The federal poverty level is the minimum annual income required to avoid living in poverty in the U.S. Any level of income below this level is considered insufficient to meet the basic necessities of life. The poverty level is determined based on a scheme devised in the 1960s and updated annually for inflation. The term refers to two slightly different metrics set by the government, one of which is used to determine eligibility for both state and federal programs. The methodology used to calculate poverty levels is sometimes criticized because it does not take into account different standards of living.
Poverty levels are calculated annually for both individuals and households using slightly different methods. Any person or household that earns less than the federal poverty level in a given year is considered by the government to be living in poverty. For example, a family of four that earned less than $22,050 US Dollars (USD) in 2009 would be considered to be living in poverty. This means it is difficult or impossible for the family to afford the basic needs of life, such as food, water, and shelter.
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The federal poverty level is based upon work and research carried out in the early 1960s by Mollie Orshansky of the Social Security Administration. Orshansky, aware that families of 3 or more often spent a third of their income on food, devised a scheme that took the cost of a cheap meal plan from the Department of Agriculture and multiplied it by three. For families of two or fewer, a multiplier of 3.7 was used. Since 1969, Orshansky's original numbers have been adjusted for inflation annually using the Consumer Price Index.
The terms "federal poverty level" and "poverty line" can actually mean two slightly different things — poverty thresholds and the poverty guidelines. Poverty thresholds are calculated by the U.S. Census Bureau, and are used for statistical purposes. The Department of Health and Human Services (HHS) creates the poverty guidelines using a simplified version of the Census Bureau's thresholds. Poverty guidelines are used to determine eligibility for many federal and state programs, such as Head Start, the Department of Agriculture's food assistance program, and some community healthcare services. Some programs, such as those created under the Patient Protection and Affordable Care Act of 2010, use income levels up to 400% of the poverty guidelines to determine eligibility for benefits.
Some have criticized the official federal poverty level figures as being an unrealistic measure of poverty in America. Critics point to the assumption that low-income families still spend a third of their income on food, as they did in the 1960s when the methodology was established. The official guidelines are also the same across the 48 contiguous states, with no accounting for regional differences in the standard of living. Separate measures are used in Alaska and Hawaii. Several alternative methods have been proposed and even tested by government agencies, but so far none of these have been adopted as the official measure of poverty.