Following the Office of Management and Budget's (OMB) Statistical Policy Directive 14, the Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty. If a family's total income is less than the family's threshold, then that family and every individual in it is considered in poverty. The official poverty thresholds do not vary geographically, but they are updated for inflation using Consumer Price Index (CPI-U). The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).
Income Used to Compute Poverty Status (Money Income)
Measure of Need (Poverty Thresholds)
Poverty thresholds are the dollar amounts used to determine poverty status.
Each person or family is assigned one out of 48 possible poverty thresholds [XLS - 48k]
Thresholds vary according to:
The same thresholds are used throughout the United States (do not vary geographically).
Updated annually for inflation using the Consumer Price Index for All Urban Consumers (CPI-U).
Although the thresholds in some sense reflect families needs,
Poverty thresholds were originally derived in 1963-1964, using:
If total family income is less than the threshold appropriate for that family,
If total family income equals or is greater than the threshold, the family (or unrelated individual) is not in poverty.
Family A has five members: two children, their mother, father, and great-aunt.
Their threshold was $28,087 in 2012. (See poverty thresholds for 2012). [XLS - 48k]
Suppose the members' incomes in 2012 were:
|Total Family Income||$29,000|
Compare total family income with their family's threshold:
Since their income was greater than their threshold, Family A is not "in poverty" according to the official definition.
The income divided by the threshold is called the Ratio of Income to Poverty.
-- Family A's ratio of income to poverty was 1.03.
The difference in dollars between family income and the family's poverty threshold is called the Income Deficit (for families in poverty) or Income Surplus (for families above poverty)
-- Family A’s income surplus was $913 (or $29,000 - $28,087).
People Whose Poverty Status Cannot Be Determined
Unrelated individuals under age 15 (such as foster children):
Authority Behind Official Poverty Measure
The official measure of poverty was established by the Office of Management and Budget (OMB) in Statistical Policy Directive 14
To be used by federal agencies in their statistical work.
Government aid programs do not have to use the official poverty measure as eligibility criteria.
Official poverty data come from the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC), formerly called the Annual Demographic Supplement or simply the "March Supplement."