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November 22, 2013

We Value What We Measure

The official measure of poverty shows a three-year average poverty rate in Virginia of 11 percent over the three years since the recession ended, well below the national rate. But in reality, even more Virginians – 13.3 percent, or one in eight – are struggling to meet their most basic daily needs.

Why the disparity? The decades-old formula used to determine the official rate uses food costs alone to gauge the minimum income necessary to meet a family’s most basic needs. Back when the formula was created, food costs typically consumed a third of a family’s income, with the rest devoted to other essential expenses.

But that was then.

The Census Bureau recently released updated poverty data using the Supplemental Poverty Measure (SPM) – a more accurate method of calculating the poverty rate that accounts for household expenses that the official measure overlooks, like out-of-pocket medical costs, work expenses such as transportation, and taxes. SPM also includes the value of non-cash benefits like housing subsidies and nutritional assistance in a family’s income. And it bases the poverty threshold on the cost of all of a household’s basic expenses, including clothing and utilities, adjusted for family size and geographic differences in housing costs.

In most states, the SPM shows a lower poverty rate than the official measure. But not here. According to the SPM, Virginia’s poverty rate goes up to 13.3 percent, due in part to the state’s high cost of living.

That means more than a million people are struggling to get by every day. At a time when it can seem like Virginians are defying the national economic odds with one of the highest statewide median incomes in the country, lawmakers need to remember that for a large number of Virginians, happy days have not returned.

–Mitchell Cole, Research Assistant

The Commonwealth Institute

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