E L-C 'E4~'g/#3" « TQQPEFT MC». 77”" 2-3139 EFL” Report No. 79~253 EPW ‘I3 x G’ SE ETER UN ///q*.l";.‘:‘.;-3 .‘_‘:l_ V‘ ‘ R V“ A COMPARISON OF POVERTY LEVELS USED BY THE FEDERAL GOVERNMENT Eflmgrglgr Y Joe Richardson __¢~, Analyst in Social Legislation i&fifi»1§*fi’ xx Education and Public Welfare Divisi n , ifij‘ 5”?- December 14, 1979 CONGRESSIONAL RESEARCH \ E RB 605 A senwce E IUBRARYCWEE « smul niversitr of M’ Hang guy 01 ' , 111 Ill! Jifl'fl7!W L E nmuii E The Congressional Research Service works exclusively for the Congress, conducting research, analyzing legislation, and providing information ‘at the request of Committees, Mem- bers andtheir staffs. The Service makes such research available, without partisan bias, in many forms including studies, reports, compilations, digests, and background briefings. Upon request, the CRS assists Committees in analyzing legislative proposals and issues, and in assessing the possible effects of these proposals and their alternatives. The Service’s senior specialists and sub- ject analysts are also available for personal consultations in their respective fields of expertise. ABSTRACT The Federal Government currently uses three different sets of "poverty levels" in counting the low~income population and determining eligibility for various benefit programs; These "poverty levels" are derived from income measures originally conceived in l963~64; however they differ in a number of important aspects. This report sets forth the basic differences between the three meas- ures. It does not explore the origin of differences, nor does it deal with 1ow~income measures that are not specifically identified as "P°VertY" measures u CRS~v CONTENTS AESTRAcT...........................................,................. iii LIST OF TABLES................g...................................... vii THE CENSUS BUREAU'S POVERTY THRESRoLDS............................... 1 THE OMB/CSA POVERTY GUIDELINES ...................................... 4 THE USDA'S FOOD AND NUTRITION SERVICE POVERTY LEVELS ................ 7 A FINAL NoTE ON PUERTO RICO AND THE TERRITORIES ..................... 10 A BRIEF TABULAR COMPARISON OF FEDERAL POVERTY LEVELS coouuoooucuvvvuo 11 CRS-vii LIST OF TABLES TABLE 1- W?i8hted average thresho1ds~~poverty cutoffs in 1978, by s1ze of fam11y and sex of head, by farm~nonfarm residence .... 2 TABLE 20 OMB/CSA poverty guidelines (1979/1980) uooououocccouovuccuvovu 7 TABLE 3! FNS poverty 1eVe13 (1979/1980) cououovouoououcvouucououuuuu... 9 A COMPARISON OF POVERTY LEVELS USED BY THE FEDERAL GOVERNMENT At the present time, there are three different sets of poverty levels used by the Federal Government 1/ in counting the low~income population and determining eligibility for benefits~~the Census Bureau's poverty thresholds, the so~ca1led OMB/CSA poverty guidelines, and the USDA's Food and Nutrition Service poverty levels (the so~called "food stamp" poverty levels). THE CENSUS BUREAU‘S POVERTY THRESHOLDS The basic set of poverty levels is the set computed annually by the Bureau of the Census, as a mechanism for counting the Nation's 10W“inC°m€ population in its yearly Current Population Surveys and the decennial cen~ sus. These poverty "thresholds" date back to 1963-64, when Mollie Orshansky, at the Social Security Administration, created them as a means of measuring changes in the low~income population over time. They were established at annual income levels representing triple the annual cost of the USDA's Economy Food Plan_g/ and form the basis for all other poverty levels used 1/ This comparison discusses only those measures identifled 33 Federal "poverty" measures. Other income measures are used in Federal Pr08Tam3 and often pointed to as measures of income-based need, such as the Bureau of labor Statistics lower living standard urban family budgets or AFDC stan- dards of need." 2/ The rationale behind this method of deriving Fhe P°VertY thre3h°1d§ was that the Economy Food Plan was a good measure of income needed to Obtaln a minimally adequate diet, and consumption surveys of the time indicate? that (continued) CRS-2 in the Federal Government. Since their creation, the poverty thresholds have been updated annually by the percentage change in the overall average Consumer Price Index (CPI), although for a brief period of time they were updated by food~price changes only. Table 1 presents the most recent Census poverty thresholds, issued in the summer of 1979 and used to count the 1ow~income population in 1978. TABLE 1. Weighted average thresholds-~poverty cutoffs in 1978, by size of family and sex of head, by farm~nonfarm residence Nonfarm Farm Size of Male Female Male Female family unit Total Total head head Total head head 1 Per30n 1/ Iooouuouoooouo $3,302 $3,311 $33460 $39196 $23795 $2,898 $2,690 14 to 64 years ......... 