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In New York City, Poverty Defined In New Terms

By Pam Fessler

Published September 10, 2009 12:15 AM

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New census figures Thursday are expected to show that the poverty rate rose in 2008. But the government still measures poverty the same way it did more than 40 years ago, and many experts think that gives an inaccurate measure of what's going on.

New York City developed a new measure last year based on recommendations by the National Academy of Sciences that takes into account expenses such as child care and health care costs. The result, according to backers of the new formula, is a more realistic picture of today's world. They're pushing the federal government to make a similar change.

Living At The Line

It's not easy to define who is or isn't poor.

Take Sandra Killett, a divorced mother of two, who lives in Harlem. Killett recently got a job at a foster care and adoption agency. It pays $29,000 a year — which puts her well above the federal poverty line. But Killett — a very upbeat New Yorker — is still struggling.

"When you're in a crisis with your family and you don't have the financial means to resolve that, I call that poverty," says Killett.

In fact, she isn't doing all that much better than when she was unemployed and eligible for more government benefits.

"You know, you get the job, and it's like, 'Oh boy, breathing room.' And so I said to my son, 'Well, you know, it's still tight. It ain't tight tight,' " Killett says.

Killett lives in one of the most expensive cities in the world, but the federal poverty measure doesn't take that into account. It's the same whether you live in New York or North Dakota.

Killett isn't considered poor by federal standards, in part, because the poverty line was created back in the 1960s. At the time, Americans spent about a third of their income on food. So the government simply took the cost of a basic food plan and multiplied it by three. Since then, the poverty line has been adjusted for inflation, but that's it — even though Americans today spend far less of their income on food, and far more on other things, such as health care.

"We quickly realized that we needed a more up-to-date and accurate measure," says Linda Gibbs, New York City's deputy mayor for health and human services.

Gibbs says the "aha" moment came when the city found a new way to help low-income residents take advantage of something called the earned income tax credit — a significant benefit for the poor.

Gibbs says Mayor Michael Bloomberg was excited at the prospect of using the tax credit and asked Gibbs how much the change would reduce poverty in New York.

"And I had to say, well, not at all," says Gibbs. That's because the earned income tax credit is not included as income in the federal poverty measure.

The official poverty rate only looks at income before taxes.

So New York City decided to do what many experts are pushing the federal government to do — change the way it measures poverty to better reflect today's world.

How It Works

Killett uses her cell phone to keep track of her 16- and 14-year-old sons. For her, a cell phone is a necessity. And New York agrees. It includes the cost of phones, as well as other utilities, in calculating its poverty line. It also includes basic housing, food and clothing costs.

It compares that amount to a family's after-tax income, plus the value of any government benefits such as food stamps or housing. Killett lives in a two-bedroom apartment where her rent is subsidized. She pays $600 a month, but the going rate is more than twice that amount.

Then, the city subtracts medical costs in calculating poverty. Killett checks her records to see how much is taken from her paycheck for premiums: almost $7,000 a year, in addition to other out-of-pocket health expenses.

Killett doesn't pay to commute — she walks to work — but commuting and other work-related costs are also taken into account in New York's poverty measure.

That makes a lot of sense to Antonia Santiago, a single mother of three. Santiago drives between her Manhattan job and her Brooklyn home. The commute takes a slice out of her paycheck.

"If I just go straight to work and straight home, I spend about $60 a week. So about $240, round it up to $250 in gas alone," she says.

Santiago drives because her children get free day care right near her job. She used to pay more than $150 a week for child care. And child care is another expense New York looks at in determining poverty. Santiago's $36,000 salary puts her well above the federal poverty line of $22,000 for a family of four. Still, she just filed for bankruptcy, so she doesn't understand why she isn't considered poor. [Story continues after chart]

Santiago and her children, ages 7, 10 and 16, share a two-bedroom apartment in what she says is not the "nicest area" of Brooklyn.

The building's elevator smells faintly of urine, and her apartment is dark and sparsely furnished. But paying just $800 a month in rent helps Santiago to make ends meet.

"I consider myself to be poor, because once I pay rent, then I come home, I have to pay bills. I mean, I don't have the little luxury amenities, as far as like washer-dryer. Even though it sounds minor, it all adds up," Santiago says.

'Constituency For Inertia'

Rebecca Blank, undersecretary for economic affairs at the Commerce Department, which produces the federal poverty rate, admits that the measure answers only a limited set of questions. For example, she says the figures show how job-related income fluctuates — important in a recession.

