By Crystal D. Swann and David Gorgani, USCM Intern
July 28, 2008

On July 13, New York City Mayor Michael Bloomberg unveiled a new poverty formula designed to accurately measure poverty in New York City. The new formula developed by New York City’s Center for Economic Opportunity (CEO) and based on recommendations made in 1995 by the National Academy of Sciences (NAS) takes into account expenditures (such as housing, child care, clothing and others) and benefits (such as food stamps, housing assistance, tax credits) unaccounted for in the present federal poverty calculations.

“Since the mid-60’s the economy has vastly changed…but the poverty formula hasn’t adjusted in response,” said Bloomberg. “We can’t devise effective strategies for tackling poverty until we understand its full dimensions.”

The current measure is predicated on the notion that food expenses make up one third of the average household’s expenses, while recent studies show that food expenses now only make up about one eighth of household expenses. By considering housing costs, the new measure also accounts for differences in the cost of living in different areas, which the current nation-wide poverty threshold ignores. This difference is especially applicable to residents of America’s cities whose income often falls above the poverty line, but who struggle due to housing costs that greatly exceed the national average.

U.S. Conference of Mayors President Miami Mayor Manny Diaz applauded Bloomberg for his announcement, stating, “A revised definition is critical to break the cycle of endemic poverty so that all our cities’ residents can thrive.” While this new measure will not affect federal funding the city receives or the number of people receiving aid, it is a critical first step to organizing and measuring the effectiveness of local anti-poverty programs in the city.

To put this into perspective, the nation’s official poverty measure was developed in 1968 by Mollie Oshansky in the Social Security Administration shortly after President Lyndon Johnson declared a “War on Poverty.” The poverty line consisted of three multiplied by the subsistence food budget (the amount needed for “temporary or emergency use when funds are low”) as determined by a 1955 Household Consumption Survey. The survey found that a family of three spent one-third of their pre-tax budget on food.

On July 17, the House Ways and Means Subcommittee on Income Security and Family Support convened to hear expert testimony on draft legislation to redefine the poverty measure in the United States. Chairman Jim McDermott (WA) announced his support of a revised poverty measure to a panel that included a representative from CEO, stating, “We have waited nearly half a century for a new poverty measure – we should wait no longer.” McDermott has issued draft legislation entitled “The Measuring American Poverty Act of 2008,” which seeks “to provide for an improved and updated method for measuring the extent to which families in the United States have sufficient income to allow a minimal, socially acceptable level of consumption that meets their basic physical needs, including food, shelter (including utilities), clothing, and other necessary items, in order to better assess the effects of certain public assistance programs in reducing the prevalence and depth of poverty, to accurately gauge the level of economic deprivation, and to ensure appropriate targeting of public resources.”

These remarks echoed Diaz’s assertion that “…poverty is a national problem that demands national investment.” Bloomberg’s announcement and the subcommittee hearing come on the eve of The U.S. Conference of Mayors’ Action Forum on Poverty, to be held in Los Angeles and hosted by Conference Task Force on Poverty, Work and Opportunity Chair Mayor Antonio Villaraigosa.