Official Poverty Measure
The Census Bureau determines poverty status by using an official poverty measure (OPM) that compares pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963 and adjusted for family size.
The OPM uses calculations of these three elements—income, threshold, and family—to estimate what percentage of the population is poor.
The official poverty estimates are drawn from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC), which is conducted in February, March, and April with a sample of approximately 100,000 addresses per year.
In 2016, the most recent year for which data are available, the OPM national poverty rate was 12.7 percent. There were 40.6 million people in poverty.
What the OPM Counts as Income
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:
- Unemployment and workers’ compensation
- Social Security
- Supplemental Security Income
- Public assistance
- Veterans’ payments
- Pension or retirement income
- 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.
How OPM Sets Thresholds
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.
How the OPM Defines Family
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.
Big Picture: Poverty Trends, 1959 to the Present
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.
OPM Estimates Appear in the Annual “Poverty Report”
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.
How Experts Say the OPM Falls Short
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.
Supplemental Poverty Measure
The Census Bureau introduced the Supplemental Poverty Measure or SPM in 2010 to provide an alternative view of poverty in the United States that better reflects life in the 21st century, including contemporary social and economic realities and government policy.
As its name suggests, the SPM supplements but does not replace the official poverty measure, which remains the nation’s source for official poverty statistics and for determining means-tested program eligibility.
In a side-by-side comparison of the official poverty measure and the SPM, the Census Bureau notes their differences in measurement units, poverty threshold, threshold adjustments (e.g., by family size), updating thresholds, and what counts as resources, summarized in Table 3 below.
|Table 3. Poverty measure concepts differ between the official poverty measure and the Supplemental Poverty Measure.|
|Poverty Measure Component||Official Poverty Measure||Supplemental Poverty Measure|
|Measurement Units||Families (see note) or unrelated individuals||Resource units (official family definition plus any coresident unrelated children, foster children, and unmarried partners and their relatives) or unrelated individuals (who are not otherwise included in the family definition)|
|Poverty Threshold||Three times the cost of a minimum food diet in 1963||Based on expenditures of food, clothing, shelter, and utilities (FCSU)|
|Threshold Adjustments||Vary by family size, composition, and age of householder||Vary by family size and composition, as well as geographic adjustments for differences in housing costs by tenure|
|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 resource units can use to meet their FCSU needs, minus taxes (or plus tax credits), minus work expenses, medical expenses, and child support paid to another household|
Source: L. Fox, “The Supplemental Poverty Measure: 2016,” Current Population Reports P60-261 (RV), Revised September 2017.
Note: “Family” as defined by the Census Bureau is “a group of two people or more (one of whom is the householder) related by birth, marriage, or adoption and residing together; all such people (including related subfamily members) are considered as members of one family.”
A comparison of official and SPM poverty rates in 2016 for the total population and among three age groups: under age 18, adults ages 18 to 64, and elders age 65 and over, is shown in Figure 2.
For most groups, SPM poverty rates were higher than official poverty rates; children are an exception with 15.2 percent poor using the SPM and 18.0 percent poor using the official measure. Analysts attribute the lower SPM child poverty rate largely to the measure’s inclusion of noncash benefits such as Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) benefits.
The much higher SPM poverty rates for people age 65 and older—14.5 percent vs. 9.3 percent using the OPM—partially reflect that the official thresholds are set lower for families with householders in this age group, while the SPM thresholds do not vary by age.
In addition, the SPM rate is higher for people age 65 and older because it includes out-of-pocket medical expenditures, which are typically high for the elderly, whereas the official measure does not take them into account.
Figure 2. Poverty rates using OPM and SPM measures for total population and by age group, 2016, show a higher OPM child poverty rate and higher SPM elderly poverty rates.