteria, some programs actually use a percentage multiple of the guidelines, such as 125 percent, 150 percent, or 185 percent. This is not the result of a single coherent plan; instead, it stems from decisions made at different times by different congressional committees or federal agencies. Some examples of federal programs that use the guidelines in determining eligibility include the following:

  • Department of Health and Human Services: Community Services Block Grant, Head Start, Low-Income Home Energy Assistance
  • Department of Agriculture: Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamp Program), National School Lunch Program, Child and Adult Care Food Program
  • Department of Energy: Weatherization Assistance for Low-Income Persons
  • Department of Labor: Job Corps, National Farmworker Jobs Program, Workforce Investment Act Youth Activities

Major means-tested programs that do not use the poverty guidelines in determining eligibility include Temporary Assistance for Needy Families (TANF), Supplemental Security Income, the Earned Income Tax Credit, and the Social Services Block Grant. For a more detailed list of programs that do and do not use the guidelines, see "What programs use the poverty guidelines?" on the DHHS ASPE website.

Some state and local governments have chosen to use the federal poverty guidelines in some of their own programs and activities. Examples include state health insurance programs, financial guidelines for child support enforcement, and determination of legal indigence for court purposes. Some private companies such as utilities, telephone companies, and pharmaceutical companies have also adopted the guidelines in setting eligibility for their services to low-income persons.

Poverty guidelines for the years since 1982 and other historical information are available on the website of the DHHS Office of the Assistant Secretary for Planning and Evaluation. The 2016 values of the poverty guidelines are provided in the table below.

U.S. Department of Health and Human Services Poverty Guidelines, 2016
  Annual Income
Persons in Family/Household 48 Contiguous States and District of Columbia Alaska Hawaii
1 $11,880 $14,840 $13,670
2 16,020 20,020 18,430
3 20,160 25,200 23,190
4 24,300 30,380 27,950
5 28,440 35,560 32,710
6 32,580 40,740 37,470
7 36,730 45,920 42,230
8 40,890 51,120 47,010
>8 persons For families/households with more than 8 persons, add $4,160 for each additional person. For families/households with more than 8 persons, add $5,200 for each additional person. For families/households with more than 8 persons, add $4,780 for each additional person.

Source: Federal Register, Vol. 81, January 25, 2016, pp. 4036–4037. Available at https://www.federalregister.gov/documents/2016/01/25/2016-01450/annual-update-of-the-hhs-poverty-guidelines.

Notes: Section 673(2) of the Omnibus Budget Reconciliation Act (OBRA) of 1981 (42 U.S.C. 9902(2)) requires the Secretary of the Department of Health and Human Services to update the poverty guidelines at least annually, adjusting them on the basis of the Consumer Price Index for All Urban Consumers (CPI-U). As required by law, this update is accomplished by increasing the latest published Census Bureau poverty thresholds by the relevant percentage change in the Consumer Price Index for All Urban Consumers (CPI-U). The guidelines in this 2016 notice reflect the 0.1 percent price increase between calendar years 2014 and 2015. After this inflation adjustment, the guidelines are rounded and adjusted to standardize the differences between family sizes. Separate guidelines for Alaska and Hawaii reflect administrative practice adopted in the late 1960s. The poverty guidelines are designated by the year in which they are issued and are updated to account for the last calendar year's increase in prices as measured by the Consumer Price Index.

What are the key differences between thresholds and guidelines?

Both the poverty thresholds and the poverty guidelines are the same for all mainland states, regardless of regional differences in the cost of living. Both are updated annually for price changes using the Consumer Price Index for All Urban Consumers (CPI-U). The poverty guidelines are sometimes loosely referred to as the "federal poverty level" or the "poverty line," but these terms are ambiguous and should be avoided in situations where precision is important. Key differences between the thresholds and the guidelines are outlined in the table below.

Key Differences Between Thresholds and Guidelines

 

Poverty Thresholds

Poverty Guidelines

Characteristics by Which They Vary Detailed (48-cell) matrix of thresholds varies by family size, number of children, and, for 1- & 2-person units, whether elderly. Weighted average thresholds vary by family size and, for 1- & 2-person units, whether elderly. There is no geographic variation; the same figures are used for all 50 states and D.C. Guidelines vary by family size. In addition, there is one set of figures for the 48 contiguous states and the District of Columbia; one set for Alaska; and one set for Hawaii.
How Updated or Calculated The 48-cell matrix is updated each year from the 1978 threshold matrix using the CPI-U. The preliminary weighted average thresholds are updated from the previous year's final weighted average thresholds using the CPI-U. The final weighted average thresholds are calculated from the current year's 48-cell matrix using family weighting figures from the Current Population Survey's Annual Social and Economic Supplement. Guidelines are updated from the latest published (final) weighted average poverty thresholds using the CPI-U. (Figures are rounded, and differences between adjacent-family-size figures are equalized.)

Issuing Agency

Census Bureau

Department of Health and Human Services

Purpose/Use

Statistical – calculating the number of people in poverty

Administrative – determining financial eligibility for certain programs

Rounding Rounded to the nearest dollar Rounded to various multiples of $10 - may end only in zero

Timing of Annual Update

The Census Bureau issues preliminary poverty thresholds in January, and final poverty thresholds in September of the year after the year for which poverty is measured. The poverty thresholds are adjusted to the price level of the year for which poverty is measured. For example, the poverty thresholds for calendar year 2012 were issued in 2013 (preliminary in January, final in September), were used to measure poverty for calendar year 2012, and reflect the price level of calendar year 2012.