"What this won't show you, which is quite important, is the extent to which federal programs might buffer the loss of cash income. So some people who lose their jobs are going to get more food-stamp income. Some of them are going to be able to claim more earned income tax credit income," Blank says.

Blank says her agency is trying to find better ways to analyze how those programs affect poverty, and the Census Bureau does produce some alternative poverty figures used primarily by researchers. But Blank doesn't expect the official measure to go away soon. It's used to determine eligibility for programs, such as Medicaid. And changing it is not only complicated, but political. There are bound to be winners and losers. New York's alternative, for example, produced a lower poverty rate for single-parent families with children, who generally receive more government benefits, and a higher rate for the elderly, who tend to have high medical expenses.

"There's a big constituency now for inertia on this thing," says Nicholas Eberstadt, a researcher at the American Enterprise Institute.

Eberstadt says everyone wants to know how changing the formula affects them. As a result, most of the proposals to update the measure, at least initially, would not affect eligibility for programs but would be used instead — as in New York — to help shape policy. There are bills in Congress calling for an updated poverty measure, and the Obama administration has expressed some interest in making a change. Eberstadt, who says the measure would be more accurate if it focused on consumption rather than income, thinks something needs to be done soon.

"I'm very worried that our existing poverty rate is a broken compass, and it's just going to misguide us — and now, of all times, while we're in the middle of a big global economic crisis. We need to have good instrumentation to inform us about who's in need," Eberstadt says.

Killett couldn't agree more.

"I'm so confused about what's poor and what's not poor," Killett says. "And I have to keep going back and saying, 'If you knew your basics were covered, maybe I wouldn't consider myself to be poor.' "

But she knows that for her, and many others, they're not covered — no matter what the official numbers say.

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STEVE INSKEEP, host:

The nation's new poverty rate is rising. The latest figures, just released this hour, show that 39.8 million people are below the official poverty line - and there are millions more just above that income level who are still struggling to get by, as we're going to hear this morning.

The 2008 poverty rate stood at 13.2 percent, which is a bit higher - and in fact, the highest poverty rate in ten years. The government measures poverty the same way it did more than 40 years ago, though, and some experts think that's a problem. They think it gives an inaccurate picture.

NPR's Pam Fessler reports.

PAM FESSLER: It's not easy trying to define who is or isn't poor.

Take Sandra Killett, a divorced mother of two, who lives in Harlem.

Ms. SANDRA KILLETT: When you're in a crisis with your family and you don't have the financial means to resolve that, I call that poverty.

FESSLER: She's walking home from a job she recently got at a foster care agency. It pays $29,000, which puts her well above the federal poverty line. But Killett — a very upbeat New Yorker — is still struggling. In fact, she isn't doing all that much better than when she was unemployed and eligible for more government benefits.

Ms. KILLETT: You know, you get the job, and it's like, oh boy, breathing room. And so I said to my son, well, you know, it's still tight. It ain't tight tight.

(Soundbite of laughter)

FESSLER: Killett lives in one of the most expensive cities in the world, but the federal poverty measure doesn't take that into account. It's the same whether you're in New York or North Dakota.

(Soundbite of beeping)

FESSLER: Killett lives in a two-bedroom apartment where her rent is subsidized. She pays $600 a month. The going rate is more than twice that amount.

Ms. KILLETT: I think it's about 56 apartments in here - mixed income. Watch yourself.

FESSLER: She isn't considered poor by federal standards, in part, because the poverty line was created back in the 1960s. At the time, Americans spent about a third of their income on food. So, the government simply took the cost of a basic food plan and multiplied it by three. Since then, the poverty line's been adjusted for inflation, but that's it — even though Americans today spend far less of their income on food, and far more on other things, such as health care.

Ms. LINDA GIBBS (Deputy Mayor for Health and Human Services, New York City): We quickly realized that we needed a more up-to-date and accurate measure.

FESSLER: Linda Gibbs is New York City's deputy mayor for health and human services. She says the aha moment came when the city found a new way to help low-income residents take advantage of something called the earned income tax credit — a significant benefit for the poor.

Ms. GIBBS: And so, the mayor is very excited. This is great. How much is this going to reduce poverty. And I had to say, well, not at all, because the earned income tax credit as a tax refund is not counted in the income in the household.

FESSLER: That's because the official poverty rate only looks at income before taxes.

So, New York City decided to do what many experts are pushing the federal government to do — change the way it measures poverty to better reflect today's world.

Let's go back to Sandra Killett.

