South-Western College Publishing - Economics  
Drawing the Line –Poverty Revisited
Subject Income Inequality
Topic Income Distribution and Poverty
Key Words Poverty, Income Redistribution
News Story

The current definition of poverty was created in the Johnson Administration and, except for inflation adjustments, has remained unchanged since 1965. According to this definition, a family of four earning less than $16,600 would be considered impoverished. Approximately 12.7 percent of the U.S. population is below the poverty level. The Census Bureau, in an attempt to revise the poverty measure, has developed Experimental Poverty Measures that would add millions more to the poverty rolls. Some sociologists and economists argue that the standard should be even higher.

There is no consensus¾nor any objective standards¾on what is or is not a socially acceptable standard of living. Consequently, there is no agreement as to what constitutes a poverty level. The current definition was based upon a minimal food budget and multiplied by three, since food was one-third of the average family's budget. The proposed definition broadens the definition of income to include subsidies like food stamps. Five separate categories of expenditures are included; food, housing, health care, transportation, and personal expenses. In each case the Census Bureau tried to determine what was the required expenditure that would preserve a reasonable amount of self-respect. For example, under the revised measure a telephone is considered essential, as is housing in good repair, decent clothing and transportation, which in many cases is a used car. These goods were not considered under the current definition.

The Bureau's new approach to poverty would raise the poverty threshold from $16,600 to $19,500. This would mean that 17 percent of the population, or 46 million people, would now become eligible for government programs for the poor. There are other proposed measures of poverty that would raise the standard even higher – between $21,000 and $28,000.

(Updated January 1, 2000)

1. Describe the principal ways in which the federal government redistributes income.
2. What is the significance of the poverty level in terms of federal government programs?
3. "The current economic expansion has probably had a significant impact in removing individuals from poverty." Is this statement true or false? Explain your answer.
Source Louis Uchitelle, "Devising New Math To Define Poverty," The New York Times, October 18, 1999.

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