by Savanna Shay Duran
April 21, 2015
Poverty isn’t just devastating to the children who experience it. Child poverty costs the United States an average of $500 billion a year in lost productivity and earnings, and also leads to higher health- and crime-related expenses in the long term. Sadly, children from lower-income families will very likely remain in poverty as adults because poverty limits a child’s access to opportunities that would help him or her achieve success in the future and make positive contributions to the community. This cyclical nature of poverty makes it important that federal, state, and local governments invest in effective intervention and assistance programs that ensure low-income children have access to the same opportunities that help their middle- and high-income peers become successful.
But how does the government determine which programs are effective? A decades-old formula is used for determining the official federal poverty level (FPL). While the purpose of the formula is to determine whether a family is eligible for various anti-poverty programs, it is also the metric used to determine the economic well-being of various populations. Unfortunately, the formula does not take into account the value of many anti-poverty programs. The Supplemental Poverty Measure (SPM) was created to better measure the effectiveness of anti-poverty programs. A policy brief from the Annie E. Casey Foundation looks at the SPM and its usefulness for determining which programs are making a difference in the lives of children living in poverty.
A tale of two poverty measures
The formula for the FPL dates back to the 1960s and is based on the minimum cost required to provide a family with a sufficient, yet nutritious diet. This amount is then multiplied by three since the cost of food in the 1960s was one-third of a family’s budget. However, food now accounts for less than 10 percent of a family’s budget, so the formula does not accurately reflect today’s living expenses. For example, a family of three can earn up to $19,790 to be considered living at or below the poverty level. Given much higher costs for housing, health care, child care, and other expenses, a family of three earning up to $39,580—or twice the poverty level—is still considered low income. The FPL is also deficient in that it does not take into account the cost-of-living variable, which differs greatly among the 50 states.
The FPL is based on a family’s size and income. This includes wages, child support payments, and any governmental cash assistance, such as social security. However, most anti-poverty programs do not increase a family’s income because the money goes directly to those who provide the services—such as doctors, child care providers, landlords, supermarkets, and the like. While it makes sense to measure income in order to determine a family’s eligibility for anti-poverty assistance programs, this approach dose not measure the impact of non-monetary assistance programs, such as Medicaid, child care assistance, housing subsidies, SNAP or tax credits.
In other words, while the FPL can tell us how many low-income families and children are eligible for anti-poverty programs, it cannot tell us how many are lifted out of poverty by those same programs. The SPM, however, takes the value of these programs into account—along with a more accurate accounting of a typical family’s bare-bones budget and the cost-of-living differences among the states—to give us a more accurate measurement of poverty.
What the Supplemental Poverty Measure shows us
The SPM enables us to see how effective government programs are at reducing child poverty. New Mexico’s child poverty rate in 2011-2013 was 36 percent—meaning 36 percent of New Mexico’s children lived in families with incomes at or below the federal poverty level. But when the value of non-cash programs like Medicaid, SNAP and others, are taken into account, just 16 percent of our children are living at or below the FPL. This tells us that these programs lift more than 100,000 New Mexico children out of poverty. While these kids still live in low-income families, they have access to many of the supports and opportunities that will help them find success in school and later in life.
The Casey Foundation’s report also shows us that:
- Tax credits available to low-income families lift 4.8 million children out of poverty;
- SNAP lifts 2.1 million children out of poverty;
- Housing subsidies help 1 million children; and
- Using the SPM, the poverty rate among both Hispanic and Black children is 29 percent, and among Native American children it’s 26 percent, but it’s just 10 percent among white children.
We must continue to use the Supplemental Poverty Measure because it allows policymakers to assess the progress being made in the fight against child poverty. It is important that government officials at all levels have an accurate, efficient means of determining which programs are helping lift children out of poverty. Continued investments in the most effective programs will help ensure that all children have the opportunities that lead them to success.
Savanna Shay Duran is a senior at the University of New Mexico and an intern at New Mexico Voices for Children.