Revised gov't formula shows new poverty high: 49.1M

[November 08, 2011]  WASHINGTON (AP) -- The ranks of America's poor are greater than previously known, reaching a new level of 49.1 million -- or 16 percent -- due to rising medical costs and other expenses that make it harder for people to stay afloat, according to new census estimates.

The numbers released Monday are part of a first-ever supplemental poverty measure aimed at providing a fuller picture of poverty. It is considered experimental and does not replace the Census Bureau's official poverty formula, which continues to determine eligibility and distribution of billions of dollars in federal aid for the poor.

Based on the revised formula, the number of poor people exceeds the record 46.2 million, or 15.1 percent, that was officially reported in September.

Broken down by groups, Americans 65 or older sustained the largest increases in poverty under the revised poverty formula -- nearly doubling to 15.9 percent, or 1 in 6 -- because of medical expenses that are not accounted for in the official rate. Those include rising Medicare premiums, deductibles and expenses for prescription drugs.

Working-age adults ages 18-64 also saw increases in poverty -- from 13.7 percent to 15.2 percent -- due mostly to commuting and child care costs.

For the first time, the share of Hispanics living in poverty surpassed that of African-Americans, 28.2 percent to 25.4 percent. That is due to an increase in the poverty rate for Hispanics under the new measure because of lower participation of immigrants and non-English speakers in government aid programs such as housing and food stamps.

Due to new adjustments for geographical variations in costs of living, people residing in the suburbs, the Northeast and West were the regions mostly likely to have poor people -- nearly 1 in 5 in the West.

Economists have long criticized the official poverty rate as inadequate. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have actually shrunk to a much smaller share -- more like one-seventh -- failing to account for other expenses such as out-of-pocket medical care, child care and commuting.

The official formula also does not consider non-cash government aid when calculating income, such as food stamps and tax credits, which have increased in the last few years.

Kathleen Short, a research economist at the Census Bureau, said many of the shifts in poverty reflect the large numbers of older people who hover near the poverty line after receiving Social Security cash payments. The poverty line is defined under the official measure as $11,139 for an individual, or $22,314 for a family of four.

Because of Social Security benefits, only 9 percent of seniors, or roughly 3.5 million, live in poverty according to the official formula. But that number increases by roughly 2.7 million when taking into account the additional health care costs. If it weren't for those health care costs, the poverty rate for seniors would have dropped to 8.6 percent.

"The medical expenses are very large," Short said.

Not all groups saw increases in poverty under the new measure. For instance, children and African-Americans saw small declines in their poverty rates, mostly due to the positive effects of government aid programs including food stamps. Residents living in more rural areas as well as the Midwest and South also fared better, due to lower costs of living.

Among the findings:

• Poverty for Asians increased, from 12.1 percent under the official measure to 16.7 percent; among whites, it rose from about 10 percent to 11.1 percent.

• The poverty rate for children declined, from 22 percent to 18.2 percent.

• Without the earned income tax credit, the poverty rate under the revised formula would jump from 16 percent to 18 percent. Without food stamps the poverty rate would rise to 17.7 percent.

• Under the revised formula, the West had the most people in poverty at 19.4 percent. It was followed by the South (16.3 percent), the Northeast (14.5 percent) and the Midwest (13.1 percent).

Economists and anti-poverty experts continue to differ widely on how best to calculate poverty. On Monday, the Census Bureau acknowledged that its new measure remains a "work in progress," with additional refinements needed to better determine commuting and housing costs.

[Associated Press; By HOPE YEN]

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