How to measure poverty is a subject of continual debate. In the process of reviewing the issue, a recent New Yorker piece included an interesting tale about Mollie Orshansky, a statistician that invented how the U.S. poverty rate is calculated:
From 1945 to 1958, she worked in the Department of Agriculture’s Bureau of Human Nutrition and Home Economics, where she worked on a series of diets designed to provide poor American families with adequate nutrition at minimal cost. In painstaking detail, the food plans laid out the amount of meat, bread, potatoes, and other staples that families needed in order to eat healthily.
In 1958, Orshansky joined the research department of the Social Security Administration, and decided to try to estimate the incidence of child poverty.... Orshansky used her food plans to calculate a subsistence budget for families of various sizes. For a mother and father with two children, she estimated the expense of a “low cost” plan at $3.60 a day, and of an even more frugal “economy plan” at $2.80 a day. Rather than trying to calculate the price of other items in the family budget, such as rent, heat, and clothing, Orshansky relied on a survey by the Agriculture Department, which showed that the typical American family spent about a third of its income on food. Thus, to determine the minimum income a family needed in order to survive, she simply multiplied the annual cost of the food plans by three. Families on the low-cost plan needed to earn at least $3,955 a year; families on the economy plan needed to earn $3,165.
Orshansky compared these figures with the Census Bureau’s records on pre-tax family incomes and concluded that twenty-six per cent of families with children earned less than the upper poverty threshold and eighteen per cent earned less than the lower poverty threshold. In total, she estimated that between fifteen million and twenty-two million children were living in poverty, a disproportionate number of them in single-parent households and minority neighborhoods.
[In 1964], Congress created the Office of Equal Opportunity, which used Orshansky’s method to determine eligibility for new anti-poverty programs, such as Head Start. Other federal agencies followed suit, and in 1969 the White House adopted a slightly modified version of Orshansky’s lower threshold—the one based on the economy food plan—as the official poverty line.
The article notes that, to this day, the same general method is in use, not because it’s the best—it has numerous, obvious problems—but because changing the measurement would change the poverty numbers, which would be politically unacceptable.
For the full article, see The New Yorker, Relatively Deprived: How Poor is Poor?