U.S. Poverty Threshold
The U.S. Poverty Threshold is the level of annual income which defines whether a person or family is in a poverty status, or simply, “in poverty”. An income level below the threshold means the person or family is in poverty; above the threshold and they are not considered as being in poverty. The Poverty Threshold is sometimes called the Poverty Line. It was established over 40 years ago as a measurement of the minimum income necessary to support a household with food, housing and basic necessities. Each year the threshold is adjusted for the impacts of inflation.
The U.S. Poverty Threshold is based on household size with the inherent assumption being that it is more economical for two or more people to live in a household because they can share some expenses. The average U.S. Poverty Thresholds for 2015 [i] are shown in the table above.
Household income used in the determination of poverty status is defined by the Census Bureau as “Money Income”. Money Income represents wages, salaries, self-employment and investment income on a before tax basis and excluding any noncash benefits. Therefore money income excludes most benefits from welfare such as SNAP, Housing Assistance and EITC. Money income does include Social Security and Unemployment payments.
Limitations of the U.S. Poverty Threshold and Money Income
Here is how the Census describes the limitations on the use of Money Income [ii]: “Therefore, money income does not reflect the fact that some families receive noncash benefits, such as Supplemental Nutrition Assistance/food stamps, health benefits, subsidized housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents, which often take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Data users should consider these elements when comparing income levels. Moreover, readers should be aware that for many different reasons there is a tendency in household surveys for respondents to underreport their income. Based on an analysis of independently derived income estimates, the Census Bureau determined that respondents report income earned from wages or salaries more accurately than other sources of income, and that the reported wage and salary income is nearly equal to independent estimates of aggregate income."
Because Money Income does not include welfare benefits the Census Bureau measurement of poverty status is not a measurement of whether an individual or family is actually living in poverty. This is because welfare benefits boost most low-income Americans over the poverty threshold. See more information on the Poverty Level Page.
Development of the Poverty Threshold
See Poverty Quotes Page - Mollie Orshansky
See also Articles on Poverty - How much is too little, June 2015
[i] U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States: 2015, Appendix B. September 2016. Available here.
[ii] Ibid. Page 21.
[ii] Ibid. Page 21.