3,386 3,392 3,516 3,253 2,913 2,987 2,764 65 years and over ...... 3,116 3,127 3,159 3,118 2,661 2,685 2,650 2 persons ................ 4,225 4,249 4,258 4,206 3,578 3,582 3,497 Head 14 to 64 years ..... 4,363 4,383 4,407 4,286 3,731 3,737 3,614 Head 65 years and over .. 3,917 3,944 3,943 3:923 3:352” 3:354 3:313 3 persons ................ 5,178 5,201 5,231 5,065 4,413 4,430 4,216 4 PETSOHB Icoooooooooocuou 6,628 6,662 63665 63632 59681 59683 5:622 5 persons ................ 7,833 7,880 7,888 7.806 6.714 6,714 6,700 6 persons ................ 8,825 8,891 8.395 3,352 7.541 7,543 7.462 7 Persons or more ........ 10,926 11,002 11,038 10,765 9,373 9,386 8,813 (continued) food costs consumed roughly one~third of a lower-income fam- ily's budget. Although, for most household sizes, the dollar amount of the Economy Food Plan was tripled, for one~ and two~person households, the pov~ erty thresholds were set at slightly more than triple the Economy Food Plan to take into account the fact that certain necessities such as housing ben- efit from economies of scale in larger households. The Economy Food Plan was discontinued in 1975 and has been supplanted by the Thrifty Food Plan, used to set food stamp allotments. _l/ Unrelated individual. CRS~3 A number of points are important to note when comparing the Census Bureau's poverty thresholds with other Federal poverty levels. ~- The Census poverty thresholds are used only to count low~income persons and households, and, in some cases, to allocate funds among States according to legislative formulas based on the number of low~income persons. They are not used to determine program eligibility. ~- The Census poverty thresholds are updated annually and generally made officially available early in the summer of any given year, as updated through the previous year. l/ For example, the most current Census poverty thresholds are for 1978, as published in 1979, and take into account infla~ tion through 1978. Updating is done by inflating the poverty thresholds issued the previous year by the percentage difference between the two most recent annual average CPIs. For example, the difference between the 1977 annual average CPI and the 1978 average was 7.6 percent, and the poverty thresholds published in 1978 were updated accordingly to produce those issued in l979._g/ -- The Census poverty thresholds have only one type of "geographic" variation; otherwise, they are standard for the Nation. Two separate sets ‘l/ Preliminary estimates are available as early as February of any given year. 2/ In addition to the basic inflation updating, the Census poverty thresholds are further adjusted by "weighting" them to reflect the distri~ bution of the low—income population by household size and composition, farm/nonfarm status, etc. This second adjustment results in only very minor changes in the inflation~adjusted thresholds, less than one~quarter of one~ percent in the most recent update. However, this second "weighting" adjust- ment is the major reason that the Census poverty thresholds are fl0t Offi“ cially available until roughly halfway through a given year, a1fh0U8h the CPI data needed for the basic inflation updating is available for computa~ tions in January. CRS~4 of poverty thresholds are published for farm and nonfarm families; the farm family poverty thresholds are set at 85 percent of the nonfarm levels to take into account the value of home~produced food and, accordingly, apply only to actual farming families, not all rural residents. ~~ In addition to the farm/nonfarm variation, the Census poverty thresh~ olds vary by household size, sex of the head~of~household, and, for one~ and two~person households, the age of the head-of~household (elderly vs. non~ elderly). 