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The federal poverty standard, developed in 1964, is often criticized as being an inadequate measure of financial stress. A new measure, the Self-Sufficiency Standard, has been developed by Dr. Diana Pearce of the University of Washington. The Self-Sufficiency standard offers a more complete and realistic picture of the amount of income required to make ends meet. The standard varies according to a number of variables that affect a household’s cost of living. This article explains Dr. Pearce’s Self Sufficiency Standard for each of Oregon’s counties and household types and describes the results of a demographic analysis of households in Oregon. The analysis summarizes the characteristics of households that do and do not meet the Self-Sufficiency Standard.

Table of Contents

1. Introduction

The methodology used to determine annual federal poverty thresholds was developed in 1964 as a measure of the adequacy of a household’s income for providing its most basic needs. Developed by Mollie Oshransky of the Social Security Administration, the methodology was based on her analysis of consumption data that showed that families of three or more persons spent about one third of their after-tax money income on food in 1955. She developed the thresholds based on this assumption and the cost of the Department of Agriculture’s Economy Food Plan^[1]. The thresholds vary by size of household and number of related children below 18 and they are adjusted over time for inflation. However, the methodology does not account for differences in the cost of living due to location, age of children, or other factors^[2]. Furthermore, the spending assumptions on which the methodology was based are outdated. According to the 2007 Consumer Expenditure Survey, U.S. households now spend an average of 12.4 percent of all their spending on food. Even for very low-income households, this percentage is about 15 percent^[3], much lower than the one-third assumed in the methodology for calculating the federal poverty thresholds.

Many researchers and policy analysts have criticized the FPL as out of date and an inaccurate measure of poverty. They argue that the FPL overlooks a number of families who are experiencing economic distress. Because many federal and state safety net programs are based on the FPL^[4], this means that many households who are in economic distress might not receive assistance.

Dr. Diana Pearce, Director of the Center for Women’s Welfare at the University of Washington, has developed an alternative measure of income adequacy called the Self-Sufficiency Standard^[5]. This measure considers many factors ignored by the federal poverty thresholds. For example, the Self-Sufficiency Standard includes the cost of housing, childcare, food, health care, transportation, and reflects differences in these items by geography. It also varies by the ages of children in a household to reflect how a household budget varies as needs for child care, health care, and food vary with the age of children. Finally, the standard also includes the effect of taxes and tax credits. Dr. Pearce’s work was funded by WorkSystems Inc.

Dr. Pearce has calculated the Self-Sufficiency Standard for each of Oregon’s counties, and this is reflected in Table 1. Table 1 also includes the median household income for each county and the federal poverty standard for each household type.

Table 1: Self-sufficiency Wages for All Counties in Oregon State and Federal Poverty Level, 2008

Sources: The Self-Sufficiency Standard for Oregon State by Diana Pearce at University of Washington. The data are also available here. Note: *, Median Household income obtained from the American Community Survey for the period of 2005 to 2007. All values in US Dollars.

Table 1 shows that for a single adult, the most expensive county in Oregon is Washington County, with a Self-Sufficiency Standard of $22,646. The least expensive county in Oregon is Baker County, with a Self-Sufficiency Standard of $15,927 for a single adult. The table also shows that the federal poverty threshold for a single adult, $11,201, is inadequate income for any of Oregon’s counties.

Table 1 also reflects changes in the Self-Sufficiency Standard as household size and composition changes. In Clackamas County, for example, an adult with an infant must make $41,894 to meet the Self-Sufficiency Standard, while an adult with a preschooler only needs $39,663. This reflects the standard’s sensitivity to differences in the cost of childcare from an infant to an older child.

Finally, Table 1 shows how the Self-Sufficiency Standard compares to the median household income in each county for 2005-2007^[6]. In most counties, the median household income is sufficient to meet the Self-Sufficiency Standard. However, keep in mind that this is the median, or middle income level. That means that half of the households earn less, and half earn more, than the median income.

The Institute of Portland Metropolitan Studies has used Dr. Pearce’s calculations and information from the American Community Survey to calculate the percentage of households earning sufficient income to meet their basic needs. Our objective for the analysis was to further our understanding of the extent of poverty in Oregon, the geographic areas and households types most affected, and the extent to which the existing federal poverty standard disregards households failing to make ends meet. A detailed description of the methodology and assumptions used in the analysis is provided at the end of this article.

This policy brief offers a quick glance of the results of our analysis. A more thorough analysis and report is forthcoming and will be available by the end of June 2009 on the IMS web site. The data developed for the analysis are available for download by exploring the tables and charts contained in this policy brief.

2. Self-Sufficiency in Oregon’s Counties

Figures 1 and 2 offer an overview of the percentage of households not meeting the Self-Sufficiency standard and federal poverty level by county in Oregon. Statewide, 27.1 percent of all households do not earn enough money to meet the Self-Sufficiency standard for their county and household type. The map shows that the counties with the highest percentage of households with inadequate income include Benton, Coos, Curry, Josephine, Lane, and Linn Counties. Within these counties, at least 30 percent of households do not earn enough to meet their basic needs as defined by the Self-Sufficiency Standard. Counties with the lowest percentage of households not meeting the standard include Clackamas, Multnomah, and Douglas Counties.

Figure 1: Percent of Population below Federal Poverty Level, by County

Figure 2: Percent of Population below the Self-Sufficiency Standard, by County

A closer look at the data in Table 2 offers additional insights about the Self-Sufficiency Standard and its relationship to the federal poverty standard. For example, while only 7.8 percent of households in Lincoln County don’t earn enough income to meet the federal poverty standard for their household type, an additional 21.8 percent are above the federal poverty standard but below the Self-Sufficiency Standard. A policymaker examining poverty in Lincoln County using only the federal poverty standard might not realize that there is such a large number that fall in between the two standards. These households may be forgotten as targets of prosperity policy.

