FOR IMMEDIATE RELEASE
July 13, 2008
NEW YORK CITY MAYOR BLOOMBERG ANNOUNCES NEW ALTERNATIVE TO FEDERAL POVERTY MEASURE
First Government Ever to Reformulate Faulty 40-Year Old Federal Poverty Measure
New York City to Share New Model With Other Cities Throughout the United States
Mayor Michael R. Bloomberg today announced a new alternative to the Federal poverty measures developed over the past year by the City’s Center for Economic Opportunity (CEO). New York City is the first local government in the nation to reformulate the 40-year old broken poverty measure, which is based primarily on food expenditures and has not materially changed since it was first adopted in 1969. The new poverty measure factors in food, clothing, shelter and utilities expenditures; counts tax credits and benefits - such as Food Stamps and Section 8 housing subsidies - and adjusts for differing geographic cost factors in housing. The Mayor also announced that CEO will host a series of workshops to provide technical assistance to other municipalities throughout the nation that are interested in replicating this new methodology. The Mayor made the announcement during a speech at the 99th Annual NAACP Convention in Cincinnati, Ohio.
“If we are serious about fighting poverty, we also have to start getting serious about accurately measuring poverty,” said Mayor Bloomberg. “Since the mid-60’s the economy has vastly changed. So has society and so have government benefits but the poverty formula hasn’t adjusted in response. We can’t devise effective strategies for tackling poverty until we understand its full dimensions.”
“For years there has been widespread frustration that the current measure does not reflect the true state of poverty in our nation,” said Deputy Mayor for Health and Human Services Linda Gibbs. “This new measure will allow us to better understand the impact of current social policies, see the real benefit of government assistance programs and make smarter, data-driven policy decisions going forward.”
“We are clearly using an outdated standard to measure the level of poverty in our nation. I commend Mayor Bloomberg for looking at ways to update this measure,” said Representative Charlie Rangel (D-NY), Chairman, House Committee on Ways and Means. “His proposal is a useful start. I hope to look at ways to update the measure at federal level.”
“Like Mayor Bloomberg, I believe our current poverty measure needs to be updated and improved because it has lost some of its relevance since it was created over 40 years ago,” said Representative Jim McDermott (D-WA), Chairman, Income Security and Family Support Subcommittee. “I commend the Mayor for working on a specific alternative measure of poverty in New York City, which is based on recommendations of the National Academy of Sciences. I intend to hold a Congressional hearing on July 17th looking at a similar proposal I have crafted for a nationwide change in how we measure poverty. This is an important discussion because in the words of the late Senator Daniel Patrick Moynihan, from New York: ‘You can’t solve a problem until you can measure it.’”
“On behalf of the nation’s mayors, I applaud Mayor Michael Bloomberg for his local and national leadership on addressing the issues of poverty and opportunity,” said U.S. Conference of Mayors President Miami Mayor Manny Diaz. “We support his efforts to recreate a national dialogue around redefining poverty in 2008. Mayor Bloomberg has stepped up where Washington has been silent. For forty years, we have been grappling with the complex issue of poverty. A revised definition is critical to break the cycle of endemic poverty so that all our cities’ residents can thrive.”
“Mayor Bloomberg has identified the bottom line of what mayors and working families all across this country are painfully aware,” said Mayor Douglas H. Palmer of Trenton, New Jersey, the Past President of the United States Conference of Mayors. “Our measure of poverty is long outdated, as we know from those who go to work every day, but remain trapped inside the web of poverty. It is a national disgrace when working families are shut out of preschool, child health insurance, homeownership, and the education and training they need to achieve their dreams. What Mayor Bloomberg is saying, and what I am reinforcing today, is that America must finally confront and finally address the issue of poverty, not only because is it the right thing to do but also because the issues related to poverty threaten to destroy our children’s futures and the basic fabric of this society.”
