Research

Lowballing Elder Poverty: Who Counts As “Poor” In America?

July 10, 2024

Relative senior poverty levels are more than double the official U.S. rate.

Issue Brief | Official U.S. poverty rates significantly undercount America’s elderly poor. According to internationally-recognized relative poverty measures, more than 12 million older Americans are poor. Policymakers should adopt relative poverty measures to address the depth and extent of elder poverty in America.

By Christopher D. Cook and Drystan Phillips

 

Key Findings:

  • More than 12.4 million Americans aged 66 and older are poor, according to internationally-accepted relative poverty standards – far more than the 5.8 million counted in U.S. official absolute poverty rates.
  • The number of poor older Americans has increased since the 1970s; while rates have gone down, the amount of senior poverty has gone up.
  • Official U.S. rates severely undercount elder poverty by only including “absolute” poverty, meaning those with barely enough resources to stay alive.
  • Relative poverty measures critical factors of deprivation and social exclusion and isolation, while absolute poverty focuses on being above a specific threshold of money, often only what is needed to survive.
  • “Relative” poverty, used to count poverty in most of the world, more accurately describes how many people are poor in the context of their society.
  • The U.S. should report relative poverty levels in line with internationally-recognized standards used by the Organization for Economic Cooperation and Development (OECD).

How many older Americans are poor, and what should we do about it? The answers depend on how you define and count poverty – in terms relative to the rest of the population, or in absolute terms based on a specific value deemed necessary to keep people alive. How we answer this hugely important question determines who gets assistance to survive or, better yet, to escape poverty. 

The long-running debate over relative vs. absolute poverty resurfaced earlier this year at U.S. Senate hearings, where SCEPA Director Teresa Ghilarducci testified on the plight of millions of Americans who are not prepared for retirement. Stark differences emerged over how to measure U.S. elder poverty rates – a debate that heavily influences perceptions of and responses to the problem.

Now, imagine being over 65 years old and trying to survive on $15,060 a year.

According to official U.S. government poverty levels in 2024, one is considered “poor” in America – and thus qualifying for certain assistance – if their annual income is $15,060 or less for a single person, $31,200 for a family of four. When we rely on absolute poverty rates at these rock-bottom levels, we do a grave disservice to millions of low-income people who are struggling to survive and in need of assistance. When policies leave them out, many will become even poorer and in more desperate need of even greater assistance. If the U.S. used the internationally-recognized standard measure of relative poverty – being below 50% of a nation’s median income – more than 12.4 million (12,475,000) Americans aged 66 and over would be counted as poor. 

In 2022, according to U.S. absolute poverty measures, 10.2% of Americans aged 65 and over were in poverty – up significantly from 8.9% in 2020, an increase of more than one million people in dire need of help. Poverty is even more widespread among Americans aged 75 and older, at 11.3%; and 13% for women aged 75 and up.

Rates can be deceptive and can imply less of a human crisis than people are experiencing. Using the US Census Bureau's official absolute poverty measure, in 2022, nearly six million elderly people (5,897,000) aged 65 and older were poor – meaning they had just barely enough money and nutrition to keep themselves alive. Using the Census Bureau’s more inclusive Supplemental Poverty Measure, which accounts for people’s full expenses, more than eight million elders (8,187,000) aged 65 and up were poor as of 2022.

 

Figure 1 Relative Poverty Reveals More Widespread Economic Precarity

Comparative rates of relative and absolute poverty in America, 2023

 

Figure 1A – Comparative numbers of relative and absolute poverty in America, 2023

Sources: U.S. Census, 2022. Organization of Economic Cooperation and Development (OECD): Old-age income poverty | Pensions at a Glance 2023 : OECD and G20 Indicators | OECD iLibrary (oecd-ilibrary.org)

How we measure poverty makes a powerful statement about what our society decides it means to be poor, and what we do about it. The lower the official poverty rate, the less of a problem or crisis there appears to be. What and who counts as “poor,” and therefore needing assistance? The United States measures poverty very differently from our peer nations, relying on an absolute standard, while other nations measure poverty relative to the wider society and economy. To be considered “poor” in the U.S., you must live on an amount determined by a calculation based on the cost of cheap calories. To be considered poor in other nations means you live on much less money than the rest of the people in that nation.

Why U.S. Absolute Rates Undercount Poverty 

As distressing as those numbers are, they significantly understate the problem. To be considered “poor” in the U.S. according to Census Bureau’s official absolute poverty measure, as of 2024, you must live on the miserly amount of $15,060 a year ($31,200 for a family of four). This amount is determined by calculating the cost of cheap calories – a minimal nutritional standard considered just enough to keep you alive. 

As the US Congressional Research Service explains: “The official poverty measure used in the United States is defined using cash income only, before taxes, and is computed based on food consumption in 1955 and food costs in 1961, indexed to inflation.” This leaves out medical and other significant costs, giving rise to what experts consider a more accurate measure – the Supplemental Poverty Measure (SPM), which accounts for these expenses.

