Federal Poverty Level (FPL)

The Federal Poverty Level (FPL) is a measure of income established by the government to determine eligibility for various programs and benefits. Each year, the Department of Health and Human Services (HHS) sets the FPL, which varies based on the number of people in a household and is adjusted for inflation. It is widely used as a metric to identify individuals and families in need of financial assistance.

Historical Context of the FPL

The concept of a federal poverty threshold dates back to the 1960s. Mollie Orshansky, a statistician working for the Social Security Administration, developed the initial poverty thresholds. These were based on the economy food plan – the cheapest of the four food plans devised by the Department of Agriculture. Orshansky’s work was rooted in the assumption that families spent approximately one-third of their after-tax income on food, and thus, multiplying the cost of the economy food plan by three could provide a rough income level at which families might be considered to be living in poverty.

The U.S. Office of Economic Opportunity adopted the thresholds in 1965 as an administrative measure to determine eligibility for anti-poverty programs. The thresholds were updated to reflect price changes in subsequent years, and in 1969, the Bureau of the Budget (now the Office of Management and Budget) designated the poverty income thresholds with Orshansky’s multipliers as the federal government’s official statistical definition of poverty.

Calculation and Annual Updates

The federal poverty guidelines, updated annually by the HHS, show the total yearly income needed for individuals or families to be considered at the poverty level. The FPL is used to establish eligibility for Medicaid, the Children’s Health Insurance Program (CHIP), and other social service programs.

Example of FPL for Different Household Sizes in 2023

In 2023, the FPL for a household of one in the contiguous 48 states and D.C. is $14,580 annually. For each additional person in a household, the threshold increases by approximately $5,140.

Here is a simplified chart:

• One-person household: $14,580
• Two-person household: $19,720
• Three-person household: $24,860
• Four-person household: $30,000
• Additional persons: Add $5,140 for each

The figures vary slightly for Alaska and Hawaii to account for the higher cost of living in these states.

Uses of the FPL

The FPL is a crucial tool in determining eligibility for many federal, state, and local assistance programs, including but not limited to:

• Medicaid: Provides health coverage for people with low income, including families, pregnant women, elderly individuals, and people with disabilities.
• Supplemental Nutrition Assistance Program (SNAP): Provides food-purchasing assistance for low- and no-income people living in the U.S.
• Children’s Health Insurance Program (CHIP): Provides health coverage to eligible children, through both Medicaid and separate CHIP programs.
• Supplemental Security Income (SSI): Pays benefits to disabled adults and children who have limited income and resources.
• Head Start/Early Head Start: Programs that promote school readiness of young children from low-income families.
• Low Income Home Energy Assistance Program (LIHEAP): Assists low-income households in meeting their immediate home energy needs.

Criticisms and Alternatives

While the FPL is a widely used measure of economic need, it has faced criticism for several reasons:

• Outdated Basis: The poverty thresholds are based on food costs from the 1960s, whereas contemporary households spend a smaller proportion of their income on food and more on housing, healthcare, and childcare.
• Lack of Geographic Adjustments: Except for Alaska and Hawaii, the FPL does not account for the varying cost of living in different regions of the country.
• Depth of Poverty and Assets Ignored: The FPL considers only current income and not assets, debts, or the depth of poverty.

Several alternative measures have been proposed and used in addition to the FPL:

Supplemental Poverty Measure (SPM)

The SPM, introduced by the Census Bureau in 2011, considers additional factors like tax payments, work expenses, medical costs, and the value of non-cash benefits (e.g., food stamps, housing subsidies). It also adjusts for geographical differences in housing costs, providing a more nuanced understanding of poverty.

Self-Sufficiency Standard

Developed by the University of Washington’s Center for Women’s Welfare, the Self-Sufficiency Standard measures the income necessary for working families to meet their basic needs without public or private assistance. It takes into account family composition, ages of children, and costs for housing, childcare, food, healthcare, transportation, and taxes for every county or sub-county in a state.

The Role of FPL in Public Policy

The FPL plays a critical role in informing public policy and the allocation of resources for assistance programs. It provides a standardized measure to assess the economic needs of the population and supports targeted interventions to alleviate poverty.

Policy Development and Analysis

Lawmakers and policy analysts rely on FPL data to shape policies aimed at reducing poverty and supporting low-income families. By understanding the population segments living at or below the poverty level, policymakers can craft programs that address the specific needs of these groups.

Monitoring Economic Health

The FPL is also used as an indicator to monitor the overall economic health of the nation. Changes in the percentage of the population living below the poverty level can signal shifts in economic conditions, prompting government responses to emerging trends and crises.

Conclusion

The Federal Poverty Level is a foundational measure in the U.S. used to assess economic need and eligibility for numerous assistance programs. Despite its wide application, it has several limitations and has prompted the development of alternative measures to provide a more accurate picture of poverty. The FPL remains a critical tool in public policy, guiding the distribution of resources and shaping efforts to support low-income individuals and families. By continually evaluating and refining measures of poverty, policymakers can improve the effectiveness of programs designed to reduce economic hardship and promote human well-being.