April 25, 2011

What is Poverty?

This article called The Real Poverty Line in America  discusses a study about what income is required for a decent standard of living.    You can find the actual study at The Basic Economic Security Tables™ Index (BEST)

They used the term 'poverty line' in the Main St. article title.   I don't know if they really think that 'poverty line' and 'economic security' are the same thing or not.   They might just be trying to be controversial or something.  

The BEST economic security income levels

The income levels that he BEST study come up with to give that 'economic security' level are :

1 worker $30,012
1 worker, 1 infant $46,368
1 worker, 1 preschooler, 1 schoolchild $57,756
2 workers $42,504

The BEST figures include things like monthly spending of $490 for transportation, $291 for personal and household items and saving $75 a month towards emergency fund.   That is NOT poverty level living for certain.   Its not even particularly frugal living in my opinion.   But defining a poverty rate is not the intent of the BEST study.  BEST is the "Basic Economic Security Tables" so they are looking at an "economic security" level and not "poverty" level.   Economic security is a higher standard than poverty.


The federal poverty line 

The federal poverty lines are :





The 2009 Poverty Guidelines for the 48 Contiguous States and the District of Columbia
Persons in family Poverty guideline
1 $10,830
2 14,570
3 18,310
4 22,050
5 25,790
6 29,530
7 33,270
8 37,010
For families with more than 8 persons, add $3,740 for each additional person.


They have higher figures for Alaska and Hawaii

The BEST numbers are roughly triple the federal poverty level amounts.

The federal poverty line is apparently not really a direct measure of what it really costs people to subsist.   Apparently the poverty line was developed in 1963-1964 by taking the cost of food for a family of 3-4 and then multiplying by 3.  They multiplied food costs by 3 because at the time people spent about 33% of their money on food.    Since then the poverty line has been updated by using the CPI inflation index.   The current federal government poverty line has very little to do with hat it costs to provide the basic necessities in 2011.
The social security administration site has more on the history of the poverty lines used by the federal government. 

It seems that the federal poverty line is more accurately an inflation adjusted measure of what it cost to feed three families in the 1960's.

What is Poverty?

I'm not going to pretend that I know a lot about poverty.   My family may have been 'low income' at some points when I was growing up but we were never what I'd consider poor.    However I did qualify for free lunches at school at one point so it seems that we could have been considered poor by some government standard at the time.   When I think of poverty I think of not being able to afford basic necessities like food and shelter.  If you don't have enough money to feed or shelter yourself then you are definitely poor.   I don't mean that you ran out of money at the end of the month because you blew all your cash on iPhone apps or at the casino.   I mean that you don't have enough money coming in to afford life's necessities.

As a single person I could pretty easily rent a room with utilities included and feed myself for about $450 a month.   Thats only $5,400 a year.    Throw in another $100 for clothing.  By one measure then I could say that the poverty line for an individual is around $5,500 a year.

Are transportation, health care, and a phone basic necessities of life?    You could look at it that way.   Personally I think health care is more fundamental to basic subsistence than transportation.   For another $1,000 I could get an annual bus and train pass.

 The cost of healthcare is a killer for anyones budget if they're paying it out of pocket without any government aid.     Health insurance would run up to $400 a month for another $4,800 a year.   You could get a lower cost health insurance plan and risk that you don't have high bills, but in the end you may pay as much or more than the higher premium plan with lower deductible.   I could get a plan with a $175 monthly premium and a $2,500 annual deductible which on average would cost list.  This might run you $250 monthly on average over multiple year periods.   That is still $3,000 a year for health care.

Is a phone a necessity?   I think there is a reasonable argument that says that you do need a phone.   You have to have some way to keep in touch with the rest of the world and get help in emergencies.   Today however a basic cheap cell phone can be had for as little as $5 or $10 a month.  

Looking at it 4 different ways we come up with 4 different thresholds.   For a single person those levels would be : 

Food, shelter and clothing = $5,500
Food, shelter, healthcare, transportation, clothing and a phone = $9,500
Federal poverty guideline = $10,830
BEST minimum = $30,012

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