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Defining Poverty

Mark Greenberg, Director of CAP's Task Force on Poverty, testifies to Congress on why the method for measuring poverty should be updated.

The following is an excerpt of the testimony of Mark Greenberg, Director of the Task Force on Poverty at the Center for American Progress, to the Subcommittee on Income Security and Family Support of the House Committee on Ways and Means. To download a PDF of his full testimony, please click here.

Thank you for holding this hearing and others this year, bringing renewed attention to the importance of addressing poverty in America.  In this testimony, I will provide some brief background, and then discuss why the method for measuring poverty should be updated, some principles that should guide the effort and recommendations to move the process forward. 

I am the director of the Task Force on Poverty at the Center for American Progress, a nonprofit, nonpartisan public policy think tank in Washington, D.C.  I am on leave from the Center for Law and Social Policy, where I was the Director of Policy.  CAP’s 14-member Task Force was charged with making a case for why the nation should address poverty and proposing a strategy for how to do so.  In April, CAP’s Task Force released its report, “From Poverty to Prosperity: A National Strategy to Cut Poverty in Half.”

Our Task Force’s principal focus was not on the definition of poverty, but rather strategies for addressing it.  Nevertheless, the question of how poverty should be defined came up repeatedly in our efforts, in two significant and related ways.

  • First, when seeking the views of state and local actors about strategies to reduce poverty, one of the most common initial observations was that it was rarely useful to use the official poverty line as a measure of need, because it was so low in relation to living costs.  In recent years, the increased reliance on approaches like self-sufficiency standards, family budgets, and setting program eligibility at some multiple of the poverty line is a direct response to concerns that the poverty line simply doesn’t adequately reflect the amounts that families need in order to get by.
  • Second, as our Task Force considered policy responses to reduce poverty, we faced, in practical terms, an issue that is routinely recognized in the academic discussions of poverty measurement.  Many initiatives that would clearly improve economic well-being for low-income families would have no effect on poverty under official measures, because the official measure does not count the effects of tax policy and near-cash benefits or adjust for work-related costs.  For example, expanding the Earned Income Tax Credit or Child Tax Credit would not reduce the official poverty rate (except indirectly if it affected employment), even though it would increase family resources.  Expanding child care assistance would not reduce the official poverty rate (except by raising employment) even though it would defray costs that families face in going to work.  Expanded housing subsidies or improved food stamp participation rates would also not affect the official poverty rate.

We ultimately addressed the first issue by emphasizing in our report that while 37 million Americans were living in poverty, a far larger group faced the challenge of making ends meet, and by developing policy proposals that were sensitive to and grounded in this reality.  We addressed the second issue by using a modified measure of poverty when calculating the poverty reduction effects of our proposals, drawing upon recommendations from the National Academy of Sciences’ Panel on Poverty and Family Assistance: Concepts, Information Needs and Measurement Methods in “Measuring Poverty: A New Approach” (National Research Council, 1995).  This modified measure counted the effects of tax policy, treated food stamps and housing benefits as income, and deducted out-of-pocket child care expenses from income.  Only in doing so could one fully see the real effects of a set of policies in improving family well-being.  At the same time, we could not readily incorporate every NAS recommendation into our analysis, and only adjusted poverty thresholds to the extent necessary to begin our analysis with the same number of people in poverty as would be the case under official measures. Our experience underscored the need for the federal government to improve and modernize the definition of poverty, in order to develop both more realistic thresholds, a better measure of resources, and a more effective way to gauge the effects of government policies.

While my principal focus in this testimony is on the need to improve the poverty measure, I want to begin by emphasizing that we get much valuable information from the current one.  The current measure is a useful and reliable indicator of the extent of serious deprivation, and of the extent of disparities across races, sex, and ages, workers and non-workers, and other groups.  Most importantly, year-to-year changes help us understand whether more or fewer families are struggling to get by.  Alternative measures—including those based on the National Academies of Sciences recommendations—show different poverty levels, but typically reflect quite similar trends because the largest sources of income and, thus, the largest “driver” of poverty rates will be cash income from sources that are included in the official measure. 

I believe the poverty measure can be significantly improved.   Still, the shortcomings of the current measure should not be used to dismiss the information provided by the current poverty measure about the state of our nation.

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