About 3.5 million Americans ages 65 and older lived in poverty in 2010. An additional 2.3 million older Americans were “near poor,” with incomes below 125 percent of the poverty line. For these poor and near-poor older adults, life is often a constant struggle to meet basic needs.
Today’s poverty measures give policymakers and the public a sense of the large and—in today’s economy—growing number of poor people. But there is widespread agreement that we need a new way to measure poverty, to understand who is poor and how well anti-poverty programs are working. Developed in the mid-1960s, the current official poverty measure relies on a woefully outdated approach to draw a poverty line below which a family’s income is considered inadequate to meet basic needs. As a result, the official poverty rate provides an incomplete picture of the well-being of Americans.
Who Is Poor in America?
The official poverty thresholds vary by family size, number of children and whether or not the head of household is 65 or older; but they are the same for families who live in a high-cost area, like New York City, or a relatively low-cost area like Fort Smith, Ark. In 2010, the poverty threshold for a single elderly person was $10,458, and for an older married couple it was $13,194. For younger people, the poverty thresholds are slightly higher ($11,344 for a single person and $14,676 for a couple).
By the official measure, older Americans are less likely to be poor. In 2010, 9 percent of elders were in poverty compared to 22 percent of children under age 18 and about 13.7 percent of non-elderly adults. This wasn’t always the case. In 1959, more than one in three older Americans lived in poverty—higher than the percentage of children (27.3 percent) or non-elderly adults (17 percent). The drop in elderly poverty rates over the past 50 years is a testament to the success of the Social Security program. Social Security provides most retirees a guaranteed income that reflects today’s living standards and lasts throughout retirement. Today, income from Social Security lifts about 14 million older Americans out of poverty.
The Elderly Poor
Breaking down the official poverty rate for older Americans by race, ethnicity, gender and age reveals a more nuanced picture, as revealed by the following 2010 statistics:
A Modern Measure of Poverty
When the official poverty measure was first developed, the thresholds were set at three times the cost of a “minimum food plan,” because food expenditures represented about one-third of family expenditures (according to a 1955 Department of Agriculture survey). The only adjustment made since then is an annual update to account for inflation.
Last year, the Census Bureau began publishing a supplemental poverty measure (SPM) with the official measure to address its long-standing perceived weaknesses. Thresholds under the SPM are adjusted not only for family size and composition, but also for geographic variation in housing costs and rising living standards. The new measure also adopts a broader measure of resources available to families, counting, for example, the refundable Earned Income Tax Credit (EITC) targeted toward low-income working families; and including near-cash sources of income such as Supplemental Nutrition Assistance Program benefits (SNAP). But the new measure also deducts from income what families spend on medical care and necessary expenses to hold a job (e.g., childcare).
The new measure changes the picture of poverty in America. The number of older Americans living in poverty under the SPM is 77 percent higher than it is under the official poverty measure (6.2 million instead of 3.5 million) largely because of out-of-pocket medical care costs. The poverty rate for older Americans rises from 9 to 15.9 percent under the new measure, slightly higher than non-elderly adults (15.2 percent). However, it is still lower than the rate for children (18.2 percent), although that rate dropped about four points, primarily from including EITC and SNAP.
Reducing Poverty in Older Adults
How older adult poverty evolves in the future will depend upon what changes are made to the Social Security program to address its future financial challenges. It will also depend upon whether the recently passed healthcare reform (Affordable Care Act), which includes provisions that reduce or attempt to hold down healthcare costs for older Americans, can survive the legal challenge to its constitutionality.
Efforts to target poverty among elders could begin by focusing on getting elders to participate in income and in-kind assistance programs for which they may be already eligible, such as Supplemental Security Income (SSI) or SNAP. And programs such as Medicaid, Medicare Savings Programs (MSP) or Low Income Subsidies for Medicare’s Part D Drug benefit (LIS), can help lowincome older Americans cover some of their out-of-pocket healthcare expenses.
Renewed efforts to deliver benefits to people in need and more effective tools for assessing benefits’ impacts could begin to make a real difference in the lives of the millions of older Americans who struggle to get by.
Gary Koenig is director of economic security at AARP’s Public Policy Institute.
Editor’s Note: This article appears in the May/June, 2012, issue of Aging Today, ASA’s bi-monthly newspaper covering issues in aging research, practice and policy nationwide. ASA members receive Aging Today as a member benefit; non-members may purchase subscriptions at our online store.
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