The current poverty benchmarks in the United States are miserably out of date, basing their measurements on decades old research. In the 1960s, the average family of three spent about a third of their after tax income on food, so the poverty line was set at about three times the cost of the cheapest food plan from the Department of Agriculture.[i] This way, a family could afford a nutritional diet by spending no more than a third of their income on food. In 1965, this calculation was officially adopted by the Office of Economic Opportunity as the standard measure of poverty, and it hasn’t fundamentally changed since.[ii] This guideline for poverty, which was implemented almost half a century ago, has only been updated to account for inflation. The federal poverty line for a family of four is only $23,850 a year.
Although the adequacy of the current poverty benchmarks has been the subject of much debate over the years, there have been no changes to the official poverty line. One of the criticisms of the current poverty line is that families don’t spend a third of our paychecks on food anymore. Researchers at MIT show that a single parent of two in Arkansas earning a living wage should anticipate budgeting only about 17 percent of their income on food, not 33 percent like in the 1960s.[iii] In fact, food costs don’t even make the top three expenses in this budget. That same parent should plan to spend about 20 percent of their income on childcare, 20 percent on transportation, and another 20 percent on housing. In addition to the MIT study, various studies over the years have found that it takes a wage that is significantly higher than the minimum wage or poverty line wages to really meet all of the basic needs of families. You can read a previous report by AACF here.
Childcare and housing are essential for Arkansas families, and their costs have all gone way up in recent decades. The cost of childcare has shot up, increasing 70 percent from 1985 to 2010, even after adjusting for inflation. In Arkansas the average single mother pays about 30 percent of her annual income on childcare, which can cost almost as much as full time tuition at an in state college.[iv] Housing is another expense not captured by the federal poverty guidelines that is taking a huge bite out of low income families’ budgets. In the 40 years after the implementation of the poverty guidelines, the median gross rent in the United States almost doubled.[v] If the poverty guidelines are based of food costs, they just aren’t a realistic representation of what it currently costs to make ends meet. Be on the lookout for an upcoming report from Arkansas Advocates for Children and Families about what poverty looks like in Arkansas.
Median gross rent went from $232 in 1960 to $453 in 2000. Adjusted to 2000 dollars.