The Stanford Center on Poverty and Inequality, in collaboration with the Public Policy Institute of California, has developed a California Poverty Measure (CPM) that builds upon the U.S. Census Bureau’s Supplemental Poverty Measure (SPM). The SPM improves on the Official Poverty Measure (OPM) in several ways:

(1) The OPM is outdated. It is based on a formula developed over fifty years ago, when food comprised about a third of a typical family’s monthly expenses. The OPM simply multiplied the cost of a USDA food plan by three. The OPM is adjusted annually for inflation but not for shifting expenses (e.g., increases in the relative costs of energy and transportation.) In contrast, the SPM considers consumer expenditures on a wider range of goods.

(2) SPM accounts for geographic differences in the cost of living by adjusting for housing costs. OPM does not.

(3) SPM includes a broader definition of the poverty unit than the OPM. For example, cohabiting partners are included in the poverty unit under SPM, but not under OPM.

(4) While OPM considers only pre-tax cash income, SPM also includes non-cash and post-tax transfers like the Supplemental Nutrition Assistance Program and refundable tax credits. In addition, the California Poverty Measure also considers necessary expenses on work related expenses (including transportation), child care, and out of pocket medical costs.

The Census SPM shows California with the highest poverty in the nation. However, while the SPM is useful for assessing poverty across the country, the Census reports are limited in key ways. First, in order to produce reliable, precise state estimates, three years of data are typically combined. Second, due to small sample sizes, estimates of poverty for specific groups (e.g. by gender, age, race-ethnicity, immigration status, educational attainment, and so forth) are not available. Third, participation and benefits for programs like SNAP are often underreported in national data. Finally, the SPM is computed based on national data that do not account for various state-specific effects on poverty. For example, California has a large population of undocumented immigrants who are ineligible for the safety net, and hence it is important to adjust poverty calculations accordingly. We also made necessary adjustments for California’s cash out program for SSI recipients; and we used California administrative data to adjust participation and benefits for CalFresh (SNAP) and CalWORKS (TANF).

The CPM permits counterfactual simulations that allow us to answer such questions as “How would a reduction, or increase, in medical out-of-pocket expenses affect poverty in California?,” “Would an increase or decrease of 5 percent in SNAP benefits reduce poverty across the state by much?,” and “Which groups would be most affected by a change in SNAP benefits?”  In this session, we will present findings using the CPM and suggest how it can be used to understand poverty within and across California.

The 2011 measure, released in October 2013, has received wide attention and has been presented to diverse audiences. The 2012 measure will be released shortly before the APPAM meeting.