“Mayor Bloomberg’s office is a leader in the search for innovative methods to understand and address poverty in America,” said Los Angeles Mayor Antonio Villaraigosa. “This new poverty measurement clarifies the fact that too many working families face an uphill battle as they struggle to attain the upward economic mobility that is essential to the American Dream. I call on Congress, the presidential candidates and the Census Bureau to take note of this significant advancement and put it to use as an effective tool for making policies and public investments that reflect the economic realities faced by poor families.”
“Mayor Bloomberg is a true champion in the fight against poverty. In order to develop policies and programs that will increase economic opportunity, we must have accurate information about the nature of poverty in our cities,” said Cincinnati Mayor Mark Mallory. “I am looking forward to continuing to work with Mayor Bloomberg to advance the dialogue and bring about real change that will improve people’s lives.”
“I commend Mayor Bloomberg for leading this effort to establish a more up- to-date poverty measure. It will help make a significant impact in our fight to end poverty,” said Newark Mayor Cory A. Booker.
“The nation's poverty measure has been flawed for many years, but no policymaker has taken action. Now New York has taken a bold and sophisticated step. Washington should follow,” said Brookings Institution Senior Fellow Ron Haskins.
“The federal poverty measure very much needs to be revised and modernized, and this is an important step forward for efforts to do so. New York City’s approach has been careful and thoughtful. States and other cities will be able to learn a lot from this, and it will help advance the national debate about developing a new, better measure,” said Director of the Poverty and Prosperity Program, Center for American Progress Director Mark Greenberg.
“The Center for Economic Opportunity has launched more than 40 anti-poverty programs, policy proposals and research projects which represent both nationwide best practices and new, cutting-edge ideas that can make an impact where traditional methods have failed,” said CEO Executive Director Veronica White. “We will continue to share our methodology and lessons learned with others worldwide.”
The New York City poverty rate using the CEO measure is different than the official rate, 23.0 percent as opposed to 18.9 percent (by excluding people in group quarters, the U.S. Census Bureau’s official rate of 19.2 percent is brought down to 18.9 percent). The poverty line - or threshold - for a family of two adults and two children under the current measure is $20,444 and increases to $26,138 under the new CEO measure. The CEO measure will not immediately change program funding or eligibility for New York City social service programs. Instead, it will give the City a more useful tool to develop poverty-related policy moving forward and allow City agencies to base future plans on accurate and timely data. The new CEO poverty measure is based on recommendations developed by the National Academy of Sciences’ (NAS) Panel on Poverty and Family Assistance. The work was conducted by staff of the CEO, under the leadership of Dr. Mark Levitan, Director of Poverty Research.
Flaws Within the Federal Poverty Measure
The Census Bureau’s official measure of poverty compares a family’s total pre-tax cash income against a set of thresholds – the poverty line – that vary by family size and composition. The income thresholds were developed in the mid-1960s based on the cost of the U.S. Department of Agriculture’s “Economy Food Plan,” a diet for temporary or emergency use when funds are low. Because the data available at that time indicated that families typically spent a third of their income on food, the thresholds were set at three times the cost of the food plan. The cornerstone of the official poverty threshold – food – has gone from one-third to one-eighth of household spending over the past 40 years. The threshold is also uniform across the nation and does not account for major differences in living costs which are driven largely by housing costs.
To calculate income, the official measure uses pre-tax cash income which includes cash received from any source including earnings, investments, pensions, insurance as well as cash assistance. Pre-tax cash income, however, is an incomplete measure of the resources available to a family to attain an acceptable standard of living. Government uses refundable tax credits (such as the Earned Income Tax Credit) to supplement family income. Additionally, the official measure does not account for the effect that “in-kind” benefit programs – for example, Food Stamps or Section 8 housing vouchers – have on living standards. Consequently, much of what government does to support low-income families is undetected by the official measure.
