There Could Be Millions More Americans Living in Poverty Than Officially Reported

The federal poverty level is used to help determine eligibility for the Supplemental Nutrition Assistance Program, or SNAP, and other benefits.

The federal poverty level is used to help determine eligibility for the Supplemental Nutrition Assistance Program, or SNAP, and other benefits. Shutterstock

 

Connecting state and local government leaders

New research suggests poverty statistics do not fully account for how price inflation differs for the rich and poor.

About 38 million Americans were living in poverty last year, according to official estimates. But new research says those numbers might be understated because inflation in the price of goods is hitting people at the bottom end of the earnings ladder harder than those at the top.

Using alternative inflation adjustments described in the research paper means over 3.2 million more people would have been added to the federal government’s poverty statistics in 2018. 

That’s significant because the federal poverty line helps determine who is eligible for programs meant to assist poor and low-income households, like Medicaid and food stamps.

“These measurement choices seem sort of technical, bureaucratic and therefore sometimes kind of boring,” said Christopher Wimer, a co-author of the paper and a director of the Center on Poverty and Social Policy at Columbia University.

“But they really have pretty profound implications for peoples’ lived experiences,” he added. “Because the way this translates through is access to benefits, eligibility for programs.”

Underpinning the new research is a phenomenon known as “inflation inequality”—the idea that higher and lower income households face different inflation rates. An inflation rate, in general terms, measures how the average price of goods and services in a place rises over time.

One of the other co-authors of the new paper, Xavier Jaravel, a professor at the London School of Economics, published research earlier this year that looked at inflation inequality using datasets from 2004 to 2015, including price scanner data from retail stores.

This earlier work by Jaravel indicates that the annual inflation rate is 0.44 percentage points higher, on average, for the bottom 20% of earners in the U.S., compared to the top 20%.

Jaravel’s work suggests that what’s driving this difference is increasing inequality, with the greatest gains in income in recent years going disproportionately to people who are wealthier. 

Competition among companies who want to sell goods to richer people is depressing prices for items that they typically buy, while the cost of goods that lower-income households would regularly purchase is rising more in line with usual inflation rates.

Using the alternative inflation adjustment from Jaravel's research, the authors of the new paper also found that income inequality was greater than what’s captured by official measures.

With conventional inflation adjustments, the gap in household income growth between the top and bottom fifths of the nation’s earners widened to about 15 percentage points between 2004 to 2018, with income for the low earners falling by about 1 percentage point. 

But applying the alternative adjustment shows that income for the bottom fifth of earners declined by 7 percentage points and that the gap is closer to around 21 percentage points.

Wimer noted that the nation’s official poverty line was developed in the 1960s based on the cost of food, but that since that time costs like housing and utilities have grown to consume an increasing share of peoples’ household budgets.

The Trump administration, meanwhile, has floated the idea of changing the way inflation adjustments are factored into the poverty line. Wimer says the proposals, if anything, would make the threshold increase at an even slower rate than what’s outlined in the paper.

“That would result in fewer people being found in poverty,” he said.

“Most people think that the official poverty line is already too low,” Wimer added. “When you take something that’s too low and make it grow slower, you’re worsening the problem.”

A full copy of the research paper can be found here.

Bill Lucia is a Senior Reporter for Route Fifty and is based in Olympia, Washington.

NEXT STORY: Voting in Local Elections Matters. This Is What Cities Can Do.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.