When President Lyndon B. Johnson launched the “war on poverty” in 1964, he needed a quick definition of “poor.” Just a year earlier, Mollie Orshansky, an economist with the Social Security Administration, developed a measure estimating that the poorest Americans spent a third of their income on food, finding the cheapest form of 2000 calories per day – just enough to sustain life for a short period of time. Multiplying those basic sustenance costs by three, Orshansky produced today’s American poverty standard. 

While the U.S. is not the only country that uses absolute poverty, most high-income nations use the relative poverty standard: anyone is considered poor if they are living on roughly half of what everyone else has to survive on. As a World Bank report on poverty describes, “the national poverty measures of most developing countries are absolute, whereas those of most OECD countries are relative. There are exceptions, notably the United States, that use an absolute measure, which was established based on the work of Orshansky (1965).” Some nations using absolute poverty measures – including China, India and Indonesia – “tend to revise their poverty threshold upward as their income standards increase.” The U.S. has gradually increased its poverty level guidelines, nudging it up from $12,760 in 2020 ($26,200 for a family of four). 

The Official absolute U.S. poverty rates only account for the most severe deprivation, not including many who are in fact very poor in both absolute and relative terms, when we consider rising costs of living, particularly for things like rent, healthcare, and long-term care. 

The United States should adopt international relative poverty standards to measure the amount of deprivation in the nation. The peculiar way the United States measures poverty does not accurately account for the social and human meaning of deprivation. 

Relative Poverty Reflects Realities, Shows 12.4 Million Poor Older Americans

When we look at internationally-recognized levels of relative poverty, we see that elder poverty is far more widespread in the U.S. The Organization for Economic Cooperation and Development (OECD) finds that 23% of American elders are poor – that’s 12,475,000 people aged 66 and older. 

This “relative” poverty rate is an international standard that evaluates people’s realities within the context of their society – their relative amount of deprivation and social exclusion. As End Poverty describes, “Relative Poverty is when a household receives 60% of the average household income in their own economy. They do have some money, however, not enough to afford anything above the basics.” In this internationally-accepted measure (the OECD calculates it at 50%), a person or household is “poor” when their financial resources are much lower than the average of their society, meaning their consumption and engagement are significantly hindered.

Applying this standard to the U.S., the OECD estimates that median disposable income in 2022 was $46,625. Under this standard, an individual with half that, or annual disposable income of $23,312, would be counted as poor. 

What does this mean in concrete terms? The average rent in the largest 50 U.S. metropolitan areas was $1,879 a month in 2022, and the nationwide average was $1,388. That’s $16,656 a year in rent on average nationally, and $22,548 in urban areas – nearly all of the $23,312 relative poverty level, without counting a dime for food, utilities, medical and other basic living expenses; and those average rents eclipse the total U.S. absolute poverty level of $15,060. A family living in a U.S. median rent-level city at the U.S. absolute poverty level would be homeless, packed in overcrowded housing with other families, or on the move to somewhere far less costly.

Add food to this equation and we quickly see how dire these numbers are. In 2022, American households in the lowest income quintile (including those in poverty) spent an average of $5,090 on food, nearly one-third of their income, according to the U.S. Department of Agriculture. People struggling to survive on the U.S. absolute poverty level of $15,060 face constant “choices” between food, housing, medicine, utilities, and other essentials. There is no money left over for any social activities beyond basic survival, meaning they are deprived of social connection and engagement.

For elderly people, costs are significantly higher, particularly for healthcare and medicine – meaning many more will be poor, even with household incomes or resources closer to the relative poverty level of 23,312. The Elder Index, which accounts for the heightened costs of being old, “shows that it costs about $1,000 more [per month] for an older adult to afford daily costs (with housing and health care taking the biggest chunk) than the average Social Security retirement benefit, which was $1,670 per month,” according to the National Council on Aging. This means America’s elders need about $27,120 a year just to maintain a basic living – close to the OECD’s relative poverty level of $23,312 and far more than the U.S. absolute poverty level of $15,060.

Conclusions

How we count poverty has huge implications for how our society addresses it. Determining the extent of America’s elder poverty, whether it constitutes a “crisis,” and what we do about it, depends on which data we use. The U.S. poverty standard determines who is eligible for life-sustaining aid such as Supplemental Security Income, food stamps, medical and long-term care through Medicaid, emergency housing, and energy assistance. How we count elder poverty informs the perception of a retirement income crisis and how urgently we must respond with policies and assistance.

When economists and policymakers deny or downplay the severity of elder poverty in America, it’s important to stress the data showing that more than 12 million are stuck in relative poverty, meaning they are economically precarious and deprived, and socially excluded. This is especially perilous for elderly people. We must pursue policies to address this social and economic crisis experienced by tens of millions of older Americans.

Policy Recommendation: Count Relative Poverty to Address Full Extent of U.S. Poverty

In order to address the full depth and extent of U.S. poverty (for elders and all others), we need data that reflect these realities. We encourage policymakers to address America’s relative elder poverty, which is far more widespread than official absolute poverty figures suggest. Relying on narrow absolute measures based on someone barely surviving on $15,060 a year does a disservice to all those who are poor and in need of assistance. Once again: Imagine being over 65 years old and trying to survive on $15,061 and not being considered “poor.” 

SCEPA director Teresa Ghilarducci and research associates Karthik Manickam, and Jessica Forden contributed research for this brief.