Federal Poverty Threshold

The federal poverty threshold is the measurement of poverty in America. The U.S. Census Bureau uses it to report how many Americans live in poverty each year, and it's used by other organizations for statistical purposes too. It does not determine qualifications for poverty-reduction programs such as the Affordable Care Act, Medicaid, or welfare. The government outlines those qualifications with the federal poverty level.

The Office of Management and Budget uses it as the official federal poverty definition, whereas the Department of Health and Human Services bases its calculations for the federal poverty level on it. Learn how the poverty threshold works and its history, as well as how poverty is impacting America today.

How Poverty Is Defined

The Census Bureau's definition of poverty—based on pre-tax income, including earnings, pensions, or retirement income—is precise. It also includes interest, dividends, rents, royalties, and income from estates and trusts.

The Bureau includes educational assistance, alimony, child support, assistance from outside the household, and other miscellaneous sources as income factors to compute poverty status. It does not count tax credits, capital gains or losses, and noncash benefits such as food stamps. It does include cash benefits, though, such as unemployment compensation, workers' compensation, veterans' payments, and survivor benefits. It counts Social Security, Supplemental Security Income, and public assistance.

Income of family members is included in the count, but income of roommates or other non-relatives is excluded. It also takes into account whether the head of the household is older or younger than 65, and how many adults and children there are.

Each year, the poverty threshold adjusts for inflation, using the consumer price index (CPI).

Poverty Threshold Chart

Here's the poverty threshold for typical family types and sizes, as of 2020. Once a family reaches three or more members, the income level is the same, despite the age of the head of the household.

A History of the Poverty Threshold

The poverty threshold was created during the presidency of Lyndon B. Johnson. It was designed to ensure families had enough to eat, and used the U.S. Department of Agriculture (USDS) food budgets allocated for families under economic stress. It also used data about what portion of their income families spent on food.

These USDA budgets were developed during the Great Depression. The government used them to determine how much agencies should spend to feed each family. 

Poverty Trends in the U.S.

According to the U.S. Census, the official poverty rate in 2020 was 11.4%, up around one percentage point from 2019, in part due to the impact of the COVID19 pandemic. That's still down from 15.1% in 2010, the high caused by the 2008 recession. The record was 22.4% in 1959. Poverty levels decreased significantly after President Lyndon Johnson's War on Poverty programs.

In 2020, 37.2 million Americans lived in poverty. That's far lower than the 46.7 million seen in 2014, which was the highest number in U.S. history. 

Gender

More than half (51%) of Americans living in poverty were female, while 49% were male. A 2018 National Bureau of Economic Research (NBER) study, based on the population of Denmark, found women’s earnings fell after the birth of their first child, while men’s earnings were not affected. Even 10 years after parenthood, women's salaries were 20% lower than their male counterparts.

Race

Nonwhite races are a higher proportion of the poverty-stricken than they are in the overall population. The number of Black people in poverty was 1.8 times greater than their share among the general population. While Blacks represented 13.2% of the total population in the U.S., they represent 23.8% of the impoverished. There is a discrepancy among Hispanics too, as they represent 18.7% of the total population, but 28.1% of the population in poverty.

Non-Hispanic Whites and Asians were, in contrast, underrepresented in the impoverished population. Non-Hispanic Whites made up 59.9% of the total population, but 41.6% of the population in poverty. Whereas Asians made up 6.1% of the population and 4.3% of the population in poverty.

One reason is structural inequality and racial discrimination that makes it more difficult for nonwhites to get ahead. As a result, one-quarter of Black households have zero or negative net worth. Less than 10% of White families are in that position.

The racial wealth gap also exists for Black families with graduate or professional degrees. On average, they have $200,000 less in wealth than similarly-educated Whites. Black and Latino college graduates have statistically less wealth than White high school dropouts, too.

Education

Research shows there is a high correlation between education and income. About 23% of adults living in poverty did not graduate from high school, and 7.8% had attended college but didn't receive a degree. Just 3.9% of adults living in poverty had college degrees, according to 2019 Census data.

Age

Sadly, children are in the poorest age group in America. Of children under age 18, 14% of them were living in poverty, according to 2019 data, down from 22% in 2010. That's 10.5 million children. The poverty rate for individuals 65 and older is 8.9%, a decrease of just under 1 percentage point from 2018. those living in poverty were either too young or too old to work. That makes it difficult to increase their income and get out of poverty.

Geography

The Census also breaks down poverty by state. Across the United States, 44% of those living in poverty were in the South, and many southern states have the lowest incomes in America. The following states have the highest percentages of poverty: Mississippi, Louisiana, Kentucky, Arkansas, West Virginia, Alabama, Oklahoma, Tennessee, and South Carolina. Puerto Rico also is included on this list.

Another 22% of those in poverty lived in the West and 19% were in the Midwest. Another 15% lived in the Northeast. Six of the 10 richest states are near a major East Coast city. They benefit from living near major research universities with their populations of highly-educated people.

Working/Welfare Status

Of those living in poverty, 7% worked full-time for the whole year, around 15% worked part-time for the whole year, and another 34% worked less than a week.

Despite the success of the War on Poverty, not many of these low-income people receive welfare. TANF is the Temporary Assistance for Needy Families program. In June 2020, it served 2.9 million people. That's less than 10% of the 34 million living in poverty, and only 2.1 million children received welfare in the same time period. That's less than 20% of the 10.5 million children who needed it. 

Disability Status

The poverty rate for people living with a disability was 25.7% in 2019, according to research from the Catholic Campaign for Human Development (CCHD)'s initiative, Poverty USA. That’s nearly 4 million impoverished people living with a disability, amounting to 9.5% of those living in poverty in the U.S.