New formula shows more live in poverty

Associated Press / October 21, 2009

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WASHINGTON - The level of poverty in America is worse than first believed.

A revised formula for calculating medical costs and geographic variations shows that about 47.4 million Americans last year lived in poverty, 7 million more than the government’s official figure.

The disparity occurs because of differing formulas the Census Bureau and the National Academy of Sciences use for calculating the poverty rate. The NAS formula shows the poverty rate to be at 15.8 percent, or nearly 1 in 6 Americans, according to calculations released this week. That is higher than the 13.2 percent, or 39.8 million, figure made available recently under the original government formula.

That measure, created in 1955, does not factor rising medical care, transportation, child care, or geographical variations in living costs. Nor does it consider non-cash government aid in calculating income. As a result, official figures released last month by Census could have overlooked millions of poor people, many 65 and older.

According to the revised formula:

■ About 18.7 percent of Americans 65 and older, or nearly 7.1 million, are in poverty compared with 9.7 percent, or 3.7 million, under the traditional measure. That is due to out-of-pocket expenses from rising Medicare premiums, deductibles, and a coverage gap in the prescription drug benefit.

■ About 14.3 percent of people 18 to 64, or 27 million, are in poverty, compared with 11.7 percent under the traditional measure. Many are low-income, working people with transportation and child-care costs.

■ Child poverty is lower, at about 17.9 percent, or roughly 13.3 million, compared with 19 percent under the traditional measure. That’s because single mothers and their children disproportionately receive non-cash aid such as food stamps.

■ Poverty rates were higher for non-Hispanic whites (11 percent), Asians (17 percent), and Hispanics (29 percent) when compared with the traditional measure. For blacks, poverty remained flat at 24.7 percent, due to non-cash aid.

■ The Northeast and West saw bigger jumps in poverty, due largely to cities with high costs of living such as New York, Boston, Los Angeles, and San Francisco.

The Census Bureau said it expedited release of the alternative numbers for this month because of the interest expressed by lawmakers and the Obama administration in seeing a fuller range.

Legislation pending in Congress would mandate a switch to the revised formula, although the White House could choose to act on its own.