A new yardstick to measure poverty

People wait in line to receive free milk from the Milk from the Heart program which makes weekly deliveries in New York City.

David Brancaccio: Our struggle with money and debt. This hour, we'll come at that challenge from a variety of angles. But let's start with the poorest Americans.

Officially, the poverty line for a single parent with two kids is a little under $18,000 -- whether you live in an expensive city or in a cheaper rural area, regardless of your health or whether or not you get food stamps. For the past 50 years, none of that counted when figuring out who is poor. But the government is about to make some changes. Until now, the poverty line was drawn by taking the cost of basic food needs and multiplying times three.

Tim Smeeding: And we've kept it that way since 1960 and increased it only for prices.

Brancaccio: Tim Smeeding is the director of the Institute for Research on Poverty. He says back then, food was a third of an American family's expenses.

Smeeding: Now if you come to today, food is one-seventh of the annual budget of most people. So it's time for something new.

Next week, the Census releases new numbers that take a different look at poverty. They'll consider the whole picture: A family's needs as well as their resources. So the Census will subtract the cost of child care and commuting, but it will also add the benefits a family receives, like food stamps and tax credits.

Take Denise Chapman for example, whose income hovers just above the old poverty line. She works full-time for a Rescue Mission in Trenton, N.J., driving former addicts around town.

Denise Chapman: I'm going to this Montgomery, to get to Perry, Perry to get to Carroll Street and we'll be back at the Mission.

On this Monday morning, she took three people to the hospital, two people to the dentist, a man to welfare and then picked up some donations before heading back. She uses the Mission's van, which is good, because her own Chevy Venture has been broken down for a month. From the sounds of it, she'll need a new transmission, which could cost hundreds.

Chapman: Yeah, that's what my dad said. But I said if it is, then I would just junk it. Because I can't afford to put all this money in a van and then something else go wrong with it.

Brancaccio: You don't have hundreds lying around for a transmission?

Chapman: No, I don't. I don't have no hundreds, actually not, let alone lying around.

Chapman makes less than $12 an hour, so hundreds of dollars is a week's paycheck. Her job pays for her health insurance, but that does not cover co-pays.

Chapman: I have diabetes, I got high blood pressure, my cholesterol. I can't afford that medicine.

So that's where the state steps in to pick up the tab for the co-pays.

Chapman: So I thank God that I get the New Jersey Family Care.

She benefits from New Jersey Family Care because she has two kids and is considered by the state a low-income parent. But many poor Americans are stuck with those costs, and according to Tim Smeeding, the poverty expert, that makes a huge dent in people's personal finances.

Smeeding: There was a time in America when you didn't worry so much about out-of-pocket health care costs, and that was about 1960. Back then, you know, you spent 5 or 6 percent of your income on it and that took care of it and it was a different world.

Under the old system. Chapman's income puts her 30 percent above the poverty line. But under the new Census guidelines she might be classified as "poor." Sure, those medical co-pay benefits will make Denise Chapman look richer on paper. But keep in mind: She lives in one of the most expensive states in the country. Life in New Jersey means she's actually much poorer. Again, on paper. And, let's face it, in the real world, she is struggling.

Chapman talking to passenger: What you getting from the store, mama?

Denise Chapman is standing outside her new apartment. The rent is $700, about half of what she takes home each month. Her kitchen appliances are decent but the house next door is abandoned, and Denise says drug users go in and out.

Chapman: I watch 'em. Everyday. I don't care if they see me or not, I still watch them, 'cause I got to be careful for me and my kids.

But her main problem with the neighborhood isn't safety; it's the schools. She'd like to move to a better school district for the sake of her straight-A daughter. But right now, that's not a choice she can afford, even if, officially, she's not quite poor.

Mary Gay Abbot Young is Chapman's boss at the Rescue Mission, and she wonders if being above the poverty line is really good enough anyway.

Mary Gay Abbot Young: If you live here, where I wouldn't want to live; if you eat at this place, where I wouldn't want to eat; and if you send your children to this school that my kids would never go to, is that really the standard we want to hold?

But in Denise Chapman's view, poverty is relative. She says just look at her clients at the Mission.

Chapman: I don't consider myself as poor-poor. But I know that I am. But I look at their situation and say, "Oh no. I'm doing a little bit better than them." And that's how I get by life, every day.

In 2010, 47 million Americans were living in poverty, the highest number in more than half a century. When these new additions and subtractions from the Census Bureau are mixed into the poverty figures next week, the number of officially poor households in America will likely rise. Policy makers will use the new system to better evaluate and target programs to try to do a better job lifting people up the economic ladder.

About the author

David Brancaccio is the host of Marketplace Morning Report. Follow David on Twitter @DavidBrancaccio

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