APPENDIX

RECOUNTING THE POOR-A FIVE-YEAR REVIEW1

By Mollie Orshansky 2

Reprinted from the Social Security Bulletin, April 1966, U.S. Department of Health, Education, and Welfare, Social Security Administration

In 1965 the Social Security Administration developed two criteria of poverty to assay the relative economic position of different types of households in the United States. The derivation of these criteria and the characteristics of the population they defined as poor in terms of 1963 income have been reported in the Social Security Bulletin.3

The present article reviews the trend from 1959 to 1964 in the num bers identified by these criteria and offers some detail about the poverty roster for 1964. Because the lower of these criteria is being used as the current working definition of poverty, the somewhat less stringent measure has now been designated as the "near poor" level. Persons rated poor or near poor by these measures can be said to be in the "low-income" category. The level of living represented by the low-income threshold is still substantially below the "modest but adequate" level described by the city worker's family budget developed and priced by the Bureau of Labor Statistics. Further data and discussion of the characteristics of the poor and the near poor will appear in subsequent issues of the Bulletin.

By 1964, an extended period of continued economic expansion had brought the income of American households to new highs. Families now had a median money income of $125 a week compared with $104 in 1959. Even after allowing for rise in prices, the Nation's families, though on the average no larger, had about $8 to spend in 1964 for every $7 available to them 5 years before. Individuals living alone rather than as part of a family unit did as a group even better. Their median income in 1964 was about $38 a week, about one-sixth higher than it was in 1959 after discounting for higher prices.

But the general satisfaction at this impressive record was tempered by realization that there were still many among us living far below acceptable standards. If one could point with pride, there was yet much to view with alarm.

Poverty that never was a random affliction by 1964 had become even more selective, and some originally highly vulnerable were now even more so. The ranks of the poor were crowded with those who through age, disability, or other handicaps could not find or hold a job. But many households were counted poor even when the worker at the head had not been unemployed.

THE OVERTONES OF POVERTY

Of the 60 million households in March 1965-counting as a separate unit every family group and every person living alone or with nonrelatives only-12 million or 1 out of every 5 had incomes in 1964 so low as to be considered poor by the Social Security Administration's basic poverty index. An additional 41⁄2 million units above this poverty line nevertheless had incomes low enough to be border

1 Submitted by Dr. Harold L. Sheppard. See p. 39.

Office of Research and Statistics. The data were compiled with the assistance of Marcella Swenson.

Mollie Orshansky, "Counting the Poor: Another Look at the Poverty Profile," Social Security Bulletin, January 1965, and "Who's Who Among the Poor: A Demographic View of Poverty," Social Security Bulletin, July 1965.

ing on dire poverty if not already in it. There were thus in the midst of plenty a minimum of 34 million Americans and possibly as many as 50 million who lived with privation as their daily portion. Included in this group were from 21 percent to 31 percent of the Nation's children and from 31 percent to 43 percent of our aged.

These measures of poverty and low income are based on the amounts needed by families of different size and composition to purchase nutritionally adequate diets at minimum cost when no more than a third of the family income is used for food. The lower of the two measures, now generally adopted as the poverty level, is based on the restricted variety of foods suggested in the Department of Agriculture economy food plan for emergency use or when funds are very low. The near-poor level averages about one-third higher in dollar cost. The low-cost food plan from which it is derived has long been used by public and private welfare agencies as a benchmark in developing standards of need.

As a concept, the overall term "low income" may be even less precise than the designation "poor" in connoting a particular level of living. But perhaps no phrase can do this as well as the numbers, which suggest the wide gap between the group identified and those above the threshold. The designation "minimum adequate" might seem more descriptive but is avoided because of the potential confusion with the BLS "modest but adequate" city worker's family budget, which is 50 percent higher than the SSA low-income level.

For many of the poor it was the inability of the family breadwinner to find or keep a job that caused their plight. But 22 million households, including 6 million children, were on the poverty roll even though the family head worked steadily at a full-time job throughout the year.

