Ever wonder how many people are unable to pay for basic necessities like food, clothing and utilities? Ever asked how rates of poverty have changed over time and what policies out there are making a difference? In order to reach some of these answers, we first need a standard metric to measure poverty in America. For 50 years, we’ve used one tool, but many have called for a more comprehensive measure that provides a better perspective about those living in poverty. Today, we’ll explore the Official Poverty Measure (OPM). Next week we’ll look at a newer measure that compliments this metric and reveals more about families and the resources they have to make ends meet.
The Official Poverty Measure has been the go-to-poverty-measure since 1969. The U.S. Census Bureau creates it using two components, poverty thresholds and family resources. Poverty thresholds are still based on the average food expenses among low-income families back in the 1960s but are adjusted every year for inflation, family size, and composition like age of family members, homeowners etc. Family resources is essentially a family’s income. The federal government uses pre-tax income (i.e. wages and investments). (The OPM for 2013 is located in the table below)
You’re probably most familiar with the OPM when we talk about it in terms of the federal poverty line (it’s the same thing). Broadly speaking, the OPM is how the federal government determines how many people are living in poverty in America. Because the OPM measures pre-tax cash income, typically from work earnings, it provides researchers and policymakers a good indication about work and earnings among low-income families.
Practically speaking, the OPM is used by state and federal officials to set eligibility criteria for programs like SNAP, TANF, and Medicaid. For instance, households with a gross monthly income set at or below 130% of the federal poverty line will qualify for food assistance with SNAP.
However, controversy has surrounded the use of the OPM since it first came on the scene. Since the OPM only measures the pre-tax income of families, it really tells us nothing about the actual cash on hand that families have to make ends meet or how poverty relief efforts improve these families’ well-being.
Next Wednesday, we’ll explore a newer measure that complements the fifty-year-old metric and provides a better understanding of how policy and government programs alleviate poverty for low-income families.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.