The Poverty Line Is Broken: Here’s How We Can Fix It

Since the 1960s, the United States has measured poverty using a tool that no longer reflects reality. As housing costs soar, childcare becomes a second rent, and healthcare bills spiral out of reach, the Federal Poverty Level (FPL) remains mostly unchanged — still based on a decades-old formula that assumes food is a third of your budget.

Spoiler: it’s not. And it hasn’t been for a long time.

Let’s break down why the FPL is outdated, what poverty in America actually looks like today, and what we should be using instead.

What Is the Federal Poverty Level?

The Federal Poverty Level was developed in 1963 by government economist Mollie Orshansky. She based it on the cost of a bare-bones food plan developed by the USDA. Since families in the 1960s spent roughly a third of their income on food, Orshansky multiplied the cost of the "Economy Food Plan" by three to define poverty.

Cost of bare-minimum food plan × 3 = Poverty Line 

That’s it. That’s the formula.

And while the FPL has been adjusted for inflation over the years, it hasn’t been modernized. Which means in 2024:

• A single adult is considered in poverty if they earn less than $15,060 a year.

• A family of four? Less than $31,200.

Ask yourself: could your family survive on that?

Why the FPL No Longer Works

We live in a very different world than we did in 1963, but the FPL hasn’t caught up. Here’s what it gets wrong:

1. Food Isn’t the Largest Expense Anymore

Today, food typically makes up only 10–15% of a household’s budget. The biggest costs now are housing, healthcare, childcare, and transportation — none of which the FPL accounts for.

2. It Doesn’t Vary By Region

Someone in rural Mississippi has wildly different living costs than someone in San Francisco. But the poverty line? It’s the same in both places.

3. It Ignores Modern Necessities

Today, internet access, insurance, school fees, and digital tools are essential. The FPL doesn’t factor any of them in.

4. It Undercuts Our Understanding of Need

Because the FPL is so low, millions of families who are struggling every day don’t qualify as "poor" — and get left out of programs designed to help.

So How Many People Are Actually in Poverty?

Official statistics say about 11.5% of Americans live in poverty.

But if we used a more realistic model — one based on actual cost of living — that number could rise to 30–45%. That’s not an exaggeration.

Let’s look at some real numbers using MIT’s Living Wage Calculator, which estimates what a household needs to meet basic needs without public assistance:

 We’re not just a few dollars off — we’re talking about tens of thousands in missing income.

What Should We Do About It?

At The Poverty Solution, we believe it’s time to retire the outdated poverty line and adopt a more accurate, human-centered model. That’s why we’re proposing a Modern Poverty Level — an up-to-date, location-adjusted framework for measuring real need.

✅ A Modern Poverty Level (MPL): Our Proposed Solution

To effectively define and address poverty, we recommend shifting to a Modern Poverty Level that includes:

🏠 Realistic Cost-of-Living Measures

• Based on average local prices for housing, food, healthcare, childcare, and transportation

• Uses data from HUD, USDA, and regional cost calculators like MIT’s Living Wage

🌍 Geographic Adjustments

• Poverty lines that reflect local living expenses — urban vs rural, state vs state

🧾 After-Tax Income

• Includes deductions, credits, and net household income — not just gross earnings

🧩 Essential Modern Expenses

• Access to internet, technology, and basic insurance are no longer luxuries

• Include those costs in the baseline calculation

📊 Public + Private Support Index

• Tracks availability and accessibility of support programs (SNAP, WIC, housing vouchers) to adjust the poverty line based on real-world gaps

Why This Matters

A more accurate poverty measurement means:

• Better targeting of programs for those who truly need them

• More honest conversations about economic hardship

• Policy solutions rooted in reality, not outdated math

If we don’t measure poverty correctly, we’ll never solve it.

Join the Movement

We're not just studying poverty. We're building the systems to end it.

🚀 Explore our Poverty Alleviation System — a community-centered strategy built around the Model Poverty Level.

📣 We’re also thrilled to announce our new podcast:
“Essential Leadership to End Poverty” launching July 1!
Stay tuned for bold conversations with the leaders creating real change.

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Let’s create a future where no one is left behind simply because the math was wrong.

 Written by: 

Sources

• Living Wage Data:
  Glasmeier, Amy K. MIT Living Wage Calculator. Massachusetts Institute of Technology. https://livingwage.mit.edu

• Poverty Underestimation (30–45%):
  Collyer, Sophie, David Harris, and Christopher Wimer. Poverty in the Pandemic: Hardship Among Low-Income Adults in the U.S. Center on Poverty and Social Policy, Columbia University, 2020. Read the report

•  West, Rachel, Melissa Boteach, and Rebecca Vallas. Harnessing the Child Tax Credit as a Tool to Invest in the Next Generation. Center for American Progress, 2015. Read the report

• ALICE Threshold: According to the United Way's ALICE (Asset Limited, Income Constrained, Employed) project, in 2022, 42% of U.S. households fell below the ALICE Threshold, indicating they couldn't afford basic necessities despite earning above the official poverty line. Investopedia