Federal Poverty Threshold

How the Feds Measure Poverty in America

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The Federal poverty threshold is the measurement of poverty in America. The U.S. Census Bureau uses it to report how many Americans live in poverty each year. The poverty threshold is used for statistical purposes. It does not determine qualifications for poverty-reduction programs such as the Affordable Care Act, Medicaid, or welfare. The government outlines those qualifications with the federal poverty level.

 

Federal agencies use the threshold to measure and report on poverty. The Office of Management and Budget uses it as the official federal poverty definition. The Department of Health and Human Services bases calculations for the federal poverty level on it.

How Poverty Is Defined

The Census Bureau's definition of poverty is a little complicated, though. First, it's based on pre-tax income. This includes earnings, pension or retirement income. It also includes interest, dividends, rents, royalties and income from estates and trusts. It does not include capital gains or losses.

The Bureau includes educational assistance, alimony, child support, assistance from outside the household, and other miscellaneous sources. It does not count tax credits. It includes cash benefits such as unemployment compensation, workers' compensation, and veterans' payments and survivor benefits. It counts Social Security, Supplemental Security Income, and public assistance.

It does not include non-cash benefits, such as food stamps or housing subsidies. 

It counts the income of family members. It excludes the income of roommates or other non-relatives. It takes into account whether the head of the household is older or younger than 65. It also considers the number of adults versus children.

 

The poverty threshold measurement is an all-or-nothing proposition. If the total family income is below the threshold, then everyone in the family is poor. If income is greater than the threshold, then the Census counts no one in the family as poor. 

The poverty threshold does not vary by state, even though the cost of living in each state is very different. Each year, the poverty threshold adjusts for inflation, using the consumer price index.

Poverty Threshold Chart

Here's the 2017 poverty threshold for typical family types and sizes. Once a family reaches three or more members, the income level is the same, despite the age of the head of household.

Family     2017 Income
Head of Household Younger Than 65  
     Living Alone     $12,752
     Two Adults     $16,414
     One Adult, One Child     $16,895
Head of Household 65 or Older     
     Living Alone     $11,756
     Two Adults     $14,816
     One Adult, One Child     $16,831
Three People     
      Three Adults     $19,173
      Two Adults, One Child     $19,730
      One Adult, Two Children     $19,749
Four People    
     Four Adults     $25,283
     Three Adults, One Child     $25,696
     Two Adults, Two Children     $24,858
     One Adult, Three Children     $24,944

For larger families, see U.S. Census Bureau, 2017 Poverty Threshold by Size of Family and Number of Children.

Recent Statistics

In 2016, (most recent data available) 40.6 million Americans lived in poverty according to the U.S. Census. That's lower than the 46.2 million in 2010, which was the highest number in U.S. history. 

More than half (56 percent) were women. Two-thirds (67 percent) were white. Almost half (42 percent) lived in the South, which 24 percent in the West, and 19 percent in the Midwest.

Almost all (84 percent) were born in the United States. Only 11 percent were people who came to America illegally.

More than a third of those who were working age (18-64) were employed. Only 11 percent worked for the full year. The reason could be because 18 percent had a disability. 

Sadly, one third of those living in poverty were children.

Equally as unfortunate were the 11 percent who were elderly (65 or older.)

The 2016 poverty rate was 12.7 percent, down from 15 percent in 2012. It's barely higher than the 12.5 percent living in poverty in 2007, before the recession.

The poverty rate for children improved, too. In 2016, 17.6 percent of related children under 18 lived in poverty. In 2015, the rate was 19.7 percent. 

The only age group that saw an increase in the poverty rate was seniors. In 2016, 9.3  percent of those aged 65 and older lived in poverty.

History 

The poverty threshold was created during the Presidency of Lyndon B. Johnson. It was designed to make sure families had enough to eat. Therefore, it used the U.S. Department of Agriculture food budgets designed for families under economic stress. It also used data about what portion of their income families spent on food. These USDA budgets were developed during the Great Depression. The government used them to determine how much agencies should spend to feed each family. (Source: "How the Census Bureau Measures Poverty," U.S. Census. "The Orshanky Method," U.S. Census.  "Alternatives to the Official Poverty Measure," University of Wisconsin.)