Sunday, April 10, 2011

The BEST Index

In an earlier post (here) I sketched the history of the U.S. poverty threshold. I noted there that the threshold was based on looking at the cost of a sustaining diet. The cost of that “food plan,” multiplied by three, got us a person’s or family’s total expenditures. The measure has not changed substantially since. If you earn enough for “food budget-times-three,” you are Okay. If not, you are in poverty. Attempts to make that measure a lot more sophisticated have not advanced much since 1963 when the measure was first introduced.

Today, thanks to a hat tip from Monique Magee (of Market Size fame, see Blogroll), I can point to a thoughtful and analytically rich approach for re-basing poverty. It is the BEST Index. It is produced by Wider Opportunities for Women (WOW) and supported financially by the Ford and the W.K. Kellogg foundations. WOW’s site is here and its site for BEST here; that last link permits you to download WOW’s extensive tables in Excel format.

The index is based on a much more careful estimation of costs that meet the basic needs of a person, alone or with children—and also, by extension, a two-adult household with or without children. BEST provides much, much more detail than the Census-based poverty tables I’ve also reproduced in an earlier post.

BEST stands for Basic Economic Security Tables. These tables are built up from survey data on housing, utilities, food, transportation, child care, personal and household goods, health care, emergency savings, retirement savings, taxes, and tax credits. The tax credits are deducted. More detail on how these values are determined and calculated—thus, for instance, where WOW obtained its data for auto insurance and the fact that collision coverage is not included but liability coverage is, can be obtained from this full report. I particularly like WOW's inclusion of savings. Yes! That's the way to think—wholistically and comprehensively!

What the BEST Index actually shows is what most of think when we look at the official poverty tables. They’re far too low. Let me illustrate this by a bar chart:

What we see here is median income levels for 2009 on the left, the poverty thresholds in the middle, and the BEST Index for 2010 on the right. I don’t much like the “median” measure. It means that half earn more and half earn less. I got the median family income figure by averaging data published by the Census Bureau for states; that one understates the total because low-population states (usually with lower median values) vote as much as populous states (usually with higher median values). All other numbers are national.

Note especially that the BEST index for 1 worker is lower than median earnings of either men or women but substantially higher than the poverty rate for single person. Further, BEST’s value for a family of 4 is more than three times greater than the poverty threshold for the same size family.

Now, of course, keeping the official poverty rate low keeps support expenditures down—thus eligibility for food stamps, Medicaid, welfare payments. Our poverty rates are intended to minimize budgets rather than to optimize the welfare of the American people.

1 comment:

  1. You have presented this complex topic so nicely. The bar chart great, communicates easily and is very good looking.

    Yes, it is extremely hard to fathom how a family of four could live on a gross annual salary of $25,000—or something like $400 net per week—and not qualify as living in poverty.