A Better Measure of Poverty Needed

The tanking economy is putting local governments in a double bind. As the ranks of the poor and jobless swell, authorities have dwindling funds to help them. Incredibly, officials in San Francisco and other cities can't even prioritize who to help because they don't know who their poorest citizens are. The problem lies with an obsolete federal measure of poverty that will only make hard times harder in San Francisco until it's changed. Mayor Michael Bloomberg has spearheaded just such a revolution in New York City, allowing officials to better direct their limited funds and energy. San Francisco needs to follow suit for the good of the poor, the taxpayers and the city.

The flawed approach we use now to measure poverty goes back more than 45 years when families spent one-third of their budget on food, as compared with less than 10 percent today. Federal officials at the time multiplied the cost of a bare-bones diet by three to establish the "poverty line." For a family of three in 1963, the resulting threshold was an income of $2,442 a year. Today, it is $18,300. But the formula has flaws: It takes no account of whether you're in rural Alabama or urban San Francisco. It ignores the fact that food is no longer the biggest-ticket item - families now struggle most with housing, transportation and health-care costs.

And, crucially, the measure focuses exclusively on household income while ignoring the help people get from assistance programs like tax credits - such as the Earned Income Tax Credit - and in-kind subsidies such as food stamps.

So families could be getting substantial aid - but because their incomes remain constant, they'd be considered as needy as others facing a much tougher situation.

Bloomberg didn't have to look far for a better way. In 1995, the National Academy of Sciences created an alternative formula at the request of Congress. The academy's measure reflects regional cost-of-living variations and takes into account nonfood costs that families bear for child care and medicine. And it calculates the value of nonincome resources they receive, such as subsidized housing.

The new approach transformed poverty numbers in New York City. Overall poverty went up 5 percentage points, but not every group saw its numbers rise.

The rate jumped 13 points for the elderly, driven largely by medical expenses. But it went down slightly for children overall - and more for children in single-parent households - thanks to the inclusion of nutrition programs and tax credits in how it was calculated. Poverty also went down in certain parts of New York City - such as the South Bronx and Harlem - where a high percentage of residents live in public housing. The result: New York can better deploy its limited resources.

So why has the new formula been ignored at the federal level? Simply, no president wants poverty to go up on his watch.

This year could be different as President Obama has the political cover afforded by the fact that people expect poverty numbers to spike because of the deteriorating economy.

But San Francisco doesn't need to wait to find out. Like New York, we can adopt the new standard on our own to better divvy up precious resources and make sure our attention is on those most in need. Bloomberg's advisers are already meeting with officials in San Francisco and Los Angeles. For the sake of the growing numbers of struggling San Franciscans, let's hope they listen.