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 very specific. It bases its definition on pre-tax income. This includes earnings, pensions, 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 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 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, 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 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 2018 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 the household.

Family 2019 Income
Head of Household Younger Than 65  

Living Alone

$13,300

Two Adults

$17,120

One Adult, One Child

$17,622

Head of Household 65 or Older  

Living Alone

$12,261

Two Adults

$15,453

One Adult, One Child

$17,555

Three People  

Three Adults

$19,998

Two Adults, One Child

$20,578

One Adult, Two Children

$20,598

Four People  

Four Adults

$26,370

Three Adults, One Child

$26,801

Two Adults, Two Children

$25,926

One Adult, Three Children

$26,017

Recent Statistics

According to the U.S. Census, the official poverty rate in 2018 was 11.8%. That's down from 15.1% in 2010, the highest since the recession. The record was 22.4% in 1959. Poverty levels decreased significantly after President Lyndon Johnson's War on Poverty programs.

In 2018, 38.1 million Americans lived in poverty. That's lower than the 46.7 million in 2014, which was the highest number in U.S. history. 

Gender

More than half (56%) of Americans living in poverty were female, while 44% were male. A 2018 NBER study found women’s earnings fell after the birth of their first child, while men’s earnings were not affected. Even 10 years after parenthood, women's salaries were 20% lower than their male counterparts. One reason is that employers see fathers as more competent employees than mothers.

Race

Over 40% of those living in poverty were white, while 28% were Hispanic, 23% were Black, and 5% were Asian. Non-white races are a higher proportion of the poverty-stricken than they are in the overall population. One reason is structural inequality and racial discrimination that makes it more difficult for non-whites to get ahead. As a result, one-quarter of black households have zero or negative net worth. Only 10% of white families are that poor.

The racial wealth gap even exists for black families with graduate or professional degrees. On average, they have $200,000 less in wealth than similarly-educated whites. Black and Latino college graduates have less wealth than white high school dropouts. 

Education

Research shows there is a high correlation between education and income. The poverty data show this clearly. Only 9% of adults living in poverty had college degrees.

The educational achievement gap has cost the U.S. economy more than all recessions since the 1970s combined.

If low-income students were able to achieve the same level of education as their wealthier, they would have added $670 billion in GDP between 1998 and 2008.

Almost 15% of adults living in poverty did not graduate from high school. Another 21% had a high school degree but never attended college. Almost 13% had attended college but didn't receive a degree.

Age

Sadly, 31% of those living in poverty were children. That's 11.9 million children under age 18. Another 13%, or 5.1 million, were aged 65 years or older. In other words, 44% of those living in poverty are either too young or too old to work. That makes it difficult to increase their income and get out of poverty.

Immigration Status

More than 83% of those living in poverty were born in the United States. Only 11% were not citizens.

Geography

The Census also breaks down poverty by state. Across the United States, 44% of those living in poverty were in the South. Eight of the country's poorest states are in the South. Many southern states also have the lowest incomes in America.

Another 23% of those in poverty lived in the West and 18% were in the Midwest. Another 15% lived in the Northeast. Six of the 10 richest states are near a major East Coast city. They benefit from living near major research universities with their populations of highly-educated people.

Working/Welfare Status

Of those living in poverty, 7% worked full-time for the whole year. At least 14% worked part-time for the whole year. Another 35% worked less than a week.

Despite the success of the War on Poverty, not many of these low-income people receive welfare. TANF is the Temporary Assistance for Needy Families program. In September 2019, it served 2.8 million people. That's less than 10% of the 38 million living in poverty. Only 2.1 million children received welfare. That's less than 20% of the 11.9 million children who needed it. 

History 

The poverty threshold was created during the presidency of Lyndon B. Johnson. It was designed to make sure families had enough to eat. It used the U.S. Department of Agriculture (USDS) 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. 

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Article Sources

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