Mayor Bloomberg’s Measure of Poverty

TUESDAY, JULY 29, 2008

First up is Mayor Bloomberg’s recent announcement of a new way to measure poverty in New York City.  Using the new Bloomberg gauge, 23 percent of New Yorkers are classified as  poor; under the standard federal poverty measure, 19 percent are.  What accounts for the difference?

First, a bit about the federal poverty line. It was originally developed in 1963 by Mollie Orshansky, an economist working for the Social Security Administration. The latest data available at the time – a 1955 survey from the Agriculture Department – indicated that families spent about one-third of their budget on food. So Orshansky calculated the cost of a bare-bones but nutritionally adequate diet, multiplied it by three, and the poverty line was born.

Other than being adjusted for inflation, the poverty line has, for over forty years, remained essentially unchanged.  Yet American families have changed a lot.  With most women in the workforce, for instance, the typical family now spends much more on transportation and childcare than on food.  But these expenses – along with higher healthcare and housing costs – don’t figure into the federal poverty calculations. There is a widespread consensus among specialists that although Orshansky’s calculations adequately reflected consumption patterns of the 1960s, they are out of date today. (We discuss this issue in The Measure of America, pages 123-125.)

The National Academy of Sciences released a report in 1995 suggesting ways to modify the federal poverty line, and the Bloomberg measure is based on its recommendations. The new formula accounts for regional differences in cost of living and includes typical outlays for  housing, transportation, clothing, utilities, and childcare. The poverty line for a family of four under the federal measure is $20,444; under the new NYC measure, it is $26,138.

Given the longstanding and broad-based consensus on the need to revise the way in which we measure poverty, why has it taken more than a dozen years for an elected official to make a change?   One answer is that more people are classified as poor under the new measure, and rare is the politician who wants poverty rates to rise under his or her watch.  The Bloomberg administration – prevented from running again by term limits, nearing the end of its time in office, and long interested in novel approaches to making a dent in the city’s poverty rates – won’t have to answer to voters come November ’09 about why the poverty rate is up four percent.  So they were free to take the first step.

For more information:

“City Refines Formula to Measure Poverty Rate” by Cara Buckley
“An Alternative to the Federal Poverty Measure”