Economic Development

Charting New Pathways Out of Poverty

If we’re going to help poor families gain agency, dignity, and mobility, we need poverty measurements that point the way to a decent standard of living.

“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”James Baldwin

What’s the point of measuring poverty? Presumably, we measure it so that we can figure out ways to end it. Unfortunately, the poverty measures most programs use to aid the poor are blunt instruments; they don’t identify the nuanced levers that might actually help families in different situations. Meanwhile, better measures remain unused and unconsidered in federal, state, and local policy. 

The widely used US federal poverty level (FPL)—an example of the former—vastly understates poverty. The FPL is primarily based on the antiquated assumption that food costs make up about one-third of household budgets, but in the five decades since the FPL was developed, the costs of housing, transportation, childcare, health care, and other family necessities have risen far more rapidly than food costs, leaving many costs out of the equation. The FPL also neglects regional variations in cost of living, and while the federal government’s unofficial supplemental poverty level (SPL) attempts to address many of the FPL’s limitations, it does not go far enough in measuring the true cost of living for local states and communities.

These federal standards mask the true extent of families contending with deprivation. Worse, because public assistance programs use the FPL to set their eligibility requirements, many “hidden poor” find that they earn too much income to qualify for most supports, yet still struggle to meet their most basic needs. In fact, many public programs use different multiples of the FPL as a foundation for eligibility guidelines, often creating a confusing hash of program measurements. Perhaps most harmful of all to large-scale efforts to move people out of poverty, the FPL doesn’t help us set the bar for families seeking to sustain themselves.

Fortunately, anti-poverty experts, practitioners, and advocates have developed a number of alternative tools that more accurately describe a decent standard of living in different parts of the country, and for families of different configurations and stages of life. (See "Measuring Up: Aspirations for Economic Security in the 21st Century" for a review.) The most promising of these measures is the basic needs budget approach, pioneered by Diana Pearce from the Center for Women’s Welfare at the University of Washington, who founded the Self-Sufficiency Standard. (Other examples of basic needs budget approaches include the Economic Policy Institute’s Basic Family Budgets, the National Center for Children in Poverty’s Basic Needs Budgets, and ALICE from United Way Northern New Jersey.) 

A basic needs budget approach has two components:

  • An estimate of the costs of meeting basic needs for a household in a given area, based on data that account for variation in local costs of living
  • An estimate based on census data of how many households have income below those costs

Essentially, basic needs budget models put a stake in the ground for what people need to live with some dignity. The United Ways of California recently authored a report that presents our own basic needs budget approach, “The Real Cost Measure.” Our Real Cost Measure and  similar approaches make critical assumptions about what “basic” means, considering the costs of:

  • Housing: Families should be able to rent a family apartment, rather than doubling up with extended family or strangers; parents should be able to have separate rooms from their children, rather than crowding in together.
  • Childcare: Families with young children should be able to afford adequate, licensed child care so that adults can work for a living, and so that children can feel safe and nurtured, and ideally, develop their minds and bodies apace with wealthier peers.
  • Health Care: Both adults and children should have access to basic preventive health care, and be able to afford the co-payments and incidentals that go along with it.
  • Food: Households should be able to afford the USDA-defined most basic food plan, the Thrifty Food Plan, which offers just enough to avoid being malnourished (though it does not meet 100 percent of the US government’s recommended daily allowance for all vitamins).
  • Transportation: Adults should be able to get to work, to school, and back home by private or public transportation (though the budget doesn’t include savings to purchase a car).

Basic needs budgets thus more clearly describe region-specific hardships for families and the tradeoffs they face on a regular basis, such as having to sacrifice food for heat or childcare on a regular basis. This approach is intuitive and easy to understand, and because it’s grounded in a household budget containing costs that all families can relate to, it supports better community and policy conversations at the macro level, as well as better guidance for low-income families and those serving them.

Used in tandem with the American Human Development Index—which measures factors such as health and educational attainment, and was developed by Measure of America and modeled on the UN’s global Human Development Index—we could gain an even more holistic view of poverty solutions.

Shifting the Conversation to Mobility, Agency, and Dignity

The cost of meeting basic needs for two adults and two children under The Real Cost Measure in many places is more than twice the income of the Federal Poverty Level, but before balking at that, it’s important to recognize that we are long overdue for a public conversation about the real needs of working families struggling to meet basic needs. Unlike FPL—which doesn’t adequately show what income families need to meet their basic needs and thus doesn’t help map upward mobility—basic needs budgets are grounded in decent living conditions, based on the best-available cost-of-living data, and thereby highlight the high costs of being poor in a way that most people can easily grasp.

To help those fighting their way out of poverty, the first thing we must do is see them clearly, and understand what it takes to transition from a household suffering from deprivation to one thriving on its own income. That means not only uncovering the real number of households in each of our communities that struggle to meet basic needs, but also using insights about their specific situations—such as the number of adults in the household, their educational attainment, gender and ethnicity of householders, and the presence of children—to develop approaches targeted to their different challenges. Some families may be drowning, some treading water, others swimming, and still others climbing into their boat and setting a course. Different strategies and resources are relevant and available to them at different stages, but we can’t help them connect if we don’t know who they are, and they don’t know where to turn.

The Real Cost Measure has provided us with many valuable insights in California, such as:

  • One in three California households don’t earn enough to meet their basic needs; there are many more struggling households than we commonly acknowledge.
  • The great majority of these (87 percent) are working households.
  • Cost of living varies significantly by neighborhood and region.
  • There are different returns to increased education for women than men.
  • Households with children, particularly children 0-5 years old, and especially those led by single mothers, have different needs.
  • Race, language, and citizenship barriers compound challenges for all households.
  • All income supports drop away before households reach The Real Cost Measure of income adequate to meet basic needs (with one exception: the subsidies under the Affordable Care Act for households with income up to 400 percent of FPL).

These findings are helping us:

  • Set a bar for the level of effective buying power we want to help families reach and the least decent standard of living we, as a society, allow
  • Enable communities to engage in a rich and accessible conversation about the needs of struggling families, and the tradeoffs they make
  • Promote a better understanding of how families in different situations have different needs, even if they have similar total income
  • Identify possible policy levers for helping families in different situations

The best test of a poverty measure is whether it can help us speak more clearly about and act more effectively on the challenges low-income households face everyday to make ends meet. A basic needs budget approach is therefore the best measure for helping communities, poverty-fighters, and advocates tailor efforts to make a real and lasting difference in people’s lives. All of us who care about helping families move up the ladder should work to make basic needs budget data available at the federal, state, and local levels, at minimum.

Better still, we should push for government policy (either administratively through the Office of Management and Budget, or via Congressional legislation) to replace the FPL measure altogether with a basic needs budget approach. Replacing the FPL is dependent far more on politics than on merit, of course, but—with the middle class continuing to hollow out, our tepid economic recovery, wages stagnant despite productivity gains over the past 30 years, heightened attention to increasing inequality, and the undeniably large but uncertain impacts of automation looming—the time finally may be right to shift to a proactive focus on decent living standards and adequate income.

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