Poverty in the United States Totally Explained

Everything about Poverty Line In The United States totally explained

Poverty in the United States refers to people living in poverty in the U.S. Within the U.S. the most common measure of poverty is the "poverty line" set by the U.S. government. The official poverty threshold is adjusted for inflation using the consumer price index. Poverty in the United States is cyclical in nature with roughly 12% to 15% living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some time within a 10 year time span. While there remains some controversy of whether or not the official poverty threshold over or understates poverty, the United States has some of the highest absolute and relative pre-transfer, and the highest post-transfer, poverty rates in the developed world. Overall the U.S. ranks 16^th on the Human Poverty Index.
Those under the age of 18 were the most likely to be impoverished. In 2001 the poverty rate for minors in the United States was the highest in the industrialized world, with 14.8% of all minors and 30% of African American minors living below the poverty threshold. Moreover, the standard of living for those in the bottom 10% was lower in the U.S. than in any other developed nation except the United Kingdom, which had the lowest standard of living for impoverished children. In 2006, poverty rate for minors in the United States was 21.9% - highest child poverty rate in the developed world.

Measures of poverty

Measures of poverty can be either absolute or relative.

The official measure of poverty

There are two versions of the federal poverty measure: the poverty thresholds (which are the primary version) and the poverty guidelines. The Census Bureau issues the poverty thresholds, which are generally used for statistical purposes—for example, to estimate the number of people in poverty nationwide each year and classify them by type of residence, race, and other social, economic, and demographic characteristics. The Department of Health and Human Services issues the poverty guidelines for administrative purposes—for instance, to determine whether a person or family is eligible for assistance through various federal programs.
   Since the 1960s, the United States Government has defined poverty in absolute terms. When the Johnson administration declared "war on poverty" in 1964, it chose an absolute measure. The "absolute poverty line" is the threshold below which families or individuals are considered to be lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health. The "Orshansky Poverty Thresholds" form the basis for the current measure of poverty in the U.S. Mollie Orshansky was an economist working for the Social Security Administration (SSA). Her work appeared at an opportune moment. Orshansky's article was published later in the same year that Johnson declared war on poverty. Since her measure was absolute (for example, didn't depend on other events), it made it possible to objectively answer whether the U.S. government was "winning" this war. The newly formed United States Office of Economic Opportunity adopted the lower of the Orshansky poverty thresholds for statistical, planning, and budgetary purposes in May 1965.
   The Bureau of the Budget (now the Office of Management and Budget) adopted Orshansky's definition for statistical use in all Executive departments in 1965. The measure gave a range of income cutoffs, or thresholds, adjusted for factors such as family size, sex of the family head, number of children under 18 years old, and farm or non-farm residence. The economy food plan (the least costly of four nutritionally adequate food plans designed by the Department of Agriculture) was at the core of this definition of poverty.
   The Department of Agriculture found that families of three or more persons spent about one third of their after-tax income on food. For these families, poverty thresholds were set at three times the cost of the economy food plan. Different procedures were used for calculating poverty thresholds for two-person households and persons living alone. Annual updates of the SSA poverty thresholds were based on price changes in the economy food plan.
   Two changes were made to the poverty definition in 1969. Thresholds for non-farm families were tied to annual changes in the Consumer Price Index (CPI) rather than changes in the cost of the economy food plan. Farm thresholds were raised from 70 to 85% of the non-farm levels.
   In 1981, further changes were made to the poverty definition. Separate thresholds for "farm" and "female-householder" families were eliminated. The largest family size category became "nine persons or more.", and that there was an increase of 5.4 million poor from 2000 to 2006 while the total population grew by 17.5 million. The poverty rate for children under 18 years old increased from 16.2% to 17.8% from 2000 to 2004 and had dropped to 17.4% in 2005 and 2006. The 2006 poverty threshold was measured according to the HHS Poverty Guidelines which are illustrated in the table below.

Persons in Family Unit	48 Contiguous States and D.C.	Alaska	Hawaii
1	$10,400	$13,000	$11,960
2	$14,000	$17,500	$16,100
3	$17,600	$22,000	$20,240
4	$21,200	$26,500	$24,380
5	$24,800	$31,000	$28,520
6	$28,400	$35,500	$32,660
7	$32,000	$40,000	$36,800
8	$35,600	$44,500	$40,940
For each additional person, add	$3,600	$4,500	$4,140

SOURCE: Federal Register, Vol. 73, No. 15, January 23, 2008, pp. 3971–3972.

