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Elites fight back against mismeasure of poverty

New initiative by charitable organizations seeks to update statistics on financial hardship

January 13, 2015 2:00AM ET

Our understanding of poverty is starting to undergo a transformation, thanks to new research and the backing of wealthy and powerful interests.

United Way chapters in six states and the Rochester Area Community Foundation in New York are putting financial hardship in 21st century America on their volunteers’ and donors’ agendas. Since these organizations represent business leadership as well as prosperous and generous families, the development suggests that the power structure in these places is working to redefine what it means to be in need.

Their separate initiatives hold the promise of addressing one of the worst black marks on American society: A third of U.S. children live in poverty, giving us one of the worst child poverty rates among developed countries. This rate also acts as a tax on the country’s future that will be paid in lost economic output, increased demand for social services and human misery. Lowering the child poverty rate, on the other hand, will ease taxpayer burdens by producing fewer tax eaters and more tax payers. 

New measures

The push from elites to recognize the real extent of financial hardship began five years ago in Morris County, New Jersey, one of the richest places in America.

“With a poverty rate of less than 5 percent [in Morris], United Way was getting so many requests to help low-income families” that leaders decided to find out why, said Stephanie Hoopes Halpin, a research professor at Rutgers, the state university. “It soon became obvious that the 50-year-old federal poverty level did not reflect the high cost of living in New Jersey and therefore did not capture the number of struggling households.”

The federal government’s official poverty measure was developed in 1963 by Mollie Orshansky, a Social Security Administration analyst. The standard was based on three times the minimum food budget required for sufficient healthy calorie intake. Before she died in 2006, Orshansky said her poverty measure was seriously outdated.

While Congress never updated it, the United Way came up with ALICE, an acronym for “asset limited, income constrained, employed.”

“We wanted to move away from the moral connotations around poverty but also to put a face on the data,” Hoopes Halpin said. The acronym “also gave dignity to a population that typically has been portrayed in a negative light as the working poor.”

The ALICE model measures how much income is needed for financial stability. It counts earnings from work as well as government and charitable aid.

In 2012 the first ALICE report showed that 30 percent of New Jersey households earned too little to afford the necessities that constitute financial stability. It also demonstrated that more than half the jobs in New Jersey paid less than $20 an hour.

“Those findings sparked a grass-roots movement among United Ways across the country to adopt the ALICE language and methodology, as it became clear that the ALICE population extended far beyond New Jersey’s borders,” Hoopes Halpin said.

Research in five more states — California, Connecticut, Florida, Indiana and Michigan — shows that 35 percent to 45 percent of families do not meet the ALICE threshold of financial stability from paid work, government aid and charitable help.

By 2020 Hoopes Halpin expects to have ALICE data for all 3,144 counties in the United States.

‘We’re finding a growing problem with people who earned college degrees and graduate degrees falling into poverty because they cannot get work.’

Stephanie Hoopes Halpin

research professor, Rutgers University at Newark

The official federal poverty level for a family of four in 2012 was $23,050. The ALICE threshold, by contrast, was $64,689 in Connecticut, $61,200 in New Jersey and $46,495 in Indiana, the least expensive of the six states.

Among Indiana families below the ALICE threshold, work provided just 36 percent of the income needed for financial stability.

In Connecticut, which often reports the highest average income in the U.S., just 10 percent of households are below the federal poverty level, but an additional 25 percent of households are below the ALICE mark.

Inadequate wages and high housing costs are the two most significant factors in financial instability, ALICE research shows.

A look at Rochester

I have taken special interest in this data as a resident of Rochester. In what was once one of the most technologically advanced and highest-paying cities in the U.S., 1 in 6 residents now lives in extreme poverty (officially defined by Washington as less than $1,000 a month for a family of four) and 1 in 3 is below the threshold for official poverty.

I know the Rochester data well because my wife, Jennifer Leonard, is the CEO and president of the local community foundation. At talks she has given over the last year, the tone and nature of the questions from audiences have shifted from shock, surprise and in some cases disbelief to asking what can be done and how.

Among cities its size, Rochester has the second-highest poverty rate for those with college degrees and advanced degrees — likely an indication of the collapse of Kodak and other traditionally well-paying employers in the area.

“We’re finding a growing problem with people who earned college degrees and graduate degrees falling into poverty because they cannot get work,” Hoopes Halpin said.

This gives the lie to claims by social conservatives (including some who commented at other websites on my column last week) who assert that poverty is overwhelmingly the natural product of misbehavior such as dropping out of school, abusing drugs, having children out of wedlock and laziness.

Apart from the lack of jobs, disability plays a big role. People whose bodies are mangled in accidents or on the job, sometimes dramatically and sometimes through decades of hard manual labor, often have no resources except the disability insurance they bought with their Social Security taxes. In Rochester 42.1 percent of people who have a disability also reported they are poor, Ed Doherty, the retired foundation vice president who wrote the report, found by analyzing census data.

The average Social Security benefit for disabled workers is $1,146 a month, but that is before paying Medicare premiums and supplemental insurance, which can easily reach $200 a month, leaving net cash income of about $950 a month. Even with food stamps, just affording shelter is a challenge.

Many community foundations have projects in which people can look up, in easily understandable formats, data about local economic, health, education and other conditions. The Rochester area reports are a bold step toward focusing attention on that data.

What’s important about this new research is that the wealthy elite in six states and one midsize city are now engaged in addressing the financial hardships afflicting far too many Americans. When the elites want change, they can make it happen.

We should encourage our local business leaders and prosperous families everywhere to get to know ALICE not just because it’s morally right but also because all Americans will benefit when we rid ourselves of poverty, especially poverty among children.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and the editor of the new anthology “Divided: The Perils of Our Growing Inequality.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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