America’s Hidden Poverty Problem

Editor's note: This post originally appeared in the third edition of New America's new digital magazine, the Weekly Wonk.

On Tuesday, the U.S. Census Bureau announced that 46.5 million people, more than half of whom were children, lived in poverty in 2012. Those numbers are staggering, and virtually unchanged from the 2012 stats. But here’s the kicker: They’re also masking the scale of the problem.

Here’s why: The way poverty is measured is outdated and based on faulty assumptions. It’s meant to tell us how many people have incomes below a federally defined threshold. In 2012, that threshold was around $23,000 for a family of four. To put this into perspective, if both parents were working full time at the minimum wage their yearly income would be just under $30,000. A poverty threshold that makes minimum wage earnings look cushy should certainly raise an eyebrow.

Since the formula was initially calculated by tripling the cost of a basic food basket in the 1960s (and adjusted from that point to inflation since), it fails to reflect a modern family budget, which allocates much more to housing, transportation, medical expenses, and child care than the Cleavers ever did. It also doesn’t account for geographical variation. The purchasing power of a family earning $23,000 in Manhattan, New York, is, unsurprisingly, different than the same family living in Manhattan, Kansas.

Accounting for these shortcomings exposes the inadequacy of the official poverty count: When the Obama Administration released an alternate measure in 2011 using an updated formula, three million more people were classified as “poor.”

But even those numbers don’t paint a complete picture.

As the recession showed, millions of families are situated on the edge of a financial precipice with little to tether them in place. They are one car repair, one medical emergency, or one job loss away from losing their grip on the middle-class. In 2010, almost half of all families lacked the savings to live at the federal poverty line for three months without income. They may not have been “poor” but they were “pre-poor.”

Incorporating other indicators of financial security into how we assess need and give support is essential to effectively slashing poverty numbers. Without those considerations, our social safety net can be inadequate, unreliable, and, critically, it can trap recipients inside their impoverished circumstances. Many lose support just as they begin to see their financial prospects improve – cycling on and off SNAP (food stamps) as their hours change, or becoming ineligible for childcare assistance once they land a job.

“Just when someone is moving forward, the rug is ripped out from under them,” explained Tianna Gaines Turner, a mother and childcare provider, recounting her experience in the public assistance system – and that of those in her community – in testimony she submitted to the House Budget Committees hearing on the War on Poverty in July. “The cycle pushes families deeper into poverty than they were before they took the job.”

We need to change the way we define “financial security,” broadening it so we’re not penalizing families for trying to bolster their financial stability by earning a raise or saving money.

Research from the Urban Institute reveals that a family with a parent who loses a job without savings is two times more likely to miss a meal, rent, or utility payment than a family with savings. Unfortunately, public assistance programs often force families to choose between the temporary assistance they need now and the savings that could help them become self-sufficient in the long run.

These asset limits in SNAP, for example, can be as low as $2,000. In other words, a family with a $2,000 emergency fund, or, in some cases, a 1996 Civic parked in the driveway, could be ineligible for help putting food on the table. Thankfully, almost 40 states have seen asset limits as the flawed policy that they are and eliminated theirs.

“We…need to be allowed to save while we are receiving assistance, not be kicked off for just having a little more than nothing,” Turner explained.

The Census numbers give us a snapshot of poverty. We need to view the panorama. By expanding our perspective, we can design policies that intervene early, prevent unnecessary hardship and sacrifice, and allow families to move forward in their lives.