The Big Apple gets poorer

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Fed up with the slow-moving federal government, America’s local municipalities and states have recently launched many reform plans themselves, including health care (Massachusetts’s universal health initiatives) and global warming (California’s emissions caps). New York City, already a model in policing and an emerging one in school reform, is now tackling poverty. To fight it properly you need good figures; as the late Senator Daniel Patrick Moynihan once said, “you can’t solve a problem until you can measure it.” So Michael Bloomberg, New York’s mayor, announced on July 13th an alternative to the federal poverty measure.

This measure, now 40 years old, assesses pre-tax cash income against a number of thresholds, based primarily on food spending. But this has decreased from one-third to one-eighth of average household spending over the past four decades. Housing, which now makes up more than 30% of family expenditure, is not taken into account. Nor are regional cost-of-living differences. A two-bedroom apartment, for instance, costs $1,318 a month in New York City and $1,592 in San Francisco, contrasting sharply with the national average of $867 and one Mississippi county’s $498. On the income side, non-cash benefits such as subsidised housing and food stamps, are ignored. So is the earned-income tax credit, a wage subsidy geared towards the working poor.

The new formula is based on recommendations made at Congress’s request in 1995 by the National Academy of Sciences, but never implemented federally. Defining who is poor is a touchy subject. The NAS measures reflect spending on food, clothing, shelter and utilities, which are assumed to equal about 80% of median family expenditures. Adjustments are made for transport costs, child care and out-of-pocket medical costs.

This measure increases the numbers of New York’s poor, from 19% of the population to 23%. Under the new calculus, the new poverty line for a family of four is $26,138, not the official federal level of $20,444. The new measure reveals that a smaller number of New Yorkers live in extreme poverty, but shows a higher proportion of working poor—and a shocking poverty rate among the elderly: 32%, compared with the federal estimate of 18%.

The mayors of Los Angeles, Miami and Cincinnati have praised New York’s boldness. Congress may also be inspired to change the national poverty formula, and was due to start hearings on July 17th.