Feature Articles: Family Finances
Brenda Procter, M.S., State Specialist & Instructor Personal Financial Planning, University of Missouri Extension; Updated by Marilyn Preston, MA, Human Development and Family Studies, 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
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 $22,050. See
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Many argue that this method of calculation is obsolete and does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 percent of the median income for that family size. By 2005, because
of real growth in family income, the poverty threshold was only
32.9 percent 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
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 percent. Due to a slowing economy, the rate rose slightly
in the early 1970s but soon began to decrease again.
By the mid 1970s the poverty rate stabilized around 11.5 percent
until the late seventies. By 1983, the poverty rate was at 15.2
percent and through most of the 80s it was around 13 percent. In
1993, it reached a high of 15.1 percent but fell steadily through
the remaining decade. In 2007, the poverty rate was around 12.5
percent (33.7 million people). The state of Missouri rates 21st
in the Union in comparison to other states, based on a three-year
average (2005-2007) rate. 2
It is important to remember that these figures reflect an average
of all groups and some groups fare better than others. 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 2007 for those living inside metropolitan areas (including cities
and suburbs) was 12.4 percent while the poverty rate for those outside
metropolitan areas was 16.6 percent. Note: The rate for inner cities
is still higher than other areas. The poverty rate for inner cities
is higher than rural areas (17.2 percent compared to 16.6 percent).
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 2006, the
elderly poverty rate (including those people 65 years and over)
was 14 percent while the child poverty rate (including children
under 18 years of age) was 27 percent.
5 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 2007,
the poverty rate for married couples was 4.9 percent while it was
28.3 percent for female-headed households. The rate is even higher
for some minority groups. 6
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
Great need among children is also reflected in the increased
participation in Nutrition Assistance Programs. For instance, between
1990 and 2007 the percentage of children qualifying for the United
States Free and Reduced School Lunch program grew by over 25 percent
to 30.5 million children qualifying for free lunch each day.
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. 8 See
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 $7.25 per hour, his or her
yearly salary would be $15,080 ($1256.66 per month). The poverty
threshold for a family with two members is $1214 per month.
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 2008, the
average monthly TANF benefit was $234.
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.
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.
Last update: Thursday, July 23, 2009