25 Ways the Federal Poverty Rate Doesn’t Tell the Whole Story

The official federal poverty rate does not take into account where people live, which means that families living in Hawaii and Mississippi are assessed the same, despite the large difference in the cost of living in the two states — goods and services are 16% less expensive Mississippi than national average prices and nearly 20% more expensive in Hawaii.

Because the official poverty rate only looks at pre-tax annual income, it does not take into account whether an individual has a safety net should unexpected costs occur. Individuals who can borrow or rely on gifts from their parents or family members if the need arises do not face the same economic risk as those who cannot.

While the federal poverty rate considers income from investments, dividends, and interest, it does not take into account other forms of wealth, such as funds available through savings. Two individuals with incomes below the poverty threshold would each count as poor, even if one has $100,000 in savings and the other has no savings.

When it comes to child support, it seems the official measure neglects one party. While the measure factors in income received from child support payments, it does not consider the child support payments a parent makes, nor does it account for alimony payments made.

The official poverty rate does not account for taxes of any kind, including income taxes and payroll taxes. While some Americans pay a substantial amount of their annual income in income taxes, others live in states that have no personal income tax and pay much less in taxes.

Some other necessary expenses that the official poverty rate does not take into account can be grouped under work expenses, including flights, hotels, public transportation costs, materials used by artists and freelancers, and more. These costs can be compensated by employers, but often they are not.

The poverty rate does not tell us the severity of the conditions of the people living in poverty. A family of four with an annual income of $25,000 and another family of the same size with an income of $10,000 are both considered as being in poverty, but they likely have very different experiences.

The official federal poverty rate is meant to take into account the cost of food but ignores changes to costs of other basic necessities, including clothing, home costs, and utilities.

Median monthly housing costs range from $752 in West Virginia to $2,111 in California Shockingly, the differences in these expenses are not taken into account in the poverty rate.

According to one estimate, the total annual cost of utilities — electricity, natural gas, internet access, cable, and water — ranges from $569 in Alaska to $346 in Utah. These costs, too, are not factored into the official poverty rate.

There are nearly 2 million Americans currently incarcerated in state or federal prisons, but they are not counted as part of the official poverty estimate.

There are over 1.4 million members of the U.S. military in active duty. Anyone residing in military barracks is not accounted for in the official poverty estimate.

There were 16.9 million Americans attending colleges and universities in the spring of 2023, a large share of them living in college dorms, but those are not counted in the official poverty rate.

People living in group living facilities of any kind, including nursing homes, are not counted in the federal poverty measurement.

The single group facing the most economic distress, the nation’s homeless population, is not counted as part of the poverty rate. According to one estimate, over 580,000 Americans are homeless.

While they represent a financial burden to a family as much as any other children, foster children are not counted in the official poverty measure.

While the official poverty rate factors in cash-based financial assistance, such as Social Security and unemployment compensation, it does not account for a number of other needs-based assistance programs that are not based on cash, such as SNAP benefits (formerly food stamps).

For many, owning a car is a basic requirement for living, and the cost of car payments, upkeep, insurance, and gas are not considered when determining poverty rates. The vast majority of U.S. households have at least one car.

Just as tax payments are not considered in the official poverty measure, tax credits such as the Earned Income Tax Credit — received by over 25 million Americans families and individuals every year — are not considered when calculating the poverty rate.

Those millions of Americans who live without health insurance know that an unexpected health emergency can be enough to plunge someone into effective poverty. But out-of-pocket medical expenses are not counted as part of the official federal poverty rate.

Because the official poverty rate only counts gross income, a major financial concern like debt is not considered. The total U.S. household debt was estimated at over $17 trillion in 2023.

Millions of low-income Americans every year receive assistance paying for their housing, including over 10 million who benefit from federal rental assistance. Housing subsidies are not included in the official poverty measure.

For working parents, paying for child daycare can be a significant expense, particularly for low-income single parents who must work multiple jobs to make ends meet. Childcare costs are measured as part of the supplemental poverty rate but are not measured in the official federal poverty rate.

About 30 million low-income children benefit from the national school lunch program every day, which is not factored into the official poverty rate calculation.

Whether leisure time goods and services — gyms, museums, movies, vacations — should be included in the official poverty rate is up for debate, but would life be worth living without these expenses?