The official poverty measure was developed in 1963 by a former U.S. Social Security Administration employee who calculated a family’s needs by taking the costs of groceries, which consumed a higher share of a family’s budget back then, and multiplying it by three. At the time, food represented one-third of the expenses for many families.
Fortunately, we have a tool that does a much better job of measuring poverty based on today’s household economics. The Supplemental Poverty Measure or SPM, is based on a modern family budget and is adjusted to consider variations in costs across the country. It more accurately accounts for changes in costs over time for expenses such as food, health care, housing, transportation and child care.
And more importantly, it enables everyone who is concerned about reducing poverty to understand the effectiveness of programs such as the Earned Income Tax Credit and the Supplemental Nutrition Assistance Program, which help provide household resources and food for millions of children. By using the Supplemental Poverty Measure, we see that without these federal and state supports for families, the child poverty rate would have been almost double, rising as high as 33 percent, rather than the still-unacceptable 18 percent, according to the most recent data.
Despite the important information provided by the Supplemental Poverty Measure, the official poverty measure continues to be useful because it is a yardstick that is embedded in numerous government programs and enables us to track trends consistently from year to year, decade to decade. While this measure is fine for those purposes, it fails to give local, state and federal policymakers the best possible data to drive decisions, and it doesn’t give us a true sense of how government programs can make a difference in addressing poverty. The Supplemental Poverty Measure is a much more effective, accurate measure for these purposes.