The ways poverty is measured can influence how we, as a country, understand what it means to live in poverty. Poverty measures inform the work of policymakers, practitioners, and advocates to address poverty and prevent the adverse consequences associated with it. This brief summarizes basic attributes of the range of poverty measures used in the United States, as well as their strengths and limitations. Our goal is to give policy analysts and researchers the tools to appropriately interpret poverty statistics and decide when to use which measure.
In this brief, we first review two major categories of poverty measures—absolute and relative measures—as well as basic elements of a poverty measure: economic resources and thresholds. Second, we introduce poverty measures commonly used in the United States, including the U.S. Official Poverty Measure (OPM) (an absolute measure), examples of relative measures, the Supplemental Poverty Measure (SPM) and the Principal Poverty Measure (PPM) (both quasi-relative measures), and consumption-based measures of poverty. Third, we consider approaches to measuring poverty as a continuum or spectrum of well-being (as opposed to a dichotomous measure of whether someone lives in poverty or not). Finally, we conclude the brief by noting the context in which each measure can be applied and describing recent advancements in measurement.
While we focus on poverty as a measure of monetary deprivation, we recognize the importance of other social and economic indicators in capturing diverse experiences of poverty—such as lack of access to education, food, health care, and basic infrastructure—but note that they are beyond the scope of this brief.
I. Major Categories of Poverty Measures, Including Basic Elements
Poverty measures can be generally categorized into two groups: Absolute and relative measures. An absolute poverty measure compares a household’s economic resources against a threshold defined by the cost of minimum necessities such as food, clothing, and shelter. Relative measures of poverty, on the other hand, compare one’s economic resources with a threshold defined by the resources held by others in society—for example, a relative measure that defines poverty status for a given area as having an income less than that area’s median household income.
Absolute and relative poverty measures represent distinct concepts of poverty. In a hypothetical famine—a time during which most of a population is unable to meet their basic needs and therefore lives in absolute poverty—a smaller share of the population might live in relative poverty, depending on where the relative threshold is drawn. In a rich country, where most can afford basic necessities and live above an absolute poverty level, there can be a higher share of the population that lives in relative poverty: These people’s resources would still be far below those held by most others in that country.
II. Common Poverty Measures
Official Poverty Measure
The Official Poverty Measure (OPM) is an absolute, income-based measure that has been used to generate the U.S. government’s primary poverty statistics in the United States for more than half a century. The OPM is based on the official poverty thresholds—sometimes referred to as the “federal poverty line” (FPL)[2]—and considers households with annual incomes below these thresholds to be living in poverty. Using this measure, it is relatively easy to compare poverty rates over a long period of time and to estimate populations that are income-eligible for public benefits. The OPM has the following components