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Poverty Isn’t What We Think: How You Measure Makes a Difference

Tucked away in southeastern Sacramento, roughly ten miles from the capitol building, is a little-known department of government called the Division of Measurement Standards (DMS).

The DMS has one true mission, which is to assess and enforce standard measurements across the state of California so that a gallon of gas, for example, is truly a gallon – whether you buy it as far north as Redding or as far south as San Diego.

This branch of government creates an essential “basis of value comparison” for all consumers that keeps the economy humming. If citizens are confident in a gallon measured at the gas pump, they’ll purchase more, engage in the economy, and everyone wins.

Unfortunately, for fifty years, the federal government has been trying to measure poverty like California’s DMS measures gas by the gallon: assume a fixed measurement with no geographic adjustments, and then apply it mechanically in all contexts.

Too Flawed to Measure Reality

This practice works fine for gasoline, milk, and other consumables. But it’s a far less useful method when it comes to measuring poverty, which varies based on geography, available resources, and employment, among other things. Standard measurements of poverty must begin to correspond to what’s happening in the real world for those living in poverty; otherwise the resulting policy changes miss their mark.

Good examples of such warped outcomes come from the existing federal poverty thresholds established by the U.S. Census Bureau. This year, for a family of two adults and two children to be considered poor, their total cash income, before taxes and benefits, must fall below $23,283 – a threshold that stays the same no matter where that family lives.

This measure is based on three times the cost of a meal plan created by the Department of Agriculture in the 1960’s (on the assumption that families spent a third of their income on food) and only changes based on family size, the presence of children, and the rate of inflation. While it’s trite to say times have changes, there are important differences between today’s world and then.

For instance, families spend less on food than on housing and the cost of living varies widely by geography. Also, our response to poverty has changed since that time – we now offer food, shelter, heating, and cash assistance, free and reduced price lunches for children, tax credits for working families, and health insurance for the very poor, just to name a few resources.

But according to the official poverty threshold, it’s as if these programs never existed.  

Unlike gallon measurements at the DMS, officials in Washington D.C. and Sacramento can’t effectively use the poverty rate as a sound “basis of…comparison” when assessing policies in a broad context. An old measure that is too blunt to meaningfully gauge progress obscures the effects of many poverty-fighting efforts. 

A New Measure for California

This is why, over the last few months, researchers at the Public Policy Institute of California and the Stanford Center on Poverty and Inequality have produced a new way of measuring poverty for the state, modeled after a similar federal effort.  

Called the California Poverty Measure (CPM), this tool gathers together volumes of publicly available data on people and programs in the state and assembles a measure that does three things:

  1. Estimates what families spend on child care, medical costs, taxes and more;
  2. Estimates what money families are receiving from public benefit programs and tax credits (like food stamps or the child tax credit); and
  3. Establishes new poverty thresholds that vary by the geographic cost-of-living based on a) real consumer expenditures and b) housing costs (think expensive LA housing versus a more reasonable Riverside).

With this information in hand, researchers can look at a family’s income, subtract away the estimated expenses, add in benefits they may have received, and compare the result to the new thresholds. If a family’s income falls below the new threshold, they’re recorded as living in poverty.

In this way, the new poverty measure can actually respond to enhanced benefit programs or can be used to judge how regressive it would be to eliminate tax credits or food assistance for working families, for example.

While it seems like common sense for us to measure poverty after accounting for expenses and benefits that alter family income, the official poverty measure has been failing to do this for nearly fifty years.

The True Costs   

With a clearer accounting for household income we see that:

  • The overall poverty rate in California increases to 22 percent, nearly six percentage points higher than the federal measure. This represents over 2 million more people;
  • When looking across the state, 34 counties have higher rates of poverty than previously measured (with a near doubling of poverty in counties like Los Angeles and San Francisco);   
  • Child poverty remains very high, with over 26 percent of children under six years of age experiencing poverty (the highest of any age group).

And for those families living in poverty, these statistics more accurately represent their realities: Cash-strapped urban families pressured by rising rents; people across the state unable to access social safety net programs; and unmanageable child care costs for many. Additionally, those left behind continue to be people without steady employment or access to education.

Yet with this new measure of poverty, we can now simulate the effect social safety net programs have at alleviating the most extreme forms of poverty.

For example, over half of people without a high school diploma are impoverished. But if we take away all of the social safety net benefits for this population, the poverty rate would catapult to over 70 percent – evidence that these systems are helping individuals in need, but that more must be done.

With the new measure as well, the poverty reducing effect of safety net programs for children show us that for kids under six, food stamps, tax credits, and cash benefits keep nearly 15 percent of them out of poverty.

And this is only a sample of what the new measure allows us to explore.

A Path Forward   

So what now? With a better yardstick aren’t the poor still just as worse off, even with a clearer picture?

The obvious answer would surely be yes, but any new tool would be useless without the knowledge and will to apply it. In fact, there are several new developments in California that are now chipping away at poverty.

Governor Brown just signed SB 672 that will allow families to more readily apply for CalFresh benefits (food stamps), in the hope that enrollment rates will increase. Not only does this reform help ease hungry stomachs and stretched wallets, efforts such as these can be roughly evaluated against a reformed measure of poverty – something analysts in the state could not effectively do just two weeks ago.

Add that to measures such as an increase to the state minimum wage and expand Paid Family Leave – measures that are likely to reduce the amount of income insecurity in the state – and you have a recipe for lasting momentum.  

As our friends over at the Department of Measurement Standards would surely attest, with sound measurement comes sound management. A new poverty measure better informs the state’s anti-poverty policies, an improvement that is one more step toward alleviating poverty for more Californian’s.  

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