Measuring Persistent Poverty and Cost of Living for Grant Benefit-Cost-Analysis

While the Federal Poverty Level has historically been the basis for many public programs, the grant world is getting more sophisticated about measurement of cost of living and associated issues like job insecurity, food insecurity, etc. It's now commonly understood that looking at "poverty" alone excludes the 35 million households in the U.S. who are considered the "working poor" or ALICE (Asset Limited, Income Constrained, Employed). The ALICE population has earnings above the poverty level but below the basic cost of living in their communities.

This article is to point you to tools that can support the claims of poverty reduction benefit in your grant. This is helpful for a Benefit Cost Analysis, such as is required for many discretionary grants.

Only one agency that I know of defines poverty and injustice for you - The Department of Transportation's Federal Transit Authority. FTA's Area of Persistent Poverty (AoPP) provides a mapping tool that will determine if a proposed project is in an AoPP or Historically Disadvantaged Community. It is organized by Census tract number.Program advances the goals several executive orders including Advancing Racial Equity and Support for Underserved Communities.

Presumably the FTA tool could be used for other grants.

Cost of Living Comparison - COLI.org

The are many Cost of Living calculators. Most of the ones available through click-bait posts are derivative of census data and other calculators. Listed here are original approaches that use different methodologies.

The Council for Community and Economic Research has a Cost of Living Index (COLI) program that generates new data three times a year using volunteer support. The methodology is based on having a family unit who's purchases and expenses are compared in different communities with "bottom's up" data. The COLI methodology starts with the premise that the average household in the United States is not poor, and the average household increases its spending on necessities as its income rises. That's why there's a fixed set up purchases studied, which rarely changes. The COLI data provides a data set that is distinctly different from Federal data.

The COLI.org tool is intended to compare costs between participating metro areas. If you are making $50,000 in one area, the calculator will tell you what equivalent salary you'd need to live in another city. Obviously it would take more income to have the same standard of living after moving to Manhattan NYC, less to live in Harlington, TX. The COLI.org tool quantifies these amounts. It does not account for state and local taxes.

Full disclosure, I'm one of the volunteers who collects COLI data for New Jersey.

United for ALICE Wage Tool vs MIT Living Wage Tool

United for ALICE, is a program and movement that has grown out of the United Way of Northern NJ. They provide calculators and tools for exploring data on financial hardship by legislative district. Their wage tool leverages Census data as well as grass-roots state level data in partner states. Their website is rich with narrative and statistics.

Researchers at the Massachusetts Institute of Technology (MIT) look at what earnings would need to be for a specified family unit - single, married, married with children, etc. Their data is collected from Bureau of Labor Statistics, U.S. Department of Housing and Urban Development's Fair Market Rents and the National Association of Child Care Resource and Referral Agencies. Their methodology includes state and local taxes.

The assumptions underlying the MIT Living Wage Calculator minimum budget are similar to those in the ALICE studies and the COLI data – that households need to spend an average amount on transportation, housing, insurance, childcare, and other necessities. However, their top down approach to data means that spending data blends rich and poor.

The reason you need a middle-class income to meet the ALICE Household Survival Budget or the MIT Living Wage Calculator budget is that the budget reflects middle class expenditures. As a result, the highest income areas have the highest required Living Wage as computed by MIT. For a family of four, the living wage varies from a low of $64,000/yr in the Midwest and South to $72,000/yr in the North, reflecting the average incomes in those places. That said, the data can be useful in explaining motivation and how the intended outcome can be quantified.

Neither calculator takes into account realities such as, 68% of households with incomes under $25,000/yr receive publicly provided health insurance and pay little or nothing. For households between $25-50,000/yr, 53% receive publicly provided insurance. The ALICE study assumes that health insurance represents 15% of the survival budget, which is unrealistic. Another issue is childcare. Federal data provides information about children to registered day care providers and pay full price. It assumes poor households would use child care up to the federal standard.

Wrap Up

The U.S.is one of the few countries in the world that produces an official poverty rate and data that can be used to evaluate policy. Because errors or biases in federal data have been widely researched and publicized through peer review, sophisticated users can adjust to the known noise in the data.

Flaws in data reported by the nonprofits are not always transparent, and so users will make bad decisions if they assume the information is correct. Instead, use the data as a guide and look to change trends, not exact numbers.

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