What Is Poverty? - Poverty Thresholds And Guidelines In The United States

Governmental agencies in the United States tend to avoid using the term "poverty line" because they consider it ambiguous. Instead, U.S. officials divide poverty measurement tools into two categories: thresholds and guidelines. The U.S. Census Bureau issues poverty thresholds, which are statistical measurements used to track the total number of people living in poverty in the United States. Poverty guidelines, on the other hand, are issued by the U.S. Department of Health and Human Services (HHS) and are used for the administrative purpose of determining eligibility for certain federal social programs and services, including Head Start, Medicare, AIDS Drug Assistance Program, the National School Lunch Program, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), among many others.

Poverty thresholds are calculated and issued by the Census Bureau in September or October of the year following the year that they measure. This is because they are based on the Consumer Price Index (CPI) and the Current Population Survey (CPS), the results of which are not known until the end of the year in question or the beginning of the following year. Poverty guidelines are published early in the year in the Federal Register by the Department of Health and Human Services. They are based on price changes over the preceding year. The guidelines are a simplified version of the thresholds, although at the time of their respective publications thresholds and guidelines are considered equally accurate.

History of the Poverty Threshold

In 1961 the U.S. Department of Agriculture (USDA) created four food plans that could be applied to the food buying patterns of American families. The Economy, Low-cost, Moderate-cost, and Liberal food plans were based on the food spending habits of U.S. households. They were developed by estimating the least amount of food necessary to meet nutritional requirements at specified prices. The Economy plan, now called the Thrifty food plan, has been updated several times over the years—most recently in 1999 by the USDA's Center for Nutrition Policy and Promotion—to allow for revisions in nutritional guidelines and changing food prices. These food categories are used to determine where households fall on the poverty threshold.

The poverty threshold was developed in 1963 Mollie Orshansky of the U.S. Social Security Administration. Orshansky's measurement was based on the USDA's Economy food plan. According to the USDA, the Economy plan was "designed for temporary or emergency use when funds are low" because it was based on the least amount of food at the lowest possible cost. Orshansky formulated calculations for families based on their size (how many people living in a household), the sex of the head of the household, how many family members were children, whether the families were farmers or not, and the age of the head of the household (specifically, over sixty-five or under). At the time, it was assumed that American families spent about one-third of their income on food, so Orshansky multiplied the numbers on the Economy food plan by three to come up with the poverty thresholds. Orshansky's calculations resulted in a matrix containing 124 different poverty thresholds for each different household variable.

In 1981 the matrix was reduced from 124 thresholds to forty-eight when some of the distinctions were eliminated or revised. For example, the farm and nonfarm categories were changed so that all households were measured by the criteria of nonfarms. Gender differences were cut by averaging male- and female-headed households together, and the size of the largest households considered was increased from seven people to nine.