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New model finds more in poverty

The Census Bureau's updated formula shows hardship for older Americans and those in the West.

November 08, 2011|By Gale Holland, Los Angeles Times

More than 49 million Americans live in poverty, an increase from previous counts that reflects heavy medical expenses for older people and high housing costs in Western states, especially California, according to new estimates announced Monday by the U.S. Census Bureau.

The estimates, produced by a first-ever experimental recalibration of the federal model of hardship, adds 2.5 million people to the 46.6 million included in the official poverty count for 2010 released in September.

Under the new formula, more than 2.8 million Americans joined the ranks of the poor in the Western states, bringing the regional poverty rate up from 15.4% to 19.4%. The national poverty rate in the new report is 16%.

Census officials Monday did not break out results by state. But experimental research for 2009 showed California's poverty rate surging from 15.5% under the old template to 22.4%. Researchers say housing costs were the main cause.

"It's all about housing prices really," said Dowell Myers, professor of policy, planning and development at USC. "We've been complaining about this for a long time. Our housing prices are much higher than Mississippi's."

Few economists defend the official poverty measure, which was developed 50 years ago, when food prices represented a third of household budgets. Food costs have dropped to one-seventh of household payouts, while other expenses — taxes, medical out-of-pocket payments, commuting costs and child care now eat up a much larger share of expenses.

The new model, called the supplementary poverty measure, is designed to take into account these costs and also capture how government safety-net programs such as food stamps and housing and energy subsidies, may serve to offset them.

The result is what experts say is a more thorough measure of poverty, and it turns some common assumptions on their head. African Americans, renters and those living outside of metropolitan areas have lower poverty rates under the new definition, while Asians have higher rates.

And the West leads the nation in poverty in the new model, surpassing even the South, which remains the neediest region by the official poverty measure. Not only are housing costs lower in the South, but people there are more likely to have paid off their mortgages.

The high cost of California housing is one reason that Teshe McGordon found herself forced to move back in with her mother after she lost her administrative assistant job with a real estate brokerage in 2009.

"In areas that used to be affordable, the prices are just crazy, $800 for a decent one-bedroom around here," the North Hollywood resident said. "Even if you're getting unemployment, you couldn't pay the rent and eat."

Researchers say they are also surprised to see children faring better than the elderly in the new model. They had long believed the reverse — childhood poverty was growing while the elderly were doing better than in the past. But the new calculation reduces the percentage of children below the poverty line from 23% to 18% while raising the share of Americans 65 years and older who are poor from 9% to 16%.

The reason is that children receive government benefits, while medical costs are pushing low-income seniors living on fixed incomes over the brink, said Kathleen S. Short, a U.S. Census Bureau economist.

Medical costs helped draw Ernest Lee to a Monterey Park food bank over the weekend.

Lee, 78, a retired real estate broker, and his wife own their home. They augment his Social Security benefits and her wages as a factory assembler by borrowing against the home's value, he said.

But their estimated $400 to $500 monthly bill for his diabetes and high-blood pressure medications, as well as co-payments for doctor visits and treatment, have pushed the couple's finances into the red, Lee said. He said he also struggles to pay taxes and insurance on his home.

"We watch every penny; we don't go to movies, dances, restaurants," Lee said. "We live in the most basic way."

Lee said he has put three children through college, and he does not consider himself poor.

"We have a phone, a car, a television; I think we will be OK," Lee said. "At least we aren't living in a tent."

The new formula will not supplant the official figure that is used to allocate government aid and other programs. Experts were already debating its nuances. Officials described it as "a work in progress" that will be modified through future research.

"This still needs improvement, but it's a lot better," Myers of USC said.

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