Annual Report on US Consumption Poverty: 2018

Introduction

This report presents estimates of consumption and income based poverty in the United States derived from information collected in the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey and the U.S. Census Bureau’s Current Population Survey. A poverty rate visualization tool, additional results and resources can be found at povertymeasurement.org.

Summary of findings

• Simple adjustments to account for well-known flaws with the official poverty measure make clear that poverty in America has fallen sharply over the past 50 years.
• Using the standard of living of the poor in 1980, the consumption poverty rate fell by more than 10 percentage points, from 13.0 percent in 1980 to 2.8 percent in 2018, while the official poverty rate fell by only 1.2 percentage points over that period.
• If, on the other hand, one uses the standard of living of the poor in 2015, the consumption poverty rate fell from 32.9 percent in 1980 to 10.8 percent in 2018.
• Three factors explain why consumption poverty shows a long-term decline but the official poverty measure does not. First, the official federal poverty line is adjusted over time using a price index with well-documented flaws. The official poverty line for a family of four in 1980 was $8,351. Today it is $25,465. If one corrects for the flaws in how the poverty line is adjusted for inflation, based on the 1980 standard, the threshold today would be about $18,000. Second, the official poverty measure is based on cash income only, which fails to capture all the resources available to a family including tax credits and in-kind transfers. Finally, the official measure of family resources is biased due to under-reporting of certain types of income that are commonly received by those with low reported income.
• Using the higher 2015 standard, both income and consumption based poverty fell by about 1 percentage point between 2017 and 2018.

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