Federal Poverty Guideline (US): Meaning, Levels, Measurement & More

The Federal Poverty Guidelines, also known as the Federal Poverty Level (FPL), are a set of income thresholds set by the U.S. Department of Health and Human Services to determine eligibility for certain federal programs. The guidelines are often abbreviated and referred to as just “poverty guidelines.”

The poverty guidelines have their origin in the Social Security Act of 1965, which required the Secretary of Health, Education, and Welfare to develop a definition of poverty for statistical and planning purposes. In 1969, the thresholds were formalized as the “poverty index” and set standards for measuring poverty in the U.S. (https://www.floridajobs.org/community-planning-and-development/community-services/community-services-block-grant-program).

The purpose of the poverty guidelines is to provide a simplified version of the federal poverty thresholds used for administrative purposes. Important federal programs like Medicaid use the guidelines to determine eligibility and calculate benefits. Other programs use them for statistical purposes to estimate the number of Americans living in poverty each year.

Though often used interchangeably with the poverty thresholds, the poverty guidelines differ in some ways. The thresholds are used for statistical purposes, while the guidelines are used for policy and program purposes. The thresholds vary by family size and composition, while the guidelines only vary by family size. The poverty guidelines are a simplified administrative version of the statistical thresholds.

How Federal Poverty Guidelines Are Calculated

The federal poverty guidelines are calculated each year by the U.S. Department of Health and Human Services (HHS). The calculations are based on the poverty thresholds developed by the U.S. Census Bureau.

The poverty thresholds were originally developed in the 1960s by economist Mollie Orshansky. She calculated the minimal cost of a nutritious diet and multiplied it by three to account for other living expenses. This became the basis for determining the poverty thresholds, which are updated each year by the Census Bureau to account for inflation.

To determine the poverty guidelines, HHS takes the Census Bureau poverty thresholds and adjusts them based on the Consumer Price Index (CPI). The guidelines are calculated by taking the prior year’s guidelines and multiplying them by the CPI for the current year.

For example, the 2021 federal poverty guidelines were calculated by taking the 2020 guidelines and multiplying them by the 2020 CPI. The CPI is used as a measure of inflation to ensure the poverty guidelines keep pace with the cost of living.

The poverty guidelines are updated annually in the Federal Register by HHS. They serve as an administrative tool for determining eligibility for certain federal programs.

The methodology for calculating the guidelines has remained essentially unchanged since the 1960s, leading to criticisms that they are outdated and don’t accurately reflect the modern cost of living. There have been proposals to update the calculations, but the historical methodology has been retained.

Criticisms of Federal Poverty Guidelines

The federal poverty guidelines have received criticism over the years for being an outdated and incomplete measure of poverty in America. Some of the main criticisms include:

Don’t Account for Cost of Living Differences: The poverty guidelines are uniform across the 48 contiguous states and do not take into account regional variations in the cost of living. This means the poverty threshold in a high-cost area like New York City is the same as a low-cost rural area, even though $13,000 goes much further in some parts of the country than others. Experts argue this makes the poverty guidelines less accurate.

Outdated Methodology: The formula used to calculate the poverty guidelines was developed in the 1960s and is based on the cost of a minimum food diet multiplied by three. This formula has not been updated since and is considered outdated. Critics argue poverty is about more than just food costs today.

Alternatives Proposed: Various alternatives have been suggested such as basing the guidelines on current spending patterns rather than 1950s food costs, accounting for other costs like housing and childcare, or using relative poverty measures instead of absolute thresholds. There have been calls to overhaul and modernize the methodology used for the federal poverty measure. Experts note the current measure highlights just a fraction of financial hardship.

Federal Poverty Levels by Household Size

The federal poverty guidelines set income thresholds based on household size that determine eligibility for certain federal programs. Here are the 2022 federal poverty levels for households ranging from 1 to 8 people:

  • 1 person: $13,590
  • 2 people: $18,310
  • 3 people: $23,030
  • 4 people: $27,750
  • 5 people: $32,470
  • 6 people: $37,190
  • 7 people: $41,910
  • 8 people: $46,630

For families with more than 8 persons, add $4,720 for each additional person (https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines). The thresholds increase based on household size to account for the additional costs of supporting more people. These guidelines are updated annually by the Department of Health and Human Services to keep pace with inflation.

How Federal Poverty Guidelines Are Used

The federal poverty guidelines serve several key purposes in the United States:

Eligibility for Government Assistance Programs: Many government assistance programs use the federal poverty guidelines to determine eligibility and calculate benefits. This includes programs like Medicaid, CHIP, SNAP, and Head Start. Households must have incomes below certain percentages of the guidelines to qualify.

Research and Statistics: Government agencies use the poverty guidelines for statistical purposes, like estimating the number of Americans in poverty each year. Researchers also utilize the guidelines in studies on poverty and economic mobility.

Policymaking: The federal poverty guidelines help inform public policy decisions on programs and reforms related to poverty. Policymakers consider how potential policies could impact households at different percentages of the poverty guidelines.

The guidelines thus serve as an important benchmark across the public sector in understanding and addressing poverty in America. However, they have also faced criticism for being an incomplete measure of financial hardship.