To be sure, there has been and continues to be improvement: Five years earlier, with a total population less by some 13 million, the number judged poor by the same poverty index (allowing only for differences in price) was almost 5 mil. lion greater. On the other hand, the number with incomes above the poverty index yet below the low-income level-still a far from generous measureremained almost unchanged. And no upward adjustment was made in either of the measures to take account of the higher standard of living that a rising real income makes possible for the majority. The Nation's poor then are now fewer in number but the difference between what they have and what the rest of us enjoy is greater. Today's poor, as we count them, are accordingly farther away from the mainstream of American good living than those in the poverty inventory 5 years ago.

Even by the stringent definition of poverty, the record of progress is not equally encouraging for all. The nonwhite population, though, along with the majority now in better straits, are barely holding their own-they are surely not catching up: Today no less than in 1959 they experience poverty at a rate more than 3 times that of their white fellow Americans. Indeed for nonwhite youngsters in large families the prospects of a childhood free of poverty are dimmer than they used to be.

The financial fate of the aged who live alone is better than once it was, but it still spells poverty for the majority. Compared with 1959, when aged unrelated individuals accounted for every fifth household on the poverty roster, 1 out of 4 households judged poor in 1964 was that of an aged person-usually a womanliving alone. This shift did not signify that as a group such persons now had less income than formerly but rather that more of them were seizing the opportunity to live alone.

Although the chances that a household headed by a woman will be poor are now less than they used to be, the improvement has not been so marked as for units headed by a man. Moreover, the proportion of families with children but without a father in the home has been growing. Thus the persons in poor households with a woman at the head numbered 51⁄2 million in 1964, about the same total as in 1959; but though such households accounted for 40 percent of those labeled poor in 1959, the proportion had risen to 46 percent by 1964.

The farm population continues as another persistent pocket of poverty, and the number of children and other members of large families living in poverty was even greater in 1964 than it had been earlier.

In aggregate dollar terms, the amount required to close the poverty gap that is, the estimated difference between the actual income of the poor and the income required-was $11.7 billion in 1964 or about $2 billion less in 1964 than in 1959. But the improvement reflected chiefly the fact that there were now fewer poor than before, not that those in poverty were any less needy than the poor of earlier years.

One exception was the aged, for whom the dollar gap of those in poverty did tend to be smaller than in 1959. Persons aged 65 or older as a group derive a sizable share of their income from public programs rather than earnings. The expanding program of social security with higher benefits has helped some move out of poverty and others not quite so fortunate are nevertheless rendered less poor.

For many of the younger population depending for their livelihood primarily on their own employment or that of other family members, the difficulties of the large or broken family, the problems of unemployment or employment at low pay, the inhibiting effect on earning power of inadequate education, and the special disadvantage of the Negro continued to consign them to poverty status. For some situations corrective programs were only getting under way; for others, none had yet been devised.

TRENDS IN POVERTY, 1959–64

As the official War on Poverty gains momentum, measuring the effectiveness of the various weapons becomes important. One phase involves setting the target for action by determining the extent of poverty today among the various population groups. Another aspect will be estimating how much improvement special programs add to what might take place anyway. For this purpose it is necessary to see what has happened in the past. The relevant income data for such analysis are available in sufficient detail only as far back as 1959. Choosing the Criterion

Drawing the poverty line is not yet a task in which it is possible to achieve consensus, particularly when the line is above the level of mere subsistence, as it is in the United States. The difficulties are increased when the definition is to be used to measure progress over a span of time. Statistical nicety will be better served if the criterion selected remains invariant. The realities of everyday living suggest it cannot be at least not for very long. Though the change in consumption patterns from any one year to the next might be minuscule, over the long run the upgrading that goes with the developing United States economy will be too great to be ignored. Research in consumer economics is not yet at a stage precise enough to specify just how long the long run is.

For the present analysis of trends in poverty during the period 1959-64, the poverty thresholds were adjusted only to take account of price change in the per capita cost of the food plans that are their core. The measure of poverty used is defined by the SSA variable income criterion, taking into account family size, composition, and farm-non-farm residence, and the proportions of income required to purchase a minimum adequate diet. Indexes have been computed at two standards, one for poverty and one for low-income status requiring approximately a third more in funds. The poverty level index has been adopted by the Council of Economic Advisers and the Office of Economic Opportunity as a rough guide pending further research. Under this scale, fourperson nonfarm families in 1964 as a group are defined as poor if their money income for the year is less than $3,130 and in low-income status if they have less than $4,075. For farm families the poverty line is 70 percent lower.

