Redefining poverty would throw millions off critical social support programs

In 2019, the poverty level for a family of four in Hawaiʻi was set at $29,620. It’s painfully clear that $29,620 is nowhere near enough to provide for a family in Hawaiʻi. According to the Economic Policy Institute, a family of four living in urban Honolulu would need approximately $115,580 in income to have a modest, but adequate, standard of living. In Hawaiʻi County, a family of four would still need more than $93,000.

When you look at the situation here that way, it’s clear that there are a lot of people who aren’t considered “poor” but who are, nonetheless, barely getting by—many depend on at least some social support programs.

The Trump Administration has proposed redefining the Official Poverty Measure (OPM) so that it changes each year at a slower rate. Because the change will make the poverty line grow more slowly than it would otherwise, even fewer people will be counted as “poor.” This would have the effect of forcing people off critical programs that allow them to close the gap between what they earn and what they need to meet those basic needs. Considering how large that gap is in Hawaiʻi, this policy choice would be particularly devastating here.

If the change goes into effect, it will impact eligibility for programs that use these poverty guidelines, including Medicaid, the Child Health Insurance Program (CHIP), Community Health Centers, Head Start, the Supplemental Nutrition Assistance Program (SNAP), the Special Supplemental Nutrition Program Women, Infants, and Children (WIC), the National School Lunch and School Breakfast Programs, the Summer Food Service Program for children, the Child and Adult Care Food Program, the Nutrition Program for the Elderly, Low-Income Taxpayer Clinics, and Legal Services for the Poor. Women, who are overrepresented in the low-wage workforce, are more likely to participate in these programs.

The bottom line: Over time, millions of Americans would be forced off critical programs that help women, children and families meet their basic needs.

As is law, the Trump Administration is required to solicit public comment on this proposed change. Comments are due June 21, and can be submitted through this portal.

How do we measure poverty?

Currently, the Consumer Price Index for All Urban Consumers (CPI-U) is used to make annual adjustments to the OPM. The CPI-U tracks prices paid for goods and services by close to 90 percent of the U.S. population, and is therefore a very general index.

Research shows that different subgroups of the population have different consumption patterns, and therefore face different rates of inflation. In order to learn more about these differences, the Bureau of Labor Statistics (BLS) has been calculating an Experimental Consumer Price Index for the Elderly (CPI-E), for example, in order to better reflect the types of costs that affect elderly households. Similarly, there is research that suggests that low-income households face higher rates of inflation than does the general population.

The BLS also has developed a Chained CPI (C-CPI-U) to capture the ability of some consumers to reduce the effects of inflation on them by adjusting their spending as prices change. For example, they could spend less on beef as its price goes up and more on chicken as its price goes down. This type of substitution behavior causes the Chained CPI to rise more slowly than does the CPI-U.

However, one of the key reasons that low-income people may be burdened by higher inflation is that they are less able to adjust their purchases to reduce their costs. Research finds that low-income consumers simply do not have as much ability to substitute items as prices change, since they are already largely unable to afford higher-priced items. Low-income households also spend a larger portion of their income on housing, for example, which cannot be substituted out of their budget as costs rise.

Because low-income households actually appear to experience higher inflation rates than is reflected in the currently-used CPI-U, it would be entirely inappropriate to switch to the Chained CPI—which lowers inflation rates—to calculate the OPM.

Worth noting is that, while the BLS has not created an experimental CPI to analyze the costs experienced by low-income households, the Census Bureau has created a separate Supplemental Poverty Measure (SPM) to attempt to better measure the economic status of our nation’s poor and low-income families and individuals.

This is especially important for Hawaiʻi. Looking at the average OPM for 2015–17, Hawaiʻi appears to have the 10th lowest official poverty rate among the states, at 10.2 percent. With, for example, the highest rate of homelessness in the nation, the official measure does not appear to be an accurate reflection of the level of poverty in our state.

In contrast, the SPM—which takes into account Hawaiʻi’s highest-in-the-nation cost of living as well as other sources of income and expenses—indicates that our state actually has the 10th highest poverty rate among the states, at 15 percent for 2015–17. That’s an increase of 47 percent over the OPM.

Hawaiʻi Appleseed is concerned that switching to the Chained CPI to calculate the OPM would make poverty threshold calculations less accurate, not more so. Such a switch would result in dropping the poverty guidelines even lower than their current levels, causing many struggling and vulnerable families and individuals to arbitrarily lose their eligibility for the safety net programs that they rely on for their basic needs.