A Better Way to Think About Poverty?

One theme running through a recent issue of Echoes Magazine: what does it look like when families experience financial hardship? Often, that gets called “poverty.” I wrote a tiny piece about it called "A Better Way to Think About Poverty."

But what is poverty?

That question led me on down an interesting rabbit trail to learn about the 1960s War on Poverty. At that time, 19.5% of Americans lived in poverty according to the official poverty rate. In 2022, the Census Bureau said 11.5% of Americans were still living in poverty. But what do we mean when we say a family is living in poverty? For instance, 13.7% of Texans still experience food insecurity. (That is 32% higher than the national average according to Bread for the World.) And 43% can't afford the minimum cost of living. What is the difference between malnutrition, hunger, food insecurity, cost of living ... and poverty?

Meet Mollie Orshansky. She's going to help us sort it out, just like she helped LBJ.

In 1963, she developed the official poverty measure (OPM) for the Social Security Administration. In the 1950s she found that families were spending about 1/3 of their take home pay on food. She then worked with the USDA to determine the cost of a subsistence diet. Think peanut butter and bread. The USDA still calculates a "thrifty food plan" which still figures into the government's official poverty measure.

Over the years, the government has updated its poverty measure some, though less than you might think. Also, there are challenges and issues with the measure even beyond its simplicity. For instance, the OPM doesn't include some forms of governmental aid that are specifically designed to offset poverty. Food assistance, housing assistance, and Medicaid are programs that may lift some people out of poverty, but if these programs work, their effectiveness is not used to reduce the overall poverty rate.

Most importantly, the OPM is really simple. Families don't spend 1/3 of their income on food anymore. The rate of inflation for housing, higher education, health care, and childcare have vastly outpaced the rate of inflation for food. (With two kids in college, I can vouch for the astronomical costs of higher education right now.)

That brings us to ALICE.

It stands for Asset-Limited, Income-Constrained, Employed. In a few weeks, I have a meeting with some folks from United Way to make sure we are aligned in our messaging about ALICE. Here's how I currently understand it:

Asset-Limited means people don't have a lot of assets. They rent. They may share a car or use public transportation. They don't have retirement accounts. They don't have much in savings. Or they may have some of those things, but they also have a lot of debt.

Income-Constrained means people don't have jobs that pay well. They may be working at minimum wage, which is still $7.25 per hour in Texas. They may be working more than one minimum wage job, in fact.

Employed means people are working. They just don't make enough money to pay their bills. They can't thrive.

ALICE measures how much it costs to live in a specific place. United Way created the measurement in New Jersey in 2008, and Texas uses it now too. ALICE in New Jersey is a different measurement than ALICE in Texas because the cost of living is different between these two places. ALICE measures the actual minimum costs a family faces each month for housing, childcare, food, transportation, health care, and technology.

Because let's face it, you need a phone, and you really need a computer too.

Bottomline: 14% of Texans live in poverty. An additional 29% don't make enough money to pay for what their family needs. That's 43% of Texans unable to pay their bills.

That means every month, 43% of Texans do not make enough money to pay their bills. This is not what the American Dream is supposed to look like.

Read "A Better Way to Think About Poverty"