Poverty in America, the truth....

The Economic Policy Institute September 1, 2005,Briefing Paper #165

Working families' incomes often fail to meet living expenses around the U.S.

by Sylvia A. Allegretto

The ability of families to meet their most basic needs is an important measure of economic stability and well-being. While poverty thresholds are used to evaluate the extent of serious economic deprivation in our society, family budgets, that is, the income a family needs to secure safe and decent-yet-modest living standards in the community in which it resides offer a broader measure of economic welfare.1

The family budgets presented in this report take into account differences in both geographic location and family type. In total, this report presents basic budgets for over 400 U.S. communities and six family types (either one or two parents with one, two, or three children). That the budgets differ by location is important, since certain costs, such as housing, vary significantly depending on where one resides. This geographic dimension of family budget measurements offers a comparative advantage over using poverty thresholds, which only use a national baseline in its measurements.

Basic family budget measurements are adjustable by family type because expenses vary considerably depending on the number of children in a family and whether or not a family is headed by a single parent or a married couple.

The second part of this analysis compares data on actual working family incomes and the associated basic family budgets. Such a comparison can show, for example, what percentage of two-parent families with two children in Pittsburgh, Pa., are actually earning enough income to meet basic family budget thresholds.2 These comparisons can also show not only the share of families falling below family budget thresholds, but the number of total people—parents and children—that are affected. Given recent policies that emphasize work as the solution to poverty and economic hardship, this analysis is important because it shows that sometimes work simply isn't enough.

The following are major findings from this analysis:

The range of basic family budgets for a two-parent, two-child family is $31,080 (rural Nebraska) to $64,656 (Boston, Massachusetts). The median family budget of $39,984 is well above the $19,157 poverty threshold for this size family.

Over three times more working families fall below the basic family budget levels as fall below the official poverty line.

Of the six family types examined, over 14 million people (28%) live in families with incomes below the basic family budget thresholds.

The incorporation of cost-of-living differences into basic family budgets makes them advantageous in many ways. For example, when using poverty thresholds, approximately 37% of families fall below "twice poverty" (i.e., double the poverty line), whether they reside in cities or rural areas. But when using family budget measures, which embody the higher cost of living in cities, one finds that 42% of families living in cities and 30% of families residing in rural areas fall short of basic family budget thresholds.