Relative measures of poverty

Another way of looking at poverty is in relative terms. "Relative poverty" can be defined as having significantly less access to income and wealth than other members of society. Therefore, the relative poverty rate can directly be linked to income inequality. When the standard of living among those in more financially advantageous positions rises while that of those considered poor stagnates, the relative poverty rate will reflect such growing income inequality and increase. Conversely, the poverty rate can decrease, with low income people coming to have less wealth and income if wealthier people's wealth is reduced by a larger percentage than theirs. In 1959, a family at the poverty line had an income that was 42.64% of the median income. Thus, a poor family in 1999 had relatively less income and therefore relatively less purchasing power than wealthier members of society in 1959, and, therefore, "poverty" had increased. But, because this is a relative measure, this isn't saying that a family in 1999 with the same amount of wealth and income as a family from 1959 had less purchasing power than the 1959 family.
In the EU, "relative poverty" is defined as an income below 60% of the national median equalized disposable income after social transfers for a comparable household. In Germany, for example, the official relative poverty line for a single adult person in 2003 was 938 euros per month (11,256 euros/year, $12,382 PPP. West Germany 974 euros/month, 11,688 euros/year, $12,857 PPP). For a family of four with two children below 14 years the poverty line was 1969.8 euros per month ($2,167 PPP) or 23,640 euros ($26,004 PPP) per year. According to Eurostat the percentage of people in Germany living at risk of poverty (relative poverty) in 2004 was 16% (official national rate 13.5% in 2003). Additional definitions for poverty in Germany are "poverty" (50% median) and "strict poverty" (40% median, national rate 1.9% in 2003). Generally the percentage for "relative poverty" is much higher than the quota for "strict poverty". The U.S concept is best comparable to "strict poverty". By European standards the official (relative) poverty rate in the United States would be significantly higher than it's by the U.S. measure. A research paper from the OECD calculates the relative poverty rate for the United States at 16% for 50% median of disposable income and nearly 24% for 60% of median disposable income (OECD average: 11% for 50% median, 16% for 60% median).

The income distribution and relative poverty

Although the relative approach theoretically differs largely from the Orshansky definition, crucial variables of both poverty definitions are more similar than often thought. First, the so-called standardization of income in both approaches is very similar. To make incomes comparable among households of different sizes, equivalence scales are used to standardize household income to the level of a single person household. In Europe, the modified OECD equivalence scale is used, which takes the combined value of 1 for the head of household, 0.5 for each additional household member older than 14 years and 0.3 for children. When compared to the US Census poverty lines, which is based on a defined basket of goods, for the most prevalent household types both standardization methods show to be very similar.
Secondly, if the of the poverty threshold in Western-European countries isn't always higher than the Orshansky threshold for a single person family. The actual Orchinsky poverty line for single person households in the US ($9645 in 2004) is very comparable to the relative poverty line in many Western-European countries (Belgium 2004: €9315), while price levels are also similar. The reason why relative poverty measurement causes high poverty levels in the US, as demonstrated by Förster, is caused by distributional effects rather than real differences in wellbeing among EU-countries and the USA. The median household income is much higher in the US than in Europe due to the wealth of the middle classes in the US, from which the poverty line is derived. Although the paradigm of relative poverty is most valuable, this comparison of poverty lines show that the higher prevalence of relative poverty levels in the US are not an indicator of a more severe poverty problem but an indicator of larger inequalities between rich middle classes and the low-income households. It is therefore not correct to state that the US income distribution is characterised by a large proportion of households in poverty; it's characterized by relatively large income inequality but also high levels of prosperity of the middle classes. The 2007 poverty threshold for a three member family is 17,070.
Human Poverty Index
The United Nations Development Programme, uses the human poverty index in order to assess the development with regards to poverty among OECD countries. The index takes the likelihood of a child not surviving to age 60, functional illiteracy rate, long-term unemployment and the population living on less than 50% of the median national income into account. While the United States has one of the second lowest long-term unemployment rates in the developed world, it has the highest percentage of children who are not likely to live to age 60 and persons living on less than 50% of the national median income and the third highest percentage of adults lacking functional literacy skills.

Ranking ountry PI-2 robability at birth
of not surviving
to age 60 (%) eople lacking functional
literacy skills (%) ong-term
unemployment (%) opulation below 50%
of median income (%)

1 Sweden 6.5 7.2 7.5 1.0 6.5

2 Norway 7.0 8.4 7.9 0.4 6.4

3 Netherlands 8.2 8.7 10.5 2.5 7.3

4 Finland 8.2 9.7 10.4 2.1 5.4

5 Denmark 8.4 10.4 9.6 1.3 -

6 Germany 10.3 8.8 14.4 5.0 8.3

7 Switzerland 10.7 7.8 15.9 1.6 7.6

8 Canada 10.9 8.1 14.6 0.7 11.4

9 Luxembourg 11.1 9.7 - 1.2 6.0

10 France 11.4 9.8 - 4.3 8.0

11 Japan 11.7 7.1 - 1.5 11.8

12 Belgium 12.4 9.4 18.4 4.3 8.0

13 Spain 12.6 8.7 - 3.0 14.3

14 Australia 12.8 7.7 17.0 0.9 14.3

15 United Kingdom 14.8 8.7 21.8 1.1 12.4

16 United States 15.4 11.8 20.0 0.6 17.0

17 Ireland 16.1 8.7 22.6 1.5 16.5

18 Italy 29.9 7.8 47.0 4.0 12.7

Other international comparisons

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