1/ However, they do not increase above the level established for a seven~person family. THE OMB/CSA POVERTY GUIDELINES For a number of years, the Office of Management and Budget (OMB) has been responsible for updating a set of poverty guidelines derived from the Census poverty thresholds, for use in determining eligibility for Community Services Administration (CSA) programs and other programs where poverty levels are used to make individual income eligibility determinations._g/ CSA (formerly the Office of Economic Opportunity) actually publishes them under the legislative requirements of section 625 of the Economic Opportun~ ity Act, as amended, which call for annual updates of any poverty guidelines used for eligibility determinations. Other Federal departments pick up these CSA poverty guidelines and separately issue them for their own purposes. ‘l/ In reality, the Census poverty thresholds are computed for house~ holds of many different age and sex compositions, as many as were reflected in the Economy Food Plan. However, when published, these are averaged into household sizes and variations are shown only for one~ and two~person elderly households, male and female~headed households and farm/nonfarm residence. 12/ The actual preparation of the annual updates was formerly done by OMB. It is now done under OMB~established standards by an office of the Department of Commerce that was transferred there from OMB. CRS-5 The OMB/CSA poverty guidelines are similar to the Census poverty thresh- holds and, like the Census numbers, are updated annually according to changes in the CPI. However, there are a number of significant differences between the basic Census thresholds and the OMB/CSA poverty guidelines used for eli- gibility determinations. -- The OMB/CSA poverty guidelines are available earlier than the Census thresholds, primarily because they are computed without "weighting" for the population distribution among low-income households and section 625 calls for them to be computed as soon as the necessary CPI information is avail- able. As a result, the OMB/CSA numbers are computed by using the simple percentage change in the annual average CPI and are available early each spring. The computation for inflation updating is done simply by taking the Census poverty thresholds published in the previous year and updating for annual average CPI changes. The OMB/CSA poverty guidelines published in any given year are for use until the following spring and reflect infla- tion through the year immediately preceding publication. -- The OMB/CSA poverty guidelines have the same inflation update and farm/nonfarm variations used in the Census poverty thresholds. However, (1) they do not include "total" poverty guidelines, elderly/nonelderly, or male- head-of-household/female-head-of-household variations, and (2) they add two geographic variations--i.e., separate sets of poverty guidelines for Alaska and Hawaii. These separate poverty guidelines are established at 25 percent and 15 percent above the standard Census thresholds, for Alaska and Hawaii, respectively. -- More significantly, the OMB/CSA pOV€TtY 8Uide1i“e3 are r°“"ded °ffa the increments between household sizes are made to be equal» and P°V9Tty CRS-6 guidelines are set for an infinite range of household sizes (vs. the Census threshold cut-off at "7 or more persons"). The Census thresholds on which the OMB/CSA poverty guidelines are based increase in unequal increments as household size rises, reflecting the pattern established in food budgets shown by the Economy Food Plan (on which all poverty levels are based). V H°WeVets the OMB/CSA poverty guidelines increase in standard increments as household size increases. This is accomplished by adding together all of the (unequal) increments shown in the Census thresholds and dividing by the number of household size "jumps" to compute the average increment between household sizes. This average increment becomes the standard OMB/CSA incre- ment and is then either added to or subtracted from a rounded-off version of the Census poverty threshold for a four-person household to produce the OMB/CSA poverty guidelines (after inflation updating has been performed).gl/ AS 3 result, the OMB/CSA poverty guidelines show poverty levels, for house- hold sizes other than four persons, that are significantly different from the Census thresholds--higher for smaller households, lower for larger households. Table 2 presents the most recent OMB/CSA P0VettY guideline?» Published in 1979 for use through the spring of 1980, and reflecting inflation through 1978. 