Ms. KILLETT: Okay. So, where are you? Where's your brother? Okay. All right. Bye-bye. Okay. They are with their friends and they are not coming back.

(Soundbite of laughter)

Ms. KILLETT: They're in midtown.

FESSLER: Killett uses her cell phone to keep track of her 16 and 14-year-old sons. For her, a cell phone's a necessity - and New York agrees. It includes the cost of phones, as well as other utilities, in calculating its poverty line. It also includes basic housing, food and clothing costs.

It then compares that amount to a family's after-tax income, plus the value of any government benefits such as food stamps. Then, it subtracts medical costs. Sandra Killett checks her records to see how much is taken from her paycheck for premiums.

Ms. KILLETT: Here it is: 72.11 for dental and 190.32 for health.

FESSLER: Almost $7,000 a year in addition to other out-of-pocket health costs.

Killett doesn't pay to commute — she walks to work — but commuting and other work-related costs are also taken into account in New York's poverty measure.

Which makes a lot of sense to Toni Santiago, a single mother of three.

Ms. TONI SANTIAGO: This is exactly what Friday traffic is like.

FESSLER: Santiago drives between her Manhattan job and her Brooklyn home. Right now she's stuck in a backup on the FDR Drive. The commute takes a slice out of her paycheck.

Ms. SANTIAGO: If I just go straight to work and straight home, I spend about $60 a week. So it's two and a quarter, round it up to, like, $250 a month in gas alone.

FESSLER: She drives because her children get free day care right near her job. She used to pay more than $150 a week.

Child care is another expense New York looks at in determining poverty. Santiago's $36,000 salary puts her well above the federal poverty line -$22,000 for a family of four. Still, she just filed for bankruptcy, so she doesn't understand why she isn't considered poor.

(Soundbite of children playing)

FESSLER: Someone on the roof of Santiago's building in Brooklyn is throwing water balloons at the children playing below in a hot summer day. Inside, the elevator smells faintly of urine. Santiago and her children, ages 7, 10 and 16, share a two-bedroom apartment.

(Soundbite of banging)

FESSLER: The rooms here are dark and sparsely furnished, but paying just $800 a month rent helps Santiago to make ends meet.

Ms. SANTIAGO: I consider myself to be poor, because once I pay rent, then I come home, I have to pay bills. I mean, I don't have, like, the little luxury amenities, as far as a washer-dryer. Even though it sounds minor, it all adds up.

Undersecretary REBECCA BLANK (Department of Commerce, Economic Affairs): It's not a measure that tells you nothing but it answers only a limited set of questions.

FESSLER: Rebecca Blank is undersecretary for economic affairs at the Commerce Department, which produces the federal poverty rate. She says it shows how job-related income fluctuates — important in recession.

Ms. BLANK: What this won't show you, which is quite important, is the extent to which federal programs might buffer the loss of cash income. So, some people who lose their job are going to get more food-stamps income, some of them are going to be able to claim more earned income tax credit income.

FESSLER: She says her agency is trying to find better ways to analyze how those programs affect poverty, but Blank doesn't expect the official measure to go away any time soon. It's used to determine eligibility for programs, such as Medicaid. And changing it is not only complicated, but political.

There are bound to be winners and losers. New York's alternative, for example, produced a lower poverty rate for single-parent families with children, and a higher rate for the elderly, who tend to have high medical expenses.

Mr. NICHOLAS EBERSTADT (Researcher, American Enterprise Institute): There's a big constituency, now, for inertia on this thing.

FESSLER: Nicholas Eberstadt is a researcher at the American Enterprise Institute. He says everyone wants to know how changing the formula affects them. As a result, most of the proposals to update the measure, at least initially, would not affect eligibility for programs, but would be used instead — as in New York — to help shape policy.

Eberstadt thinks something needs to be done soon.

Mr. EBERSTADT: I'm very worried that our existing poverty rate is a broken compass, and it's just going to misguide us — and now, of all times, while we're in the middle of a big global economic crisis. We need to have good instrumentation to inform us about who's in need.

FESSLER: Sandra Killett of Harlem couldn't agree more.

Ms. KILLETT: I'm so confused about what's poor and what's not poor. You know, and I have to keep going back and saying, if you knew your basics were covered, maybe I wouldn't consider myself to be poor.

FESSLER: But she knows for her and many others they're not covered — no matter what the official numbers say.

Pam Fessler, NPR News.

(Soundbite of music)

INSKEEP: This is NPR News. Transcript provided by NPR, Copyright National Public Radio.

Source: NPR

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