An Alternative Poverty Measure: The Family Security Index and Portfolio

1. An Alternative Poverty Measure: The Family Security Index and Portfolio Frances Deviney, Ph.D., Senior Research Associate (deviney@cppp.org) Celia Hagert, Senior Policy Analyst (hagert@cppp.org) 900 Lydia Street, Austin TX 78702 www.cppp.org 512.320.0222

2. What is Poverty? • The Idea of Poverty - a condition of economic hardship • Quantifying Poverty - technical meaning • to define who is poor – “federal poverty level” • to measure how many people are officially poor – “poverty thresholds”

3. What is Poverty? • The “federal poverty level” (FPL) - Individuals in families with income below the federal poverty level are considered poor • Guidelines reflect the minimum amount of income that American households need to subsist • Federal poverty “guidelines” are used to determine eligibility for many federal, state, and local programs • Private organizations also use these guidelines to target their services to low-income families

4. What is Poverty? SOURCE:  Federal Register, Vol. 71, No. 15, January 24, 2006

5. What is Poverty?

6. What is Poverty?

7. What’s Wrong With the Poverty Measure? • Conventional Thinking About Poverty No Longer Works • Established in the 1960s based on assumption that cost of food accounted for one-third of household spending • Significant shifts in household expenses since then • No measurement of other household costs • Varying rates of inflation for specific expenditures • Taxes and benefits not included • No provision for geographic variation • No accounting for change in standard of living

8. From Poverty to Family Economic Security • Toward an Alternative Poverty Measure • What’s acceptable? - Poverty defined as safe and decent standard of living, not a measure of deprivation • Poverty as a measure of costs, not income • In 2001, CPPP published Making It: What it Really Takes to Live in Texas,” featuring the “Family Security Index” and the “Family Security Portfolio”

9. What is the Family Security Index? As Americans, we generally believe that economic opportunity is available to anyone willing to work hard. But when families with two parents working three jobs still cannot meet basic needs, something additional is required. We must make good on our common belief that hard work brings prosperity—or at least sustenance. We must put together the portfolio of wages, employee benefits, nonprofit and faith-based services that will create family economic security. Let us exclude no one from the land of opportunity. --From Making It: What It Really Takes to Live in Texas

10. What is the Family Security Index? • A “market-basket” approach to determine how much income working families require to meet their basic needs • Provides a realistic, yet conservative, estimate of the income needed to support working families in Texas • Uses most current available data to estimate the specific costs faced by families of various size and composition • Documents variation in costs across different regions of the state

11. Criteria • Geographically specific • 27 “metropolitan statistical areas” (MSAs) in Texas • Variety of family types • Two-parent, single-parent, children of different ages, and adult households without children • Most conservative, yet realistic estimates – the “austerity check”

12. The “Austerity Check” • Does not include the cost of video rentals, movies, cable television, eating out, other entertainment, or long distance telephone. • Omits expenditures for birthday and holiday gifts. • Does not include any expenses for credit card debt, or for saving to cover education, retirement, or family emergencies. • Does not include cushion for emergency or unanticipated expenses (e.g., car repair)

13. Family Security Index Budget Items • Housing Cost of rent and utilities with exception of phone • Food Monthly cost of food prepared at home • Child Care Monthly cost of child care specific to age of child(ren) • Medical Costs of total health care premium plus monthly out-of-pocket • Transportation Gas, registration fees, taxes, routine maintenance, and loan payments • Other Necessities Local phone, clothing, personal care, housekeeping, and reading supplies • Payroll and Federal Income Tax • EITC, Child Tax Credit, and Dependent Tax Credit

14. Monthly Expenses FSI 2001 Housing $684 Food $418 Child Care $606 Medical $652 Transportation $376 Other Necessities $321 Monthly Expenses $3,057 (For a family of two adults and two children in the Houston MSA)

15. Federal Taxes FSI 2001 Payroll Tax $234 Income Tax $262 Earned Income Tax Credit Child Tax Credit ($83) Child & Dependent Care Credit ($80) Taxes and Tax Credits $332 (For a family of two adults and two children in the Houston MSA)

16. What It Really Takes to Live in Houston FSI 2001 Necessary Monthly Income $3,389 Necessary Annual Income $40,669 Household Hourly Wage $20 Poverty Threshold $17,463 Percent Poverty Threshold 233% (For a family of two adults and two children in the Houston MSA)

17. What It Really Takes To Live in Texas FSI 2001 El Paso $35,131 Laredo $35,530 San Antonio $37,300 Brownsville $37,558 Lubbock $38,288 Houston $40,669 Dallas $43,461 Austin $44,044 (For a family of two adults and two children)

18. The Family Security Portfolio • Community-specific and comprehensive approach to help families meet basic needs and build economic security • Comprehensive set of services and programs to ensure the well-being of all working families in Texas, anchored by both private and public commitments • Improved wages and benefits a key component of the Family Security Portfolio • Family-based coordination of services from state and local government, non-profit service providers, faith-based organizations

19. The “Austerity Check” • Families often remain on Section 8 waiting lists for several years before receiving housing assistance • The Thrifty Food Plan assumes that families never purchase fast food or restaurant meals • 5.5 million Texans, one-quarter of the population, were uninsured in 2003. Only 52 percent of Texans receive health insurance through their employers (9 percent below national average). • In all but one state, the yearly cost of full time child care exceeds annual public college tuition

20. How to Use the Family Security Index • Education - To create public understanding of the real constraints faced by families with limited income, even at what’s often considered a “moderate level” of income • Planning - To establish a more realistic benchmark for program planning and evaluation, especially welfare and workforce • Advocacy - To guide the coordination of joint state and local efforts to support low- and moderate-income working families

21. What Do You Think? • Updated FSI due late Summer/early Fall • Comments? • Feedback? • Suggestions?