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 2016 and was issued in September 2017 as Income and Poverty in the United States: 2016, 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.
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. 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). 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, 2016 Size of Family Unit Poverty Threshold One person (unrelated individual) Under age 65 12,486 Age 65 or older 11,511 Two people Householder under age 65 16,072 Householder age 65 or older 14,507 Three people 18,774 Three people with two related children 19,337 Four people 24,755 Four people with two related children 24,339 Five people 29,854 Five people with two related children 29,360 Six people 34,337 Six people with two related children 33,763 Seven people 39,509 Seven people with two related children 38,905 Eight people 44,188 Eight people with two related children 43,776 Nine people or more 53,155 Source: U.S. Census Bureau, Poverty Thresholds for 2016 by Size of Family and Number of Related Children Under 18 Years, released in September 2017.
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 2018 values of the poverty guidelines are provided in the table below.
U.S. Department of Health and Human Services Poverty Guidelines, 2018 Annual Income Persons in Family/ Household 48 Contiguous States and District of Columbia Alaska Hawaii 1 $12,140 $15,180 $13,960 2 16,460 20,580 18,930 3 20,780 25,980 23,900 4 25,100 31,380 28,870 5 29,420 36,780 33,840 6 33,740 42,180 38,810 7 38,060 47,580 43,780 8 42,380 52,980 48,750 >8 persons For families/ households with more than 8 persons, add $4,320 for each additional person. For families/ households with more than 8 persons, add $5,400 for each additional person. For families/ households with more than 8 persons, add $4,970 for each additional person. Source: Federal Register, Vol. 83, No. 12, January 18, 2018, pp. 2642-2644.
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 2018 notice reflect the 2.1 percent price increase between calendar years 2016 and 2017. After this inflation adjustment, the guidelines are rounded and adjusted to standardize the differences between family sizes. As in prior years, these 2018 guidelines are roughly equal to the poverty thresholds for the calendar year 2017 which the Census Bureau expects to publish in final form in September 2018.
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 (HHS) 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. 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, 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.
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.” The most recent SPM findings are found in a Census Bureau report entitled The Supplemental Poverty Measure: 2016.
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.”
Poverty Measure Concepts: Official and Supplemental Official Poverty Measure Supplemental Poverty Measure Measurement Units Families (individuals related by birth, marriage, or adoption) or unrelated individuals Resource Units (offical 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 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: Liana Fox, “The Supplemental Poverty Measure: 2016,” Current Population Reports P60-261, September 2017.