1/ This procedure is actually performed for the nonfarm poverty guide- lines-first. Afterward, the farm poverty guidelines and those for Alaska and Hawaii are computed using the proper percentage adJUStme“t5- The f0Uf‘ person nonfarm poverty guideline is deliberately rounded UP t0 the nearest $50; all others are rounded to the nearest $20 betause the Standard 1“Cte” ments are so rounded. CRS~7 TABLE 2. OMB/CSA poverty guidelines (1979/1980) Continental U.S. Hawaii Alaska Family size Nonfarm Farm Nonfarm Farm Nonfarm Farm 1 $3,400 $2,910 $3,930 $3,350 $4,270 $3,650 2 4,500 3,840 5,190 4,240 5,640 4,810 3 5,600 4,770 6,450 5,490 7,010 5,970 4 6,700 5,700 7,710 6,560 8,380 7,130 5 7,800 6,630 8,970 7,630 9,750 8,290 6 8,900 7,560 10,230 8,700 11,120 9,450 For each additional member add 1,100 930 1,260 1,070 1,370 1,160 THE USDA'S FOOD AND NUTRITION SERVICE POVERTY LEVELS The third set of Federal poverty levels is that used by the USDA's Food and Nutrition Service for eligibility determinations in the Food Stamp Pro~ gram and other programs such as the School Lunch Program. The Food Stamp Act of 1977 mandated the calculation of a special "food stamp” poverty level for use in making individual income eligibility determinations; subsequently, the School Lunch and Child Nutrition Act Amendments of 1978 required that those same poverty levels be used for various eligibility determinations in child nutrition programs. 1/ 1/ This change was effective for the Food Stamp Program in March 1979 and, for the child nutrition programs, in July 1979. Previously, the Food Stamp Program had used "net income guidelines" based on the cost of the Thrifty Food Plan (3.3 times that cost), and child nutrition programs had used their own specially calculated poverty guidelines. CRS~8 The Food and Nutrition Service (FNS) poverty levels use the OMB/CSA guidelines as their basis, but there are four differences between the FNS poverty levels and the OMB/CSA guidelines. ~- The FNS poverty levels are published later and are effective from July of a given year through June of the following year, while the OMB/CSA guidelines are usually effective from early spring (or whenever published and implemented) to early spring of the next year. ~~ More importantly, the FNS poverty levels include a special, added inflation adjustment. The OMB/CSA poverty guidelines are updated annually for inflation through the year immediately previous to publication, by use of the annual average CPI for that year. The FNS poverty levels add to that inflation updating by increasing the OMB/CSA poverty guidelines to the extent that the CPI has changed between the annual average CPI in the previous year and the CPI for March of the year in which the FNS levels are published (for use beginning in July). ~~ The FNS poverty levels are based only on the nonfarm OMB/CSA poverty guidelines; they do not use or take into account the OMB/CSA poverty guide- lines for farm families. ~~ Although based on the annual income levels used in the Census thresh~ olds and the OMB/CSA guidelines, the FNS poverty levels are expressed in both monthly income terms (for the Food Stamp Program) and annual inC0me terms (for the child nutrition programs). l/ 1/ In reality, the FNS child nutrition programs do not use the FNS poverty levels directly. Rather, the School Lunch and Child Nutr1t1on Acts require the use of various percentages of the FNS poverty levels (125 per- cent and 195 percent). CRS~9 Table 3 presents the most recent (July 1979/June 1980) FNS poverty levels, as updated for inflation through March of 1979. TABLE 3. FNS poverty levels (1979/1980) Household size: Continental U.S. 1/ Hawaii: 2/ Alaska: 1 person Monthly auwwvuuuo $306 $354 $383 Annual .......... 3,670 4,240 4,590 2 persons Monthly ooeoeuvcu 403 465 504 Annual .......... 4,830 5,570 6,040 3 persons M0flth1y Uooovvceo 500 575 625 Annual uocoouoooo 5,990 6,900 7,490 4 persons MOflCh1y IUIOOICII 596 686 745 Annual .......... 7,150 8,230 8,940 5 persons 3 Mflnthly ouccovmuu 693 797 866 Annual 000000000! 8,310 9,560 10,390 6 persons Monthly ......... 