Poverty Guidelines vs Poverty Thresholds

The federal poverty guidelines, or poverty levels, are different from the poverty thresholds calculated by the Census Bureau. The poverty thresholds represent the minimum income needed for families to cover basic necessities and were developed in the 1960s based on food costs and multiplied by three. They vary by family size and composition. On the other hand, the poverty guidelines used today were derived from the poverty thresholds but simplified for administrative purposes.

The poverty guidelines are a version of the poverty thresholds used for determining financial eligibility in certain federal programs. They are issued each year by the Department of Health and Human Services (HHS). The poverty guidelines only specify income thresholds based on family size, not accounting for different family compositions. In 2023, the poverty guideline for a family of 4 is $27,750 [1]. So while related, the key difference between federal poverty guidelines and Census poverty thresholds is the level of nuance and methodology behind the calculations.

Measuring Poverty Beyond Income

While the Federal Poverty Guidelines focus solely on income levels, many experts argue that poverty is a complex, multidimensional issue that cannot be measured by income alone. There are other important metrics that provide a more comprehensive understanding of poverty, such as food insecurity, access to healthcare, education levels, and more.

According to the UN’s Economic Commission for Latin America and the Caribbean (ECLAC), “Prioritizing equality and redefining poverty is imperative for a new development model” (https://www.cepal.org/en/pressreleases/prioritizing-equality-and-redefining-poverty-imperative-new-development-model). Experts at ECLAC recommend measuring poverty beyond just income levels to also include aspects like access to basic rights and freedoms.

One tool that incorporates a multidimensional approach is the Global Multidimensional Poverty Index (MPI), which measures poverty across three dimensions: education, health, and living standards (https://www.learningfornature.org/en/courses/introduction-to-the-multidimensional-poverty-index/). The MPI provides a more nuanced understanding of poverty that goes beyond income.

Research shows that multidimensional poverty measures are better at targeting interventions to help the poor, as income alone does not capture the full experience of poverty. A multidimensional approach highlights key areas like healthcare access or education levels that can be improved to lift people out of poverty.

Poverty Rate in the United States

The official poverty rate in the United States in 2021 was 11.6%, or 37.9 million people living below the poverty line, according to data from the U.S. Census Bureau (https://www.census.gov/library/publications/2022/demo/p60-278.html). This was 1.2 percentage points higher than the pre-pandemic poverty rate of 10.5% in 2019.

Poverty rates differed considerably among various demographics and states in 2021:

  • By age group, children under 18 had the highest poverty rate at 16.1%, compared to 10.5% for adults 18 to 64 and 8.9% for seniors 65 and over.
  • By race/ethnicity, the poverty rate was highest among Black (19.5%), Hispanic (17.0%), and Native American (21.6%) populations.
  • By family type, 25.2% of female-headed households with no spouse lived in poverty.
  • Geographically, states with the highest poverty rates included Mississippi (19.8%), Louisiana (18.5%), New Mexico (18.2%), and West Virginia (16.0%).

The COVID-19 pandemic contributed to higher poverty in 2020 and 2021, though some government assistance programs aimed at lower income households helped mitigate more severe rises in poverty.

Programs for Americans in Poverty

The federal government has established various programs to help low-income Americans meet their basic needs. Some of the major federal assistance programs include:

Supplemental Nutrition Assistance Program (SNAP) – Also known as food stamps, SNAP provides monthly benefits via EBT card that can be used to purchase groceries. Eligibility is based on household size and income. In 2019, SNAP helped feed 35.7 million Americans.1

Medicaid – A health insurance program for low-income individuals and families who qualify. Medicaid is jointly funded by state and federal governments. Over 70 million Americans are enrolled in Medicaid, including seniors, disabled individuals, pregnant women and children.2

Section 8 Housing Assistance – Provides rental housing vouchers to help low-income families and individuals obtain safe, decent, and affordable housing. There are over 5 million Section 8 voucher recipients across the country.3

Other programs include Temporary Assistance for Needy Families (TANF), Low Income Home Energy Assistance Program (LIHEAP), and more. These federal programs serve as a vital lifeline for millions of Americans living in poverty.

Efforts to Reduce Poverty

The federal government, state and local governments, nonprofits, and community organizations have implemented various initiatives and policies aimed at reducing poverty in America. Some key efforts include:

In 2018, President Trump signed Executive Order 13828, “Reducing Poverty in America by Promoting Opportunity and Economic Mobility.” This established principles focused on work opportunities, workforce development, economic growth, affordable healthcare, childcare access, education and skills training, removing barriers, and more.

Government programs like SNAP/food stamps, Medicaid, Temporary Assistance for Needy Families (TANF), and housing assistance aim to provide a safety net and resources for low-income individuals and families. There have been proposals to strengthen and expand these programs to further reduce poverty.

Nonprofit organizations like Feeding America, Salvation Army, Goodwill Industries, and Habitat for Humanity provide food, shelter, job training, housing assistance, and other services to help lift people out of poverty. Faith-based groups and community centers also play a key role.

Advocacy groups like the Coalition on Human Needs lobby government leaders to enact policies that promote economic mobility and support disadvantaged populations. These include expanding the Earned Income Tax Credit, raising the minimum wage, and investing in childcare and education access.

Going forward, a multi-pronged approach engaging government, nonprofit, for-profit, and community stakeholders will be key to making progress on reducing poverty nationwide.

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