How is poverty measured?

The CPS ASEC questionnaire asks about income from more than 50 sources and records up to 27 different income amounts. Income is defined by the OPM to include, before taxes, the following sources:

• Earnings
• Unemployment and workers’ compensation
• Social Security
• Supplemental Security Income
• Public assistance
• Veterans’ payments
• Pension or retirement income
• Interest
• Dividends
• Child support
• Educational assistance
• Other miscellaneous sources

The OPM does not include as income noncash government benefits such as Supplemental Nutrition Assistance Program (SNAP) benefits and housing assistance.

Poverty thresholds, the minimum income needed to avoid poverty, are updated annually for inflation using the Consumer Price Index, and adjusted for family size, composition, and age of householder.

OPM thresholds do not vary geographically.* In 2016, the OPM poverty threshold for a family of four was $24,339.

Poverty thresholds serve different purposes, including tracking poverty over time, comparing poverty across different demographic groups, and as the starting point for determining eligibility for a range of federal assistance programs.

(To learn more about using the poverty thresholds, or their administrative counterpoint, the poverty guidelines, for determining program eligibility, see FAQ: What are poverty thresholds and poverty guidelines?)

* The Census Bureau cautions that the thresholds should be interpreted as a “statistical yardstick” rather than as a complete accounting of how much income people need to live. They were intended to define and quantify poverty in America and to record changes in the number of persons and families in poverty and their characteristics over time.

Family is defined by the OPM as a group of two people or more (one of whom is the householder) related by birth, marriage, or adoption who reside together. All such people (including related subfamily members) are considered as members of one family.

In 1959, when the official government poverty series began, poverty was estimated at 22 percent. Before that time, unofficial estimates by researchers found a poverty rate in 1914 of 66 percent; 78 percent in 1932; 32 percent in 1947; and 24 percent in 1958.**

Figure 1 shows more recent poverty rates, in 1968, 1990, and 2016, by age, race, and Hispanic origin, using the OPM.

Figure 1. Official U.S. poverty rates in 1968, 1990, and 2016 show variation by age and racial/ethnic group and over time

** R. D. Plotnick, E. Smolensky, E. Evenhouse, and S. Reilly, “The Twentieth-Century Record of Inequality and Poverty in the United States,” in The Cambridge Economic History of the United States, Vol. 3, eds. S. L. Engerman and R. E. Gallman (Cambridge: Cambridge University Press, 2000), 249-299; G. Fisher, “Estimates of the Poverty Population under the Current Official Definition for Years before 1959,” mimeograph, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, 1986.

The Census Bureau releases the results of their analysis using the OPM every year in a report called Income and Poverty in the United States. The report includes charts and tables on information such as the following:

• household income by race and Hispanic origin, age of household head, nativity, region, residence, income inequality, and earnings and work experience;
• poverty estimates by race and Hispanic origin, age, sex, nativity, region, residence, work experience, disability status, educational attainment, and family type; and
• depth of poverty, ratio of income to poverty, income deficit, shared households, and estimates using alternative and experimental poverty measures.

To learn more about the official poverty measure, see the Census Bureau discussion, “How the Census Bureau Measures Poverty,” and the infographic, “How Census Measures Poverty.”

Researchers and policymakers have long called for changes to the official poverty measure for a number of reasons. However, in spite of its shortcomings, detailed below, its salience in policymaking is noted by the economists Bruce D. Meyer and James X. Sullivan:

Few economic indicators are more closely watched or more important for policy than the official poverty rate. The poverty rate is often cited by policymakers, researchers, and advocates who are evaluating social programs that account for more than half a trillion dollars in government spending.

Principal criticisms of the OPM include:

• Its “headcount” approach identifies only the share of people who fall below the poverty threshold, but does not measure the depth of economic need;
• It does not reflect modern expenses and resources, by excluding significant draws on income such as taxes, work expenses, and out-of-pocket medical expenses, and excluding potentially sizable resources such as in-kind benefits (e.g., food assistance);
• It does not vary by geographic differences in cost of living within the contiguous United States despite huge variation;
• It is not adjusted for changes in the standard of living over time; and
• Its strict definition of measurement units—“family”—as persons living in the same household who are related by birth, marriage, or adoption does not reflect the nature of many households today, including those made up of cohabitors, unmarried partners with children from previous relationships, and foster children.

While the official measure remains the official national poverty statistic, the Census Bureau has been estimating poverty using a number of experimental measures as well, since the mid-1990s. See Poverty: Experimental Measures on the Census Bureau’s website for more about these approaches.

The most recent and prominent experimental measure, the Supplemental Poverty Measure—a work-in-progress that supplements but does not replace the official measure—is discussed below.