The Measuring Stick is OUTDATED

Investment Analysis Clubs Macro Economic Trends and Risks
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This week, while trying to understand why the American middle class feels poorer each year despite healthy GDP growth and low unemployment, I came across a sentence buried in a research paper:

“The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.”

The formula was developed by Mollie Orshansky, an economist at the Social Security Administration. In 1963, she observed that families spent roughly one-third of their income on groceries. Since pricing data was hard to come by for many items, e.g. housing, if you could calculate a minimum adequate food budget at the grocery store, you could multiply by three and establish a poverty line.

For 1963, that floor made sense. Housing was relatively cheap. A family could rent a decent apartment or buy a home on a single income, as we’ve discussed. Healthcare was provided by employers and cost relatively little (Blue Cross coverage averaged $10/month).

But everything changed between 1963 and 2024.

Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling. Transportation costs rose as cities sprawled and public transit withered under government neglect.

In 2024, food-at-home is no longer 33% of household spending. For most families, it’s 5 to 7 percent.

Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent.

Which means if you measured income inadequacy today the way Orshansky measured it in 1963, the threshold for a family of four wouldn’t be $31,200.

It would be somewhere between $130,000 and $150,000.

The official poverty line for a family of four in 2024 is $31,200. The median household income is roughly $80,000. We have been told, implicitly, that a family earning $80,000 is doing fine—safely above poverty, solidly middle class, perhaps comfortable.

But if Orshansky’s crisis threshold were calculated today using her own methodology, that $80,000 family would be living in deep poverty.

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Krugman Interviews Kedrosky on AI
More About Bad Data
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Didn’t we just have this thread/discussion a few days ago?

DB2

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Perhaps.
It might be helpful if we really knew how many people were living in poverty. And what the government was doing to address the problem.

Using outdated measurement we know the poverty level is “10.6 percent” [2024].

Just how much more would the poverty rate be if a more accurate measure was utilized? 10%?, 25%, 50% or more?

Is this the type of society we wish to live in?

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It would be useful if there was any desire on the part of the government to address poverty as a problem.

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There’s the same problem with the unemployment rate. If you work 1 hour per week, your employed, even though you can’t live on that.

It’s estimated thate 44% of full time workers aren’t earning enough to live in their city.

That may be the solution to AI – just cut the work week to 15 minutes at $25/hour and say we have “full employment”

intercst

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It has taken 30 years of both political parties ignoring first the working class as manufacturing folks jobs were automated and off shored and now the middle under stress to make “Affordability” an issue.
The current resident of the Oval Office has dismissed concerns about affordability.
I expect the issue will arise in the 2026 Congressional election. But to actually to do something about means wrested control of Congress from lobbyists and vested interests. Ain’t likely to happen. Well I’m 74 and won’t have to put up with this krap for more than another decade.

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In other words-poverty. Now that is a nation to be proud of-ain’t it.

The U.S. Census Bureau uses two measurements of poverty.): the Official Poverty Measure (OPM) and that SPM. The OPM, it’s widely agreed, is shamefully feeble and outdated, while the Supplemental Poverty Measure casts a wider net, catching more of the nuances of impoverishment. Still, even that has its limitations, missing millions of people who flutter precariously just above the official threshold of poverty, constantly at risk of falling below it.

That said, the SPM remains a helpful barometer for this country’s attempts to address poverty. Shailly Gupta-Barnes, my colleague at the Kairos Center and a poverty policy expert, observes that, because the “SPM accounts for family income after taxes and transfers…, it shows the antipoverty effects of some of the largest federal support programs.” Considering that, it’s neither an accident, nor a fluke of the market that the SPM just skyrocketed at an historic rate.

When the newest census figures were released in September 2023, Gupta-Barnes explained, “41% of Americans were poor or low-income in 2022, up significantly since 2021, mainly because of the failure to extend and expand tested anti-poverty programs including the child tax credit, stimulus checks, Medicaid expansion and more.”

As it happens, tens of millions of people who live in regular economic peril are being made invisible by our very tools for measuring poverty.

In 2025, the official threshold for poverty was $15,650 per year for one person

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