While they can't tell the whole story about a family's economic situation, federal poverty guidelines are often used as a start for assessing a household's need for financial assistance.
About Poverty Guidelines
In 2017, the guidelines for poverty in the 48 contiguous states and the District of Columbia were:
- 1-person household - $12,060
- 2-person household - $16,240
- 3-person household - $20,420
- 4-person household - $24,600
- 5-person household - $28,780
- 6-person household - $32,960
- 7-person household - $37,140
- 8-person household - $41,320
For families with more than eight persons, add $4,180 for each additional person to determine the poverty guidelines.
Poverty guidelines are figured on the basis of annual income before taxes. Sources of income used to calculate poverty status include:
- Earnings from employment
- Unemployment compensation
- Workers compensation
- Child support
- Assistance from outside the household and other miscellaneous sources
- Public assistance
- Veterans payments
- Survivor benefits
- Pension or retirement income
- Interest, dividends, rents, and royalties
- Income from estates or trusts
- Educational assistance
- Social Security
- Supplemental Security Income
Use of Poverty Guidelines
Poverty guidelines are important because they are often used to determine a person's eligibility for various forms of public assistance. Many programs use the poverty guideline or a multiple of the guideline, such as 125 percent of the federal poverty level, as the basic criteria for screening applicants.
- Head Start
- Food Stamp Program
- National School Lunch Program
- Low-Income Home Energy Assistance Program
- Children's Health Insurance Program
Problems with Federal Poverty Guidelines
While poverty guidelines can be a useful tool for determining financial need among various populations, it's important to realize that they have flaws as well.
Statistics regarding poverty in the United States can be misleading because they exclude certain groups of people whose status can't be calculated according to official government formulas. This includes:
- Nursing home residents
- College students living in dormitories
- Soldiers living in military barracks
- Foster children
- Homeless people who do not live in official shelters
Value of Non-Cash Benefits
While poverty statistics take into account all cash income, they don't consider the value of non-cash assistance a family receives. This includes:
- Free lunches for low-income school children
- Housing assistance
- Earned Income Tax Credit
Non-cash gifts or regular assistance from other family members are also not figured into a person's income for the purpose of determining poverty status. For example, an adult child who pays his mother's rent directly to the apartment owner is giving her significant financial assistance. However, since the money is not paid to the mother, this assistance is not considered when determining her poverty status.
Regional Costs of Living
Although the federal poverty guidelines do have separate tables to calculate poverty in Alaska and Hawaii, there are still significant regional differences in the cost of living throughout the United States. A person living in the Midwest, for example, can get by on a much lower income than someone who is living in states such as New York or California.
Economic Changes Over Time
Many people believe that the federal poverty guidelines vastly underestimate the amount of money a family needs to be self-sufficient in today's economic environment. Poverty thresholds were created in 1963 using Department of Agriculture food budgets for families under economic stress. At the time, families spent a much larger portion of their income on food than what they do today. Food prices have decreased greatly in recent decades, while the cost of housing, medical care, and child care has skyrocketed.
In fact, most economic advocacy groups estimate a true living wage would be about $10 per hour or an annual salary of $20,800 plus benefits. A living wage for a person working at a job that did not offer benefits would be $11.50 per hour.