790 908 987 Annual cvocoocovo 9,470 10,890 11,840 7 persons MODth1y ouuvuovvo 886 1,019 1,108 Annual .......... 10,630 12,200 13,290 8 persons M0nth1y uovuvuuoc 983 ‘ 1,130 1,229 IUUOIOUIUI For each additional member add: MOHth1y ovuoouvvvc 97 111 121 Annual ........... 1,160 1,330 1,450 ‘l/ Also used for Puerto Rico, the Virgin Islands, and Guam in the Food Stamp Program; for Puerto Rico and the Virgin Islands in the Child Nutrition Programs. _§/ Also used for Guam in the Child Nutrition programs. CRS-10 A FINAL NOTE ON PUERTO RICO AND THE TERRITORIES All of the foregoing poverty levels in use by the Federal Government are °°mPUt€d for the 50 States and the District of Columbia. There are no P0V€rty levels, as such, for Puerto Rico or the various outlying territories. However, in the absence of special poverty levels for those areas, the pov~ erty levels computed for the 50 States and the District of Columbia (or the 48 States and the District in the case of the FNS poverty levels) are used. CRS~1l .mmaflH smfinm ¢.mo\..mzo 93 99$ vw>«umw mmwwbww %uum>om mmmmmom mcc mama mm: mmamc smwcsm ¢mo\m:o mm mamm .wmm% wcw3oH xcow mcc mo mash cwsoucu mucmsmmw we uwwz mcu mo mama aoum vocumm mca .wd«umm comm m.uum acuauc coocum .mmamum woowv memnwoua mzm cw mcwcccwwflcw mawaumumw ow ”mHm>m4 mcum>om mzm .mwHocmm»cp msmumu mm mamm .««m3mm mam mcmmwd aw magma mmawamwwmw mpmcmmum cmcc Lmcwwc umcu camuxm .mmmpm cam now wumwmmum .muam:mm« mo canoe mcu wc«3oHHom ummm mcH .wc«nmw comm mcumm .mEm»wo»m mzm cmcu pmcuo .m«umuwcu m mm :muum>om: mafia: memuwopm GM %u«H«cww tficm maoucc mcwaumumw ow ummcccmvcsu «wa« can mm«H«Emm wawapmw oc mace macaw mum mvcocmmucu Eummcoa mcu mo Nmw um cmm wvcocmmucu %uum>om apmm .mHm:w«>«wa« cam mmfiawamw Euwwuoc mam Euww now mwao scmmucu muum>om mumummmw .mw«3co«umc vumwamum .mmomumm maoocflraoa mo mao«umH:cmu m.ummm umwcmcmo m:o«>wum mca .uwaE:m comm maumm .mmH:acom m>«umcm«mmH up mmumum wcoam muasm muwuoacm ou .wmmmu meow cc .vam muom zumm maoucwtaoa ucsoo ow umwcocmmuca mu»m>om msmamo D .. mdo«uwwpm> Eummfioz\Eumm .... muo«uwcum> uwcmmnwomo aoaonooubooo HO¥ m>%HUmF¥£ Ifldflbbbibflbbbfilvmgmmc Gmfiz IODOOIODHDDIDDOlOIIOlDDmmD uamua mqm>mq wamm>om A mnoumasa .mwao:mw:on maoucwtkoa uasou on .mma«H smwwsw ¢mo\mzo wnu mm mamm .~m>mH maoonw mwzucoe mnu um ummanoacn “~m>m~ meoocfl Hmmcam may um wmwcnom CRS~l2 smmmg m mm mmawamwwsw ¢mu\mzo ms“ mmms “Hmswm .mHm>mH maouafl mfinuaoe vam Hmsuam mm nuon wmsmmH uwHm>mA muum>om mzm .vm«Hamw omam mum vmms maamsuom cmnz \~ .u:mamnu:« umaaow vumvamum mnu mo mm: nwsounu wvaonmmson MMM.uom umm mmaMHmu«:w .amomudmv« mum mumname whoa HO N £u%3 mwaonmmson HOW mmaonmmhna mvaonmmuom umnamztm amnu pmwumq oU0UG5OM aU®UC5OHC3 ooooonpooooonuonno wCflUCDOM .ucmEmpumw numvcmum m mudvoum og muamamuoam vaosmmunu msmumo Aamnvm scsv mfiu mo Ham wcwwmum>w up wmnmwnaaooum .Hmsvm .umHm voom weoaoum msu cfl wmnmwanmumm wuflm vaonwmsos ma mumou woow mo aumuumm mnu wc«uumHmmu .Hm:vmcm DODUUDDODDDODUDDDDDQ mmnwm vaofiwmsom cmmsumm mucmEwuu:H umaaoa \H .mvHo:mmson wwvmwn maumwam tco:\mHumw~m pom umm mco«u tw~pm> .wvHo£mm:o£ aomummtm vam ta now .n:m .mvHonmmso: vmvmmz mHmBmm\mHmE now umm .maoz m:o«um«um> .wmnm«Hn:a m< mco«um«um> umnuo umm:«~mv«:u ¢mU\m2O nmvaocmmuna Nmum>om msmcwo uamua Aumsafiuaouv m4m>ma »amm>om qma %uuw>om gamma may mo Nmmfl uam Nmma um vwumanoamo oma< .vm:mmm mum mwnu nownz cw ummm man mo comm: nwsounu mmwcmzo xmccw mowum umesmcoo pom ucmaumnmvm cowumamcw Hmaomuwvwm am wv:Hu:H "mHm>mA muum>om mzm .muwnEmE muoa uo m sums mvaoswmson now um3oH vam .mvHo:mm=o: umnfime um cam .|N .uH pom mafia usmmuzu msmamo amnu umnwmn mum mmawamcwaw ¢mo\mzo .mmu«m vaonmmson ammsumn ucwemuucm cumwamum mo mm: mnu vcw wamvcsou on man .mEmuwoum mfiom cw mm: pom mmcwamvmsw ommmn man we Nmwa um wmumasuamo omH¢ .mvHo Inmmunu mvmamu mm mamm ummcwfimuflsu 9 .am~m voom mfiocoom msu mo umoo wsu wamwuu mo aomuma Iaoamu «cinema m do vmmmm .:o«umHsmoa maooamlsoa mnu mo mmuammme muwaumu lam moavoum on .wwHo£mmu:u gamma mag mo Nona cam .NmNfi .Nmn um wmumasuamu omH< .NmUEH muflum umasmcou mwm :um>m amsscm mnu mm mwamno mcu mo mm: we .umm% wcwumo Imam mnu nwsounu aomumawam mom wmxmvcw mum ummm am>«w m aw vmswmansa mvHo£mmusH nmvHonmmu:H muum>om mnmawo w~m>mA umaaoa w.~0>®..H m>«umcumuH¢ ........ w:mNmv:H comuwawca "EmuH Aumscwucoov mqm>mq »emm>om q