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 from year to year. The "poverty report" receives widespread media attention because it provides the nation's latest official statistics on income, poverty, and health insurance coverage in the United States. It indicates 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, by race or ethnicity, by region, and by family type.

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 2012 and was issued in September 2013 as Income, Poverty, and Health Insurance Coverage in the United States: 2012, drawing from the Current Population Survey Annual Social and Economic Supplements. In addition to this national report, the Census Bureau also releases information on poverty for states, counties, and other geographic divisions. In recent years this second release of poverty data, drawing from the American Community Survey, has been within days of the release of the national estimates. [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; and
  • poverty guidelines, which are a simplified version of the thresholds, primarily used for administrative purposes.

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 mainly for statistical purposes–for example, preparing the estimates of the number of Americans in poverty for each year's poverty report. The measure was devised to define and quantify poverty in America, and thereby provide a yardstick for progress or regress in antipoverty efforts, and in that sense has served 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. For example, a four-person family with two adults and two children is poor with annual cash income below $23,283; the threshold for a four-person family with a single parent and three children is $23,364.

U.S. Census Bureau Poverty Thresholds, 2012
Size of Family Unit Poverty Threshold
One person (unrelated individual) $11,720
  Under age 65 11,945
  Age 65 or older 11,011
Two people 14,937
  Householder under age 65 15,450
  Householder age 65 or older 13,892
Three people 18,284
Four people 23,492
Five people 27,827
Six people 31,471
Seven people 35,743
Eight people 39,688
Nine people or more 47,297
Source: U.S. Census Bureau, Weighted Average Poverty Thresholds, 2012, released in September 2013.

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 most recent values of the poverty guidelines are provided in the table below.

U.S. Department of Health and Human Services Poverty Guidelines, 2013
Persons in Family/Household Annual Income:
48 Contiguous States and D.C.
Annual Income:
Alaska
Annual Income:
Hawaii
1 $11,490 $14,350 $13,230
2  15,510  19,380  17,850
3  19,530  24,410  22,470
4  23,550  29,440  27,090
5  27,570  34,470  31,710
6  31,590  39,500  36,330
7  35,610  44,530  40,950
8  39,630  49,560  45,570
>8 persons Add $4,020 for each additional person Add $5,030 for each additional person Add $4,620 for each additional person
Source: Federal Register, Vol. 78, January 24, 2013, pp. 5182-5183. Available at https://www.federalregister.gov/articles/2013/01/24/2013-01422/annual-update-of-the-hhs-poverty-guidelines#t-1.
Notes: Separate guidelines for Alaska and Hawaii reflect the Office of Economic Opportunity (OEO) administrative practice beginning 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 thresholds and the 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. The poverty guidelines are sometimes loosely referred to as the "federal poverty level" or "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

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

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 or not elderly. Weighted average thresholds vary by family size and, for 1- & 2-person units, whether or not 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 D.C.; one set for Alaska; and one set for Hawaii.

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 2011 were issued in 2012 (preliminary in January, final in September), were used to measure poverty for calendar year 2011, and reflect the price level of calendar year 2011.

HHS 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, and updated to reflect the price level of calendar year 2012. Therefore, the 2013 poverty guidelines are approximately equal to the poverty thresholds for calendar year 2012 (for most family sizes).

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.)

Rounding

Rounded to the nearest dollar

Rounded to various multiples of $10 - may end only in zero

Source: Office of the Assistance Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. Available at http://aspe.hhs.gov/poverty/faq.shtml#differences.

What is the most recent "poverty line"?

When journalists and members of the public search for the latest "poverty line," they often become frustrated because they are able to find only the poverty threshold (the official statistic used to determine poverty status) for the previous year. They don't want to know what the poverty line was last year; they want to know what it is now.

But that information is simply not available. The reason is that the Census Bureau poverty thresholds–the primary version of the federal poverty measure–are updated each year by the Consumer Price Index (CPI-U). It is impossible for the Labor Department to produce an annual average CPI-U until that year is over. [3]

Are there alternative models?

Academics, statisticians, and policy analysts at IRP and elsewhere 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." [4] The most recent SPM findings are found in a Census Bureau report entitled The Research Supplemental Poverty Measure: 2011.

The most notable features of the SPM for this discussion are its use of different data sources from the official measure and its expanded definitions of resources and 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 Census Bureau analyst David Johnson and economist (and IRP director) Timothy Smeeding, "the SPM is designed to provide a more modern, comprehensive, and meaningful measure of poverty." [5]

Poverty Measure Concepts: Official Poverty Measure and Supplemental Poverty Measure

 

Official Poverty Measure

Supplemental Poverty Measure

 

Measurement units

 

Families and unrelated individuals

 

All related individuals who live at the same address, including any coresident unrelated children who are cared for by the family (such as foster children) and any cohabitors and their children

 

Poverty threshold

 

Three times the cost of minimum food diet in 1963

 

The 33rd percentile of expenditures on food, clothing, shelter, and utilities (FCSU) of consumer units with exactly two children multiplied by 1.2 to add 20 percent for all other necessary expenses

 

Threshold adjustments

 

Vary by family size, composition, and age of householder

 

Vary by housing status: owners with mortgages, owners without mortgages, and renters. Geographic adjustments for differences in housing costs (using ACS) 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 in-kind benefits that families can use to meet their FCSU needs, minus taxes (or plus tax credits), minus work expenses, minus out-of-pocket medical expenses (reported)

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

Related IRP Resources

Further resources related to this topic available on this website include the following:

 

[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] The Bureau of Labor Statistics, which generates the Consumer Price Index, published the following nontechnical guide to the CPI: U.S. Department of Labor, Bureau of Labor Statistics, Understanding the Consumer Price Index: Answers to Some Questions, August 2004 (Revised). Available at http://www.bls.gov/cpi/cpifaq.pdf. See also, "Common Misconceptions about the Consumer Price Index: Questions and Answers," available at http://www.bls.gov/cpi/cpiqa.htm.


[4] Kathleen Short, "The Research Supplemental Poverty Measure: 2011," Current Population Reports P60-244, November 2012. Available at http://www.census.gov/prod/2012pubs/p60-244.pdf.


[5] 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.