Note that when reading this table and most of the tables that follow, the percentages sum to 100% by row; for example, in Baker County, 13.2% + 14.7% = 27.9% (the subtotal percentage below self-sufficiency in Baker County), and  27.9%+72.1% = 100% (all people in Baker County).  This allows us to examine the effect that membership in a row category  has on the self-sufficiency outcome.  For example, we see that if a person lives in Benton County, they have a 31.0% chance of falling below the self-sufficiency standard, but if they live in Clackamas County, their chances fall to 24.8%, all other things being equal.

Note also that all totals and subtotals will be bolded in the tables.  So in Table 2, “Total Percent Below Self-Sufficiency Standard” is a subtotal of “Percent Below Poverty” and “Percent Above Poverty [But Still Below Self-Sufficiency Standard]“, so it is bolded.

Table 2: Self Sufficiency Standard and Federal Poverty Level for Households by County in Oregon: 2005-2007

Source: American Community Survey, 1% PUMS data 2005-2007

3. Self-Sufficiency and Ethnic Origin

It is widely understood that poverty falls disproportionately on households headed by non-whites. Table 3 reinforces our understanding by showing that while only 23.7 percent of white Oregon households earn income insufficient to meet the Self-Sufficiency Standard, the percentage is 56.2 percent for Latinos (of any race), 42.3 percent for black households, 37.9 percent for Native Americans, and 32 percent for Asian and Pacific Islanders.

Table 3-A: The Self-Sufficiency Standard, and Federal Poverty Level by Race of Householder by Household Income: Oregon 2005-2007

Source: American Community Survey, 1% PUMS data 2005-2007. * Latino may be of any race

Table 3-B: Percentage Households by Race: Oregon 2005-2007

Source: American Community Survey, 1% PUMS data 2005-2007. * Latino may be of any race

4. Women and Self-Sufficiency

Women head of households are also less likely to meet the Self-Sufficiency standard than are men. In Table 4-A we see that female headed households have a higher chance of falling below the self sufficiency standard than male-headed households, with 32% of all female headed households in Oregon below the standard and 23% of male households below. We also see from Table 4-B that this percentage increases to 61% of married family households headed by a female with children but without a spouse.

Note that unit of measurement here is the household, rather than population; so we are counting groups of people that live together at a single address. We are not counting “group quarters” population (for example, prisoners or military servicepeople housed in barracks); we are also not counting households headed by either the disabled or someone outside the ages 18-64. Note also that like above the percentages are calculated by row; for example on the first row we read across, and see that 23% of males are below the SSS, 73% are above it, and the total (in the far left column) is 100%, accounting for all the male headed households in Oregon able to work (a total of 567,776 households).

Table 4-A: The Self-Sufficiency Standard by Sex of Householder

Table 4-B: The Self-Sufficiency Standard by Household Type

Table 4-C: Percentages of household types within Oregon

5. Self-Sufficiency and Education

We also know that education is tied to income. Figure 3 and Table 5 demonstrate that relationship by showing that for both white and nonwhite female and males, the percentage of households not meeting the Self-Sufficiency Standard falls as the level of education rises. Among households headed by nonwhite females with less than a high school education, 75.9 percent do not meet the Self-Sufficiency Standard. For those households, the percentage falls to 28.1 percent if the female head of household has a bachelor’s degree or higher. Similarly, for households headed by a white male, the percentage falls from 36 percent for those with less than a high school education to 11 percent for those with a bachelor’s degree or higher.

Figure 3: Households Below the Self-Sufficiency Standard, by Education, Race/Ethnicity, and Gender: Oregon 2005-2007

Table 5-A: The Self-Sufficiency Standard by Education Level, Gender, and Race: Oregon 2005-2007

Table 5-B: Household distribution by educational attainment, sex, white or non-white.

Source: American Community Survey, 1% PUMS data 2005-2007. Note: The householder is the person (or one of the persons) in whose name the housing unit is owned or rented or , if there is no such person, the householder is any adult member, excluding roomers, boarders, or paid employees.

6. Self-Sufficiency and Work

Having a steady job does not guarantee the ability to meet basic needs, as shown in Table 6. In Oregon many households with two workers still do not meet the Self-Sufficiency Standard. Even for households without children and two working adults, 11.9 percent do not meet the Self-Sufficiency standard. Among households with children and two workers, 20.4 percent of those headed by a male or part of a married couple don’t make the standard, while 44.7 percent of those headed by a female don’t meet the standard, despite the presence of two workers.

Table 6-A: The Self-Sufficiency Standard and Federal Poverty Level by Work Status of Adults: Oregon 2005-2007

Source: American Community Survey, 1% PUMS data 2005-2007

Table 6-B: The Distribution of Households by Work Status of Adults: Oregon 2005-2007

Source: American Community Survey, 1% PUMS data 2005-2007

7. Conclusion

The Self-Sufficiency Standard developed by Dr. Diana Pearce offers a more realistic view of what it takes to get by in Oregon and shows us who is getting by and who is not. Although only 9.7 percent of Oregon’s households earn incomes below the federal poverty standard, 27.1 percent do not make enough to meet basic needs without assistance. Many households with a good education and two workers still cannot meet the Self-Sufficiency Standard. This information sheds additional light on the economic realities facing many of Oregon’s households.

To read about Metholodology and Assumptions for this analysis, click here.

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