I think it is important to explore the determination of poverty in America as it is directly related to how we view (and determine) assistance to low-income families. I previously
asked: how much is enough? That question has not been answered, nor has it been fully explored. A related question is: how little do you need to be considered poor? I firmly believe these questions must be answered before we can talk much more about wages (including the minimum wage) and public assistance for low-income workers (including the EITC). Some of the ways these are all related (for better or worse) should become clear over the next few posts and I will briefly introduce the relationship before concluding this post. Here, I'm just giving a brief intro that I hope isn't too painful.
Two figures are relevant today in determining who is poor in America (from an official standpoint): the poverty thresholds
and the poverty guidelines
. The most concise explanation of these and their differences is here
. In summary, the threshold is used by the Census to determine "who is poor" each year, while the guidelines are a simplification of the threshold used for administrative purposes of various federal programs.
The initial poverty threshold set the "line" at $3,000 in the early 1960s. Adjusting for inflation, the original $3,000 in 1962 dollars is $18,039 in 2004 dollars. That falls between the 2005 poverty guidelines for a family of three ($16,090) and a family of four ($19,350). In 1969, the poverty threshold was indexed to the Consumer Price Index.
But are the methods for arriving at these numbers accurate? In other words, is this really the best way to determine poverty? Some argue that housing and health care take up a larger percentage of income today then in the past. Recently, gas prices clearly hit home for poor families more than ever. Another criticism is that these numbers are applied across the board to families living anywehre except Alaska and Hawaii. And still other criticisms abound. Don't we care more about who is in the family rather than just how many people? The "poverty line" is the same for a single mother of two as it is for a married, dual-income couple with one child (a similar criticism I'd make about the minimum wage, and one of the more intelligent and effective aspects of the EITC). Particular criticism
has been directed to the Census' release of its latest report on February 14, 2006. Particulars here will have to wait.
One of the ways federal and state agencies have handled the inadequacy of the poverty figures is in relaxing the eligibility requirements of certain programs. Often, the poverty guidelines are used as a reference, with program eligibility set at 125%, 185%, etc. This is easy to see in Colorado, using the website
referenced earlier. The eligility requirement for the Colorado Indigent Care program is 185% of the 2005 (federal) Poverty Guidelines for a family of four. This is for a program specifically targeted
at imporverished individuals!
More generally, the Colorado Fiscal Policy Institute's Self-Sufficiency Standard for Colorado estimates that the poverty level, in reality, is two or three times higher than the federal guidelines. CFP estimates that a single-parent with an infant or preschool-age child required $44,000 merely for "basic budget needs" in 2005. This is rather dramatic, really. The minimum wage for a single mother in Colorado should then be about $21/hour. That number could drop with an effectively implemented federal and state EITC, an entire exemption from state and federal income taxes, and other state assistance to preserve income otherwise allocated for food, housing, child care, etc. Playing with these numbers very briefly in my imaginary world, the minimum wage for a single mother with a young child in Colorado should really be set at about $15/hour. These are controversial points, with little grounding in reality, but I am throwing them out there to point out (or begin to point out) the relationship between poverty determinations, our nation's lowest legal wages, and state assistance targeted at working individuals (like the EITC).
And Colorado is just one example. Some could argue that the guideline is going to be an average of sorts, resulting in a low "line" for states with higher costs of living and a high "line" for states with lower costs of living. But I'll attempt to show that this is a flawed argument on many levels.
I'll end there for today.