Feature Articles: Family Finances
Poverty Trends
Brenda Procter, M.S., State Specialist & Instructor Personal Financial Planning, University of Missouri Extension
The word "poverty" brings different images to mind
for different people. Some may think of a homeless
person; others may think of a mother who is not able to
make ends meet; still others may think of a third-world
nation and starvation. The United States government
established an official, though now often criticized,
measure of "poverty." The official measure is the basis
for determining eligibility for most means-tested
programs.
In the 1960s, Molly Orshansky, of the Social Security
Administration, developed the first official poverty
thresholds. She knew that a 1955 study had found that
families spent about one-third of their after-tax income
on food. She determined the value of the U.S. Department
of Agriculture's Economy Food Plan--designed only to
meet a family's nutritional needs in the short run--and
multiplied by three. The measure adjusts for family
size. It is basically the same measure we use today,
even though spending patterns have changed dramatically
since then.
The Census Bureau later adopted the Orshansky
measures as the official poverty thresholds. The Census
Bureau updates the figures each year for inflation using
the consumer price index; however, there have only been
minor changes in the way the figures are calculated
since their inception. Currently, the poverty threshold
for a family of four is $18,100. (See
http://aspe.hhs.gov/poverty/07poverty.shtml for
current poverty guidelines.)
Many argue that this method of calculation is
obsolete and does not show the true picture of poverty.
Families now spend less than one-fifth of their income
on food. Housing prices, health care expenses and
childcare costs have gone up, forcing families to spend
a higher proportion of their income on these items.
As median family income has grown over time, poverty
figures have not been adjusted upward at the same rate.
For example, when the poverty thresholds were first
introduced in the early 1960s, the threshold for a
family of four-$16,530 in 1998 dollars-was 42% of the
median income for that family size. By 1998, because of
real growth in family income, the poverty threshold was
only 35.4% of the median.
1 In
other words, relative to the average family, poor
families have not fared as well.
There are other arguments that current poverty
thresholds do not reflect what it takes to make ends
meet in today's society. To read more about this
subject, see
http://www.census.gov/hhes/www/povmeas.html.
Historically in the United States, the poverty rate
has gone up and down, but there has been an overall
downward trend for several decades. In the late 1950s,
the overall poverty rate for individuals in the United
States was 22 percent (39.5 million individuals). In the
1960s, there was a dramatic decline in the poverty rate
to about 12.1%. Due to a slowing economy, the rate rose
slightly in the early 1970s but soon began to decrease
again.
By the mid 70s the poverty rate stabilized around
11.5% until the late seventies. By 1983, the poverty
rate was at 15.2% and through most of the 80s it was
around 13%. In 1993, it reached a high of 15.1% but fell
steadily through the remaining decade. In 2000, the
poverty rate was around 11.3% (31 million people). The
state of Missouri rates 15th in the Union in comparison
to other states, based on a three-year average (1998 to
2000) rate.
2
It is important to remember that these figures
reflect an average of all groups and some groups fare
better than others do. Various groups, such as
female-headed households, tend to have much higher rates
of poverty. 3
Those living in rural areas tend to still have a
higher rate of poverty than those who live in urban
areas. The poverty rate in 2000 for those living inside
metropolitan areas (including cities and suburbs) was
10.8% while the poverty rate for those outside
metropolitan areas was 13.4%. (Note: The rate for inner
cities is still higher than other areas. The poverty
rate for inner cities is higher than rural areas (16.1%
compared to 13.4%). 4
Many assume that the elderly are worse off than other
populations in this country. By official poverty
measures, however, this is not true. The children of
this country are actually more likely to live in poverty
than are the elderly. For example, in 2000, the elderly
poverty rate (including those people 65 years and over)
was 10.2% while the child poverty rate (including
children under 18 years of age) was 16.2%.
Cost-of-living adjustments to Social Security payments
to the elderly have protected many elderly people from
falling below the poverty line.
Through the 1980s and 1990s, many children lived in
female-headed households where poverty conditions are
much more likely. (In 2000, the poverty rate for married
couples was 4.7% while for female-headed households it
was 24.7%. The rate is even higher for some minority
groups. 5) Unlike
Social Security benefits, welfare benefits are not
indexed to inflation. Programs such as the
Earned Income Tax Credit and the
Child Care Credit may be important in lowering child
poverty rates.
Great need among children is also reflected in the
increased participation in Nutrition Assistance
Programs. For instance, between 1990 and 2000, the
number of children who received a free or reduced price
school breakfast increased by 144%.
6
The School Breakfast Program was established in 1966
on a limited basis and then given permanent
authorization in 1975 to help schools provide nutritious
breakfasts to their students. Eligibility for the
program is based on household income. Children in
households receiving Temporary Assistance for Needy
Families (TANF) or food stamp benefits may be
automatically eligible. Studies have found that those
who participate in the breakfast program receive higher
scores on standardized tests.
7
For more information on the School Breakfast Program,
School Lunch Programs and various other food programs in
the US, see the Food Research & Action Center's website
at http://frac.org. See
http://www.fns.usda.gov/fns/ for more information on
Nutrition Assistance Programs.
Some believe that the quickest way for people to
escape poverty is to simply "get a job." However, in
many communities, jobs with living wages are extremely
limited. If someone worked full time at the current
Federal minimum wage of $5.15, his or her yearly salary
would be $10,712 ($892 per month). The poverty threshold
for a family with two members is $995 per month.
Therefore, working for minimum wage will not raise a
family of two to the poverty line.
Others believe that many are "mooching" from the
system and collecting hundreds of dollars per month in
welfare benefits. The
average welfare recipient in Missouri is a
28-year-old single mother with two children. The maximum
Temporary Assistance for Needy Families (TANF) benefit
in Missouri for a family of three is $292 per month. In
2000, the average monthly TANF benefit was $244.
8
There are no simple solutions to problems associated
with poverty. Many who are trapped in poverty are
dealing with issues such as domestic violence, mental
and physical ailments, caring for a loved one, substance
abuse, literacy, transportation and childcare. Thousands
of children are suffering from the effects of poverty
and falling behind those who are not. Single mothers and
those who cannot find jobs with living wages still
struggle. 9
10
To the extent that we do not protect their families
from poverty, we know that children are much more likely
to go hungry and more likely to be hospitalized. Poverty
is also associated with higher dropout rates, higher
rates of incarceration, poorer academic performance, and
significantly higher rates of depression. To strengthen
our families and build stronger communities, we must
continue looking for better ways to meet the needs of
those who live in poverty.
To test your overall knowledge about poverty, take a review quiz-it's fun! Click here.
1 http://www.epi.org/content.cfm/issueguide_welfare_faq
2 U.S. Census Bureau, Current Population
Survey, March 1999, 2000, 2001
3
Institute for Research on Poverty,
http://www.ssc.wisc.edu/irp/
4 Source: U.S. Census Bureau, Current
Population Survey, March 2001
5
http://www.census.gov/prod/2001pubs/p60-214.pdf
6
http://www.fns.usda.gov/fns/
8
http://www.dss.mo.gov/fsd/tempa.htm
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Last update: Saturday, March 29, 2008
