Recalibrating the Poverty Line

This year marks the 50th anniversary of the landmark paper that helped delineate the federal poverty line. A huge leap forward in its day, the poverty line established credible criteria for what constituted an acceptable standard of living. It continues to be the official measure used, for example, to determine who will get what subsidies under assistance programs such as food stamps, housing assistance and Medicaid.

However, like anything half a century old, it could use a little updating. By its standards, only 15% of Americans fall below the poverty benchmark. Yet more than 35% of us hold jobs paying less than a living wage or are unemployed and trying to find a job, and another 1 in 10 receives just above a living wage. The out-of-whack poverty line carries huge repercussions for the poor, near poor and, indeed, the entire economy.

Here's the background. Mollie Orshansky, an economist and statistician with the Social Security Administration, devised the poverty line in the 1960s. She used the average family budget and the cost of food. Because the average family spent one-third of its budget on food in 1955, Orshansky set the poverty threshold at three times the minimum cost to purchase an adequate food diet. Her formula took a basic minimum (the food budget) and related it to the overall prevailing standard of living (its proportion in the total budget of the average family). She described it as an acceptable minimum social standard according to the custom of the day. It was not an absolute measure of poverty....