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Causes of Poverty

Federal Poverty Level

In 1959, the federal government created the Federal Poverty Level (FPL). This standard is used not only to establish the number of people living in poverty, but it is also the standard used to determine eligibility for public assistance programs like welfare, food stamps, Medicaid.

The Poverty Action Network believes that the Federal Poverty Level is an inaccurate and outdated standard and that it should be changed to better reflect our current social and economic situation. The FPL was based upon the assumption that a family spends about one third of their after-tax income on food. The FPL is established by taking the cost of food for a particular family size and multiplying that by three. Therefore if a family earns less than that dollar amount they are considered impoverished and eligible for assistance.

However, in the 46 years since the creation of this system, the amount of money a family spends, proportionally, on food is much lower. Due to the increased family cost of housing, health care, child care, etc., food accounts for far less than one-third of a family’s budget.

In addition to the general calculation being outdated, it also is not flexible to account for different costs of living for a particular location or for the cost of children of different ages. No matter if you live in Seattle or Wapato, where the standards of living are very different, the FPL remains the same. In addition, if a family has a young infant who is more expensive because of the cost of child care verses a teenager, the FPL remains the same.

The Federal Poverty Level distorts the true extent of poverty across the United States. And because this measure determines eligibility for public assistance, this distortion deprives people of much needed help.

There is a lot of debate and literature on the shortcomings of the FPL, unfortunately, the Federal government continues to refuse to throw out this poor measure and replace it with a real measure for poverty in the US. Poverty Action supports a new measure that would provide a more accurate account of the staggering number of people struggling in our nation. One such standard we support is the Self-Sufficiency standard [http://www.sixstrategies.org/files/WAcomplete.pdf]

To learn more about the Federal Poverty Level [http://aspe.hhs.gov/poverty/05poverty.shtml]