An Alternative Poverty Measure:

The Family Security Index and Portfolio

Frances Deviney, Ph.D., Senior Research Associate (deviney@cppp.org)Frances Deviney, Ph.D., Senior Research Associate (deviney@cppp.org)Celia Hagert, Senior Policy Analyst (hagert@cppp.org)Celia Hagert, Senior Policy Analyst (hagert@cppp.org)

900 Lydia Street, Austin TX 78702 900 Lydia Street, Austin TX 78702 www.cppp.org 512.320.0222

What is Poverty?

The Idea of Poverty - a condition of economic hardship

Quantifying Poverty - technical meaning to define who is poor – “federal poverty level” to measure how many people are officially

poor – “poverty thresholds”

What is Poverty?

The “federal poverty level” (FPL) - Individuals in families with income below the federal poverty level are considered poor

Guidelines reflect the minimum amount of income that American households need to subsist

Federal poverty “guidelines” are used to determine eligibility for many federal, state, and local programs

Private organizations also use these guidelines to target their services to low-income families

What is Poverty?

2006 Federal Poverty Guidelines

Family Size

Annual Income* Monthly Hourly**

1 $ 9,800 $816 $4.71

2 13,200 1,100 6.34

3 16,600 1,383 7.98

4 20,000 1,666 9.61

5 23,400 1,950 11.25

6 26,800 2,233 12.88

*For each additional person, add $3,400 **Calculation based on 52 weeks at 40 hours per week

SOURCE:  Federal Register, Vol. 71, No. 15, January 24, 2006

 

What is Poverty?

Eligibility for Family Support Programs, 2005

185% 185% 130% 250% 150% 14%0%

50%

100%

150%

200%

250%

300%

WIC Reduced-PriceSchool Meals

Food Stamps &Free School Meals

Max. Child Care Typical Child Care TANF CashAssistance*

Dollar Amounts: Annual income levels for a family of three

$29,767

eff. 7/1/05

$20,376

$40,182

$23,505

$2,256

Full-time minimum wage: $10,712 per year(67% of poverty)

$29,767

eff. 4/1/05

* Income limit shown is for applicants. Once on TANF, some families with earnings disregards and other allowances for work-related expenses can have higher incomes yet continue to receive some cash assistance.

What is Poverty?

Income Caps for Texas Medicaid & CHIP, 2005

133

133

100

133

200

73

73

24

14

221

185

185

0 50 100 150 200 250

Newborns

Ages 1 to 5

Ages 6 to 18

CHIP

Pregnant Women

TANF Parent of 2,

Working Parent of 2

SSI (aged or disabled)

Long-Term Care

Federal Mandate State Option

Percent of federal poverty line:

Annual Incom

e Limit*

$29,767

$21,400

$16,090

$32,180

$29,767

$2,256

$3,696

$6,948

$20,844

* Annual income limit is for a family of 3 in child & parent categories. For SSI and Long-Term Care, income cap is for one person.

No Income

What’s Wrong With the Poverty Measure? Conventional Thinking About Poverty No Longer

Works

Established in the 1960s based on assumption that cost of food accounted for one-third of household spending

Significant shifts in household expenses since then No measurement of other household costs Varying rates of inflation for specific expenditures Taxes and benefits not included No provision for geographic variation No accounting for change in standard of living

From Poverty to Family Economic Security

Toward an Alternative Poverty Measure

What’s acceptable? - Poverty defined as safe and decent standard of living, not a measure of deprivation

Poverty as a measure of costs, not income In 2001, CPPP published Making It: What it

Really Takes to Live in Texas,” featuring the “Family Security Index” and the “Family Security Portfolio”

As Americans, we generally believe that economic opportunity is available to anyone willing to work hard. But when families with two parents working three jobs still cannot meet basic needs, something additional is required. We must make good on our common belief that hard work brings prosperity—or at least sustenance. We must put together the portfolio of wages, employee benefits, nonprofit and faith-based services that will create family economic security. Let us exclude no one from the land of opportunity.

--From Making It: What It Really Takes to Live in Texas

What is the Family Security Index?

What is the Family Security Index?

A “market-basket” approach to determine how much income working families require to meet their basic needs

Provides a realistic, yet conservative, estimate of the income needed to support working families in Texas

Uses most current available data to estimate the specific costs faced by families of various size and composition

Documents variation in costs across different regions of the state

Criteria

Geographically specific 27 “metropolitan statistical areas” (MSAs) in Texas

Variety of family types Two-parent, single-parent, children of different ages, and

adult households without children

Most conservative, yet realistic estimates – the “austerity check”

The “Austerity Check”

Does not include the cost of video rentals, movies, cable television, eating out, other entertainment, or long distance telephone.

Omits expenditures for birthday and holiday gifts.

Does not include any expenses for credit card debt, or for saving to cover education, retirement, or family emergencies.

Does not include cushion for emergency or unanticipated expenses (e.g., car repair)

Family Security Index Budget Items Housing

Cost of rent and utilities with exception of phone Food

Monthly cost of food prepared at home Child Care

Monthly cost of child care specific to age of child(ren) Medical

Costs of total health care premium plus monthly out-of-pocket

TransportationGas, registration fees, taxes, routine maintenance, and

loan payments Other Necessities

Local phone, clothing, personal care, housekeeping, and reading supplies

Payroll and Federal Income Tax EITC, Child Tax Credit, and Dependent Tax Credit

Housing $858

Food$418Child Care $569

Medical$727Transportation $391

Other Necessities$321

Monthly Expenses $3,284

Monthly ExpensesMonthly Expenses

(For a family of two adults and two children in the Austin-San Marcos MSA)

FSI 2001

Payroll Tax $251

Income Tax $298

Earned Income Tax Credit

Child Tax Credit ($83)

Child & Dependent Care Credit($80)

Taxes and Tax Credits $386

Federal Taxes

(For a family of two adults and two children in the Austin-San Marcos MSA)

FSI 2001

Necessary Monthly Income $3,670Necessary Annual Income $44,044Household Hourly Wage $22Poverty Threshold $17,463

Percent Poverty Threshold 252%

What It Really Takes to Live in Austin

(For a family of two adults and two children in the Austin-San Marcos MSA)

FSI 2001

What It Really Takes To Live in Texas

El Paso $35,131

Laredo $35,530

San Antonio $37,300Brownsville $37,558

Lubbock $38,288

Houston Houston $40,669$40,669

Dallas $43,461

Austin $44,044

(For a family of two adults and two children)

FSI 2001

The Family Security Portfolio

Community-specific and comprehensive approach to help families meet basic needs and build economic security

Comprehensive set of services and programs to ensure the well-being of all working families in Texas, anchored by both private and public commitments

Improved wages and benefits a key component of the Family Security Portfolio

Family-based coordination of services from state and local government, non-profit service providers, faith-based organizations

The “Austerity Check”

Families often remain on Section 8 waiting lists for several years before receiving housing assistance

The Thrifty Food Plan assumes that families never purchase fast food or restaurant meals

5.5 million Texans, one-quarter of the population, were uninsured in 2003. Only 52 percent of Texans receive health insurance through their employers (9 percent below national average).

In all but one state, the yearly cost of full time child care exceeds annual public college tuition

How to Use the Family Security Index

Education - To create public understanding of the real constraints faced by families with limited income, even at what’s often considered a “moderate level” of income

Planning - To establish a more realistic benchmark for program planning and evaluation, especially welfare and workforce

Advocacy - To guide the coordination of joint state and local efforts to support low- and moderate-income working families

What Do You Think?

Updated FSI due late Summer/early Fall

Comments?

Feedback?

Suggestions?