A Look at the New Supplemental Poverty Measure

 

On November 7, 2011, the U.S. Census Bureau released the Research Supplemental Poverty Measure (SPM), developed based on recommendations from the National Academy of Sciences (NAS) Panel on Poverty and Family Assistance. The Supplemental Poverty Measure is an effort to build on the current federal poverty measure—which many experts agree is outdated and underestimates poverty—and take into account the impact of government benefit programs and tax credits. Though the SPM will not replace the current official poverty measure or be used to determine resource allocation or program eligibility, this release marks an important development in how we measure poverty and understand the impacts of programs designed to alleviate poverty.

The current official poverty measure was developed in the 1960s and consists of a set of thresholds for families of different compositions and sizes which are compared to before-tax cash income to determine poverty status.  The new SPM counts more income sources beyond cash income, including tax credits and non-cash benefits such as SNAP assistance; subtracts certain expenses, such as payroll taxes and medical out-of-pocket expenditures, that reduce disposable income; and uses slightly revised poverty thresholds that vary with family composition and local housing costs. The new SPM thresholds have received criticism for being too low a measure of what it really takes to minimally make ends meet, and for being lower for some states than those of the traditional measure.

The SPM remains a work in progress, and the report from the U.S. Census Bureau identifies areas for ongoing refinement of the measure. For most groups, the 2010 SPM poverty rates are higher than official rates; though the SPM does find lower poverty rates for some groups, including children, renters, individuals living outside of metropolitan areas, and individuals covered by only public health insurance. Beyond providing new estimates of poverty and hardship, the SPM shows us the impact of government help in keeping millions of families above poverty, and highlights the swelling ranks of the “near poor” – those who are living with incomes between 100 and 150 percent of the poverty line. Analysis of 2010 Census data using the Supplemental Poverty Measure highlights the following:

  • Without government income assistance of any kind, including benefits that are counted in the traditional measure, the poverty rates in 2010 would have been nearly double what they were actually were – 28.6 percent rather than 15.5 percent.
  • SNAP benefits, if counted as income in the traditional measure, would have kept over 3 million out of poverty in 2010 – an increase from 2.2 million in 2007. Temporary expansions in maximum SNAP benefits in the 2009 Recovery Act kept 1 million people out of poverty in 2010.
  • Unemployment insurance kept 4.6 million people out of poverty in 2010.  Temporary expansions in level and duration of unemployment insurance benefits in the 2009 Recovery Act kept 3.4 million people above the poverty line.

Read the report, The Research Supplemental Poverty Measure: 2010, from the U.S. Census Bureau.

This blog was written by our guest blogger, Jenny Clary. Jenny is a Research Associate with the Social IMPACT Research Center at Heartland Alliance.

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National Partners Announce New Bank on Website

CFED, the U.S. Department of the Treasury,  the San Francisco Office of Financial Empowerment, the National League of Cities and the New America Foundation,  launched a new-and-improved Bank On website –  JoinBankOn.org. The site will serve asq home for the national community of Bank On initiatives

JoinBankOn.org was originally developed by the Treasurer of the City and County of San Francisco to widely share the lessons learned from the innovative Bank On San Francisco initiative launched in 2006. According to San Francisco Treasurer José Cisneros, the new site “is the online home of the nationwide movement to ensure everyone has access to the financial mainstream. It provides communities with easy access to information and resources for starting or enhancing local Bank On programs.”

One of the newest features of JoinBankOn.org is Research Your Community, a tool to get estimates and maps of the number of unbanked and underbanked households in your local community. This new tool allows you to:

  • Download estimates of unbanked and underbanked households at the state, county, city, MSA and census tract levels.
  • Download supplementary demographic data on at-risk populations in your community.
  • Print a customized report on the financially underserved members of your community.

Bank On Chicago, which launched in July, is serving 10 Chicago communities, partnering with 10 financial institutions, and engaging over 15 community partners. As a Bank On Chicago Steering Committee Member, IABG has been collaborating with the City Treasurer’s office and the community partners to ensure community members connect with safe banking products. In the City of Chicago, almost 35% of households are unbanked or underbanked. See a full profile of Chicago’s un/underbanked community on  JoinBankOn.org

This new national site can also provides:

  • A directory of Bank On programs across the country. Find a Bank On program in your community, learn about their initiative and connect to the program administrators all at JoinBankOn.org.
  • Downloadable resources where users can find and share materials useful at every stage in the development of a Bank On program.
  • Guides to help users start a program, including step-by-step instructions and recommendations for how to bring Bank On to your area.
  • News & Events, highlighting what’s going on around the country in financial access and economic inclusion.
  • Discussion forums where members can ask questions, share best practices and learn more about promoting financial access in their communities.

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Community Groups across the country, including the Illinois Asset Building Group (a project of Heartland Alliance), have been fighting the payday loan industry. We call them sharks. They’re a predatory industry. An industry outside of mainstream banks and other financial institutions.

But what if we were wrong?

Several major banks, and some credit unions, are now offering a product that looks, sounds, smells, and feels like a payday loan. Banks are now loaning their customers $100 with a fee of $7.50. That’s an annual interest rate of 261%. Sure, it’s lower than many payday lenders but it is still significant.

The American Bankers Association has tried to defend these programs, arguing that “direct deposit advance programs enable customers to live within their means by permitting them to manage the timing of the receipt of those means.” However, these are loans that appeal to the most vulnerable – to those most likely already caught in a cycle of debt.

Even states that have passed an interest rate cap are not safe from these products. In Maryland, advocates passed a 33% interest rate cap on small dollar loans yet their law would not extend to major banks.

While advocates at the state level continue to push for tighter regulations and close existing loopholes, the federal government has done little to regulate this growing industry:

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  • The Office of the Comptroller of the Currency, while concerned about banks that steer customers on Social Security towards these products, issued unspecific guidelines that about how the banks should regulate this activity.
  • The FDIC has advised the banks it oversees not to keep customers in this high-cost debt for more than 90 days of the year. But on average, bank payday loan borrowers are caught in this cycle for 175 days.

Here in Illinois, IL People’s Action (IPA) is building a movement against payday lending in their community. You can join their efforts through their Cap36 campaign.

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