The poverty index priced at the level for 1964 implied an average expenditure for food of 70 cents a day per person-2.2 percent higher than in 1959. The low-cost index in 1964 implied about 90 cents a day for food outlay per person or 5.3 percent higher than the earlier figure.

The weighted averages of the poverty and low-income thresholds in 1960 and in 1964 for different types of families are shown in table 1:

3 members..

4 members.

5 members..

6 members..

7 or more members.

1 member, total..

2 members, total.

3 members..

4 members.

Between 1959 and 1964 both the income received by consumers and the prices of goods they bought continued to climb, but the income went up faster. Inevitably then the poverty thresholds, adjusted only to the extent of price change, were farther below the general levels of income at the end of the period than at the beginning. The median income of four-person families in 1964, was $7,490, nearly 21⁄2 times the poverty nonfarm threshold of $3,130. In 1959, by contrast, the median income of $6,070 for four-person families was just twice the poverty index criterion.

Accordingly, the poverty line for a nonfarm family of four, which in 1959 was half the median income for all families this size, by 1964 was 58 percent less than what the average family had in the way of income. Many of the poor, of course, had incomes considerably below the poverty threshold. Because prices and standards of living tend to move with prevailing income, families in poverty in 1964 could thus find themselves more readily outbid and outspent than families labeled poor in 1959. To this extent comparing the poor in 1964 with those in 1959 may overstate the reduction in their number and understate the degree of deprivation.

Measures of Change

Really to know how well we do in combating poverty would imply knowing about changes in the content of living and the increased opportunities for escaping poverty made possible for particular kinds of families. The only indicator currently available as a gauge, however, is the size of the poverty roster. There are other difficulties in evaluating progress in the fight against poverty simply by looking at numbers. As economic and social conditions change, family living arrangements change also. With a little more income, or better prospects for earnings, some who once shared the home of another may be encouraged to take up housekeeping on their own-electing privacy even at the risk of poverty. Persons may be counted poor as members of units thus formed who previously were considered members of the nonpoor families whose households (and income) they shared. Are they indeed poorer now that they are on their own than they were then, or do we need a better way to identify those with financial resources too little for adequate self-support?

The fact that fewer family groups, particularly those with young children, now live as a subfamily in a relative's home typifies the changes that are difficult to adjust for in counting the poor. One out of two parent-child groups living as a subfamily in 1964 had insufficient income to meet the poverty standard on their own. The majority of these were among our hidden poor-that is, they were living with a family above the poverty line. In 1959, 3 out of 5 parentchild subfamilies had too little income to meet the poverty level criterion. But what may be equally significant is that the total number of subfamilies decreased during the period as the number of families increased.

In 1959, among every 1,000 families with any young children in the home there were included 40 parent-child groups living as relatives of the head or his immediate family. By 1964, such parent-child families numbered 33 per 1,000 of all families with children. Fewer young families were thus obliged to compensate for their own inadequate income by sharing with a relative, but, as with the aged, it is not possible to say for how many the new status added a poor family to the roster in place of a subfamily whose poverty was not registered before.

The Poverty Tally

For the 1959-64 period as a whole, the incidence of poverty measured by the poverty index declined from 22 percent to 18 percent of the population, the equivalent of six-tenths of a percentage point a year. From 1959 to 1962, a period which included a recession, the poverty tally declined by an average of 633,000 persons a year. During the subsequent 2 years of expansion the average decrease was 1,450,000 a year. The temporary reverse in 1960 reflects in part that this was the trough of the depression, but it must be remembered that the statistics are derived from small population samples. Changes from one year to the next thus can reflect some sampling variability in the basic data as well as a real difference in the economic pulse.

Annual Report of the Council of Economic Advisors, January 1966. page 112.