DHHS issues poverty guidelines in late January of each year. Some programs make them effective on date of publication, others at a later date. For example, the 2013 poverty guidelines were issued in January 2013, calculated from the calendar year 2011 thresholds issued in September 2012, updated to reflect the price level of calendar year 2012. Therefore, the 2013 poverty guidelines are approximately equal to the poverty thresholds for 2012 (for most family sizes).

Source: U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation, Frequently Asked Questions Related to the Poverty Guidelines and Poverty, 09/03/2015, at https://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty#differences.
Note: CPI-U = Consumer Price Index for All Urban Consumers.

Are there alternative poverty measures?

Academics, statisticians, and policy analysts have long asserted that existing methods for determining the poverty measure and estimating who is poor could be greatly improved. Efforts over the decades to devise a better measure culminated most recently in the release of a new, Supplemental Poverty Measure (SPM). The SPM builds on earlier efforts, including a variety of experimental poverty estimates using different data sources and measures that the Census Bureau has been releasing for many years in addition to the annual poverty report.

The SPM was developed by an Interagency Technical Working Group that included representatives from the Census Bureau, Bureau of Labor Statistics, Department of Health and Human Services, and other federal entities. The SPM will not replace the current official poverty measure used to create the annual poverty report, nor will it be used to determine eligibility for government programs. Instead, in the words of Census Bureau analyst Kathleen Short, "the SPM extends the information provided by the official poverty measure by including many of the government programs designed to assist low-income families and individuals that are not included in the current official poverty measure." [3] The most recent SPM findings are found in a Census Bureau report entitled The Supplemental Poverty Measure: 2015.

The most notable features of the SPM for this discussion are its use of a more comprehensive basis for setting the poverty threshold than the official measure and its expanded definitions of resources that includes noncash benefits (such as food assistance) and deducts expenses such as out-of-pocket medical expenses. The table below summarizes the differences between the official measure and the SPM in terms of measurement units, poverty threshold, threshold adjustments, threshold updates, and resource measure.

In the words of then Census Bureau Chief of the Social, Economic, and Housing Statistics Division David Johnson and Arts and Sciences Distinguished Professor of Economics and Public Affairs at the University of Wisconsin–Madison Timothy Smeeding (who served as Director of IRP from 2008–2014), "the SPM is designed to provide a more modern, comprehensive, and meaningful measure of poverty."[4]

Poverty Measure Concepts: Official and Supplemental

 

Official Poverty Measure

Supplemental Poverty Measure

Measurement Units Families or unrelated individuals Families (including any coresident unrelated children, foster children, unmarried partners and their relatives) or unrelated individuals (who are not otherwise included in the family definition)
Poverty Threshold Three times the cost of minimum food diet in 1963 The mean of expenditures on food, clothing, shelter, and utilities (FSCU) over all two-child consumer units in the 30th to 36th percentile range multiplied by 1.2
Threshold Adjustments Vary by family size, composition, and age of householder Geographic adjustments for differences in housing costs by tenure and a three-parameter equivalence scale for family size and composition
Updating Thresholds Consumer Price Index: All items Five-year moving average of expenditures on FCSU
Resource Measure Gross before-tax cash income Sum of cash income, plus noncash benefits that families can use to meet their FCSU needs, minus taxes (or plus tax credits), minus work expenses, out-of-pocket medical expenses, and child support paid to another household
Source: Trudi Renwick and Liana Fox, "The Supplemental Poverty Measure: 2015," Current Population Reports P60-258, September 2016. Available at http://www.census.gov/content/census/en/library/publications/2016/demo/p60-258.html.

Further Information

U.S. Census Bureau

Main Poverty Page

American FactFinder

U.S. Department of Health and Human Services

Poverty Estimates, Trends, and Analysis

U.S. Department of Labor

Labor Force Participation: What Has Happened Since the Peak?

Consumer Price Index

Overview of Bureau of Labor Statistics on Employment

Related IRP Resources

David S. Johnson and Timothy M. Smeeding, "A Consumer's Guide to Interpreting Various U.S. Poverty Measures,"Fast Focus No. 14-2012 (May 2012).

Poverty Measurement IRP Website Research Page

FAQ #2: How is poverty measured in the U.S.?

FAQ #3: Who is poor?

Wisconsin Poverty Measure IRP Website Research Page

Methodological Issues: Poverty Measurement IRP Website Research Page

Robert Haveman, "What Does It Mean to Be Poor in a Rich Society?" 2008 Robert J. Lampman Memorial Lecture [Slides | Video]

David S. Johnson, "Progress Toward Improving the U.S. Poverty Measure: Developing the Supplemental Poverty Measure," Focus 27(2), Winter 2010.

Robert Haveman, "What Does It Mean to Be Poor in a Rich Society?" Focus 26(2), Fall 2009.

 

[1] For more about the American Community Survey (ACS) including links to ACS reports, see http://www.census.gov/hhes/www/poverty/publications/pubs-acs.html.


[2] For more about Orshansky's role, see Gordon M. Fisher, "Remembering Mollie Orshansky–The Developer of the Poverty Thresholds," Social Security Bulletin Vol. 68, No. 3 (2008). Available at http://www.ssa.gov/policy/docs/ssb/v68n3/v68n3p79.html.


[3] Trudi Renwick and Liana Fox, "The Supplemental Poverty Measure: 2015," Current Population Reports P60-258, September 2016. Available at http://www.census.gov/content/census/en/library/publications/2016/demo/p60-258.html.


[4] David S. Johnson and Timothy M. Smeeding, "A Consumer's Guide to Interpreting the Various U.S. Poverty Measures," Fast Focus No. 14-2012 (May 2012). Available at http://www.irp.wisc.edu/publications/fastfocus/pdfs/FF14-2012.pdf.