CEO Methodology for a New Measure
CEO has based its alternative poverty measure on a set of recommendations that, at the request of Congress, was developed in 1995 by the National Academy of Sciences’ (NAS) Panel on Poverty and Family Assistance. While the federal government has yet to adopt the recommendations, they have received extensive scrutiny by government researchers and university-based scholars. It is widely regarded as a far superior method of measuring poverty than the official measure. The NAS recommends the poverty thresholds reflect purchases based on food, clothing, shelter and utilities, rather than the costs of just one basic need. They recommend that the threshold be set to equal roughly 80 percent of median family expenditures on this “market basket” of necessities, plus a little bit more for other necessary expenditures. The thresholds would then be updated annually by the change in median expenditures on the items in the threshold. The NAS also suggests that the thresholds be adjusted geographically to reflect differences in the cost of living across the United States, which CEO has done.
Additionally, rather than pre-tax cash income, the NAS panel called for the resource measure to account for the effect of tax liabilities and credits along with the cash value of in-kind benefits such as Food Stamps and housing subsidies. They also recommend that resources be adjusted to reflect necessary expenditures related to work, such as transportation costs and child care. Medical out-of-pocket expenses would be subtracted from income, since what families must spend to maintain their health is not available for purchasing other necessities.
Data Analysis Highlights Under New CEO Measure
CEO uses the Census Bureau’s American Community Survey from 2006 as the primary data source for the new measure. This large sample offers neighborhood-level estimates of poverty and allows for comparisons between demographic groups and other major cities. Under the new CEO measure, there is a decrease in the poverty rate for children living with single parent families from 44.4 percent to 41.6 percent. A smaller proportion of the population is living in extreme poverty (below 50 percent of the CEO poverty threshold). This illustrates that anti-poverty policies targeted towards children and the neediest have a positive impact. A larger proportion of the poor population is: the elderly, Non-Hispanic whites and Asians, foreign born and working families. The new measure also reflects a different spatial distribution of poverty; it is more geographically widespread and less concentrated.
Change in Poverty Rates by Demographic Group
By Gender: For males the rate is 21.0 percent under the CEO measure compared to 16.2 percent under the current measure, a difference of 4.8 percentage points. For females, the rate is 24.8 percent under the CEO measure compared to 19.5 percent under the current measure, a difference of 5.3 percentage points.
By Age Group: The proportion of children who are living below the CEO poverty line is 26.6 percent compared to 27.2 percent under the current measure, a difference of 0.6 percentage points. The proportion of the elderly who are living below the CEO poverty line is 32.0 percent compared to 18.1 percent under the current measure, a difference of 13.9 percentage points.
By Race/Ethnicity: While Hispanics remain the poorest race/ethnic group in the city, with a poverty rate of 29.7 percent under the new CEO measure, Asians now have the second highest poverty rate at 25.9 percent. For African-Americans the rate is 23.9 percent. For white New Yorkers, the rate is 16.3 percent.
Among Children by Presence of a Parent: Under the CEO measure, the poverty rate for children living with only one parent is 2.8 percentage points lower than under the current measure. The CEO poverty rate is 17.2 percent for children living with two parents compared with 41.6 percent for children in single parent families.
Among Working Age Adults, by Work Experience: For New Yorkers with full-time year-round work the poverty rate is 8.5 percent under the CEO measure compared to 3.6 percent under the current measure, a difference of 4.9 percentage points. For those who did not work the rate is 41.3 percent compared to 36.1 percent, a difference of 5.2 percentage points. The difference is most pronounced for those who had some paid employment but did not work steadily at full-time jobs, from 23.2 percent to 15.8 percent, a difference of 7.4 percentage points.
Under the CEO measure there is a change in the poverty rates within the five boroughs of New York City.
Center for Economic Opportunity
The Center for Economic Opportunity (CEO) was established by Mayor Bloomberg in 2006 to identify and implement innovative ways to reduce poverty in New York City. The CEO works with City agencies to design and implement evidence-based initiatives, including strategies and programs, aimed at poverty reduction. The CEO manages an Innovation Fund through which it provides City agencies annual funding to implement such initiatives and will oversee a rigorous evaluation of each to determine which are successful in demonstrating results towards reducing poverty and increasing self-sufficiency among New Yorkers.
Stu Loeser/Dawn Walker (212) 788-2958
Kathleen Carlson (Center for Economic Opportunity)