More Than Getting By

As the latest American Community Survey data from the Census Bureau shows us, Minnesota continues to have a low poverty rate relative to other states. Why then are so many people in Minnesota struggling to get by?

It is important for people thinking about the health of families in Minnesota to understand what the poverty rate does and does not tell us. The poverty rate was established in the 1960 by an economist at the Social Security Administration as a measure of minimum family expenses.1 While the amount has been adjusted over time, the methodology has not been changed to reflect how we live today nor does it reflect geographic differences in the cost of living either within or across states.

Currently the poverty measure for a family of four with two adult and two children is $24,848.2

NSPI analysis of ACS Data

According the to the Economic Policy Institute’s Family Budget Calculator, a household of this size in Nobles County, a rural county in Southwest Minnesota, would need to make $80,850 to achieve an adequate standard of living – about 325% of the poverty measure.3 The Minnesota Department of Employment and Economic Development does their own assessment of cost of living and puts the amount to achieve basic needs for a family of 2 adults and two children  at about $54,285 or around 218% of the poverty measure.4

What accounts for the difference between the poverty level and what it takes for a family to thrive? Methodology and geography are two of the biggest factors. The poverty measure is determined based on an estimate about how much it costs to feed a family of various sizes multiplied by three.5 The number is consistent across the country and so whether you are in Minneapolis, Mora, or Manhattan the poverty threshold is the same.

When the poverty measure was created in the 1960s the percent of a family budget that went toward food was higher than it is today. In 1960, a family with one wage earner dedicated 26% of their budget to food.6 Today the percentage of a family budget spent on food is significantly lower –  about 10% of a family budget – while housing, transportation, healthcare, and childcare make up a larger proportion of household expenses.7

NSPI analysis of ACS, EPI, and DEED 

As opposed to one measure that is used across the country, place matters in understanding an accurate family budget. For example, using HUD fair market rents for a two bedroom apartment, a family of four in Nobles County would spend about $717 on housing while the same family in Hennepin County would pay about $1,102.8 The calculators from both EPI and DEED use geographically specific costs in order to more accurately determine cost of living in different communities.9

Both the family budget calculator from EPI  and the DEED also utilize a family budget breakdown that is a more accurate reflection of how a family budgets today. While the poverty measure uses the family food budget as an approximation of expenses, EPI and DEED both use categories such as housing, transportation, healthcare, and childcare to achieve a more precise estimate of living costs.10

Poverty can be a useful tool for understanding how we compare to other states or how things have changed over time for Minnesota families. There are, however, other more specific and more accurate measures that we can use to understand the state of Minnesota families. As we are crafting policies it is important that we have measures that aim for where we want to be rather than what it takes to just get by in Minnesota.

 

 

1. United States Census Bureau, The History of the Official Poverty Measure
2. United States Census Bureau, Poverty Thresholds by Family Size and Number of Children

3. Economic Policy Institute, Family Budget Calculator
4. Minnesota Department of Employment and Economic Development, Cost of Living in Minnesota
5. Measuring American: How the U.S. Census Bureau Measures Poverty
6. Bureau of Labor Statistics, A Century of Family Budgets in the United States, https://www.bls.gov/opub/mlr/2001/05/art3full.pdf
7. Economic Policy Institute, Family Budget Calculator. See also United States Department of Agriculture Economic Research Service, Americans’ budget shares devoted to food have leveled in recent years
8. United States Department of Housing and Urban Development, FY 2018 Fair Market Rent Documentation System

9. Minnesota Department of Employment and Economic Development, Cost of Living in Minnesota and Economic Policy Institute, Family Budget Calculator
10. Ibid.