Nov. 7, 2011 at 9:55 AM ET
More Americans are living in difficult circumstances than the official data show, according to a new and sobering gauge of poverty.
The new indicator, called the Supplemental Poverty Measure, estimates that 49.1 million were grappling with very difficult economic circumstances in 2010, compared with 46.6 million under the standard poverty definition. The poverty rate under the supplemental measure is 16 percent, compared with 15.2 percent under the official measure.
The calculations for the official measure are slightly different than in the poverty report released earlier this year because the researchers used slightly different demographics.
The supplemental measure was developed in response to critics who said that the traditional measure of poverty is too simplistic. They argue that it doesn’t take into account benefits, such as food stamps, or expenses, such as health care costs, that are key parts of low-income people’s budgets.
“I think that we’re going to have a much more accurate understanding of poverty in America,” Scott Allard, an associate professor at the University of Chicago and expert on poverty, said ahead of the report’s release.
The supplemental calculation is not going to replace the official poverty measure, which Allard and others say also is valuable because it provides a consistent comparison of poverty over time.
But the new calculation does offer a more detailed view of how poor people are getting by. It includes government benefits that aim to help low-income Americans, including subsidized school lunch programs, energy assistance programs, housing subsidies and the Supplemental Nutrition Assistance Program, previously known as food stamps.
And it tries to more accurately reflect what people are paying out in expenses such as health care and payroll taxes.
“It does address some shortcomings,” said Shawn Fremstad, a senior research associate with the Center for Economic and Policy Research and an expert on poverty. “I think it has other shortcomings.”
Fremstad likes that the new measurement more accurately reflects both expenses and benefits that affect low-income families.
But he also thinks the new poverty measure still underestimates how much money you really need to make ends meet today. He noted that under the new guidelines the poverty threshold for a family of four with two children is $24,343, although there are some variations for housing status. That compares to $22,113 under the traditional guidelines.
Fremstad thinks the new threshold is still very low.
Under the supplemental measure, the poverty rate for children is actually lower than under the traditional measure. Some see that as a validation that programs that aim to help poor children, such as food subsidies, actually do work.
“These data will highlight how critical many safety net programs are for low-income families and how they elevate people out of poverty,” Allard said in an interview before the data was released.
On the other hand, the supplemental measure shows a higher poverty rate for older Americans. That could be because of expenses the new measure includes, particularly out-of-pocket health care costs.
The supplemental poverty measure also includes other factors, such as regional housing cost differences.
The criticisms of the traditional poverty measure have come from both sides of the ideological fence.
Some conservatives have argued that the standard poverty measure looks too narrowly at income, and doesn’t take into account things like alternative source of wealth, savings or people with unpredictable salary swings.
Some liberals say the decades-old formula underestimates the true cost of making ends meet today.
© 2013 CNBC LLC. All Rights Reserved