What Annual Income Is Considered Poverty Level & How Was the Federal Poverty Level Established?

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Poverty has long been a part of history, and, as a result, there have been various efforts to combat poverty in America. During the Great Depression, soup kitchens were established to help folks who couldn’t afford meals. In the years that followed, more structured forms of government assistance have been implemented. As a result, this has required officials to define a poverty line based on income levels. So, how have government agencies gone about establishing a federal poverty level — and how has it changed over time?

What Annual Income Is Considered to Be at the Poverty Level?

As one can see in the federal government’s official poverty level resources, there are three sets of guidelines. One set pertains to the 48 contiguous states (or continental) states; one applies to Alaska; and the third covers Hawai’i. Both Alaska and Hawai’i have separate guidelines because the cost of living in those states is so different. For example, it’s more expensive to ship food and “common goods” to those states.

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However, Puerto Rico and U.S. territories, such as the Virgin Islands, Guam, and Micronesia, do not have separate poverty guidelines. If a government agency that regularly uses poverty guidelines is operating in those territories, the agency has the authority to set specific guidelines for those territories on a project-by-project basis.

As of 2021, a household of one person who makes $12,000-$16,000 annually is considered impoverished. Moreover, a family of four that earns $26,000-$33,000 per year is currently considered to be living at the poverty level. While the guidelines stop at households of eight, additional people are counted by adding $4,500-$5,700 to the allowable household annual income.

The History of Measuring Poverty in America

In the 1960s, there was a growing need among American households for government assistance. Various federal agencies were interested in both measuring the existing needs folks had as well as finding a way to provide for citizens who needed support. It became evident that there was a need for uniform standards that, at the same time, took into account the nuances of life associated with various parts of the country.

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President Lyndon B. Johnson, who served during this era, is famous for declaring a war on poverty. In 1959, the national poverty rate — the percentage of American households considered to be living in poverty — was 22.4%. This means that, at that time, slightly more than 1/5 of Americans were living at or below the federal poverty level.

Since poverty has been measured, the rate has been largely on the decline, with the exception of the minor fluctuations often associated with recessions and other major economic events. As of 2019, the poverty rate had decreased significantly to 10.5%.

Mollie Orshansky, a pivotal economist who worked for the Social Security Administration in the 1960s, developed the concept of poverty thresholds. At that time, the federal poverty level was considered to be three times the costs of a “minimum food diet” for the number of people in the household.

As a result, the United States Department of Agriculture (USDA) established food plans, based on what Americans of different income levels usually bought. The low-cost plan was based on the eating habits of people who relied on government assistance to eat, while the economy plan was based on the habits of the poorest citizens who did not qualify for government assistance. By mixing these two plans, the USDA developed standards for a minimum food diet.

However, the minimum food diet standard was not completely accurate, namely because the amount of available government assistance varied greatly from state to state and municipality to municipality. Early on, the need to factor in fluctuation in the cost of living from place to place became apparent. With this in mind, the earliest measures of the federal poverty level in America were joint efforts between several government agencies. Today, the Census Bureau and the Department of Health and Human Safety are both involved in these measures.

Moreover, methods of measuring poverty have evolved over time to keep up with the rapidly changing demographic and economic patterns in the country. A household used to be considered married individuals and the children that were born to them. But, today, federal poverty guidelines recognize the supplemental poverty measure. This newer measure views a household as any adults and children who live in the same home and share resources. This can include other living arrangements, such as unmarried partners and foster children. Rather than only being concerned with the cost of food, this new measure also accounts for food, clothing, shelter, and utilities.

How the Federal Poverty Level Is Currently Used

On the government level, the term “federal poverty level” is being phased out in favor of the terms “poverty thresholds” and “poverty guidelines.” Poverty thresholds are created by the Census Bureau, and their main purpose is to develop statistics, which, in turn, are used by sociologists or economists to understand large groups of people. Poverty guidelines, on the other hand, are published in the Federal Register; used to determine if a household meets standards of poverty; and often used by administrative employees in government agencies to determine if citizens are eligible for government assistance.

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Medicaid, CHIP, SNAP, Section 8, Medicare Part D, and the National School Lunch Program are all examples of government programs that use the federal poverty level to determine eligibility. In modern use of the poverty level, there is no single line one crosses. Rather, an applicant’s eligibility is determined based on being below a certain percentage of the poverty level. For example, a person with an annual income of 138% of the poverty level would be eligible for some government assistance programs. Colloquially, the term federal poverty level is still popular, and, in some cases, it can still be found on government websites.

To recap, the use of the federal poverty level and the other phrases that have come to describe it have evolved over time. The annual income that qualifies as poverty varies from state to state and region to region, and modern federal measures of poverty calculate income by the state and the size of the household. Despite changes in terminology, these numbers continue to be used at a federal and local level for assessment purposes and, in the end, to provide aid to Americans.