Understanding Poverty


Official numbers in 2001
According to U.S. Census Bureau data, 32,907,000 individuals lived at or below the poverty level (11.7 percent of total population). In 2001, the poverty-line was $14,128 for a three-person family and $18,104 for a four-person family.

Source: Institute for Research on Poverty - www.ssc.wisc.edu/irp

In 2001, 11,700,000 children younger than 18 lived below the poverty line. One out of six children (16.3 percent) living in the United States lived in poverty in 2001. Three out of four children lived in a working family. In most rich countries, the child poverty rate is less than 8 percent.

Defining Poverty
Measuring poverty is a controversial topic for at least two reasons. First, there is disagreement regarding the definition of the "poverty line," the level of income below which a household is officially impoverished. Second, there is debate over what should be counted as income and expenses within a household to determine where it stands relative to the poverty line. For example, should a household income be measured before or after taxes are withheld? Should government assistance transfers be counted as income? Should health care costs be subtracted from the household income before poverty is measured?

Here are three different measures of poverty from 1998, some of the most recent data available.

Definition One: Official government measure of poverty (here income is measured before income and payroll taxes, and does not include cash and near-cash (e.g., housing support) government transfers).

1998 34.5 million individuals living in poverty
1980 29.3 million

The official governmental definition of poverty is widely considered to be outdated and inadequate. The definition was created in 1965 by multiplying by three the food expenses of a household at the minimum level of economic survival and public participation. This method worked on the assumption that one-third of an average household's expenses went to pay for food. The current official poverty definition still operates under this assumption, even though consumption habits of the average household have changed dramatically since 1965 (e.g., the 1965 definition assumed that all meals were home cooked). Additionally, the definition of household expenses does not factor in differences in cost-of-living, especially differences in housing costs. The only increases in the poverty line have been based on increases in the Consumer Price Index since 1965.

Although widely considered to be inadequate, the official poverty definition will likely remain unchanged because legislation related to poverty is often indexed in terms of the poverty line. An increase in the poverty line would increase the cost of legislation already on the books. Thus, some now advocate simply defining poverty for the purposes of future legislation and policy at 150-200% of the official poverty line.

Definition Two: Subtracts income and payroll taxes and adds cash and near cash government transfers. This definition also assumes a lower poverty threshold than the official poverty line in an effort to adjust for the inadequacy of the definition.

1998 32 million individuals living in poverty
1980 27.5 million

Definition Three: Same as definition two, but also subtracts medical expenses.

1998 44 million individuals living in poverty
1980 Not available

Medical expenses are subtracted from household income on the assumption that essential and basic health care expenses are not options for a household when considering how to allocate resources, just as taxes on income are not optional expenses.

How important are numbers? Joseph Stalin once said that "a single death is a tragedy, a million deaths is a statistic." Over time, this website will seek to document in greater and greater detail the human costs of poverty in an effort to move beyond statistics.


Poverty and Race in 2001
Although poverty rates among minority populations are decreasing, the disparity in the poverty rate by race/ethnicity demonstrates that poverty still occurs at a significantly greater rate among non-whites.

Number Poor
Poverty Rate
White, not Hispanic
African American
Hispanic origin
Asian/Pacific Islander

Source: Institute for Research on Poverty - www.ssc.wisc.edu/irp

Long-term poverty
Long-term poverty rates indicate an even greater racial disparity in poverty rates than official numbers.

Long-term poverty is rare among whites - fewer than 1 percent were poor for ten years or more - but common among African American children, 29 percent of whom were poor for ten years or more.

Poor African American Children were less likely to escape poverty than poor whites. One in three poor African American children were still poor at age twenty-five to twenty-seven, compared to one in fourteen whites.


Information gathered from other countries demonstrates that a combination of government policy and good jobs can significantly reduce poverty. This information provides clear refutation of the moral scapegoating that takes place in the United States, where the existence of poverty is blamed on the moral failures of the poor themselves.

Out of seven countries studied, the United States had the lowest rate of poverty reduction as a result of government income transfers.

Poverty Reduction After Government Taxes and Income Transfers
Sweden 88.6%
Netherlands 82.9%
Germany 76.5% (studied only West Germany)
United Kingdom 76.4%
Australia 67.0%
Canada 62.5%

Out of thirteen countries studied, the United States had the highest percentage of low-wage workers

Workers (%)
Rate (%)
Sweden 1995
Finland 1995 5.9 2.1
Luxembourg 1994 6.0 1.3
Belgium 1992 7.2 1.9
Netherlands 1994 11.9 4.7
Austria 1992 13.2 2.8
France 1994 13.3 3.2
Germany 1994 13.3 4.2
Australia 1994 13.8 7.0
Japan 1992 15.7 6.9
United Kingdom 1995 19.6 5.7
Canada 1994 23.2 6.6
UNITED STATES 1997 25.0 10.7

Source: "U.S. Poverty in a Cross-national Context," by Timothy M. Smeedling, Lee Rainwater, and Gary Burtless, in Understanding Poverty, edited by Sheldon H. Danziger and Robert H. Haveman, The Russell Sage Foundation, 2001.