Dr. Michael Pakko: The Importance Of Re-defining Poverty

The poverty level is an important indicator for economists and policymakers to study.

The measure dictates how much federal financial support comes to the states for education, workforce benefits, nutritional programs and much more.

What would happen if the definition of poverty changed, and thus, caused a shift in state rankings and even the poverty income threshold?  It would certainly alter the flow of federal money.

UALR economist Dr. Michael Pakko with the Institute for Economic Advancement, explores the subject of poverty and how it is defined in our latest edition of Talk Business Quarterly.

The poverty rate is an important indicator.  It provides a consistent measure for tracking the nation’s low-income population and it is used to define eligibility and funding levels for a variety of federal government programs.

Among economists, however, it is generally agreed that it is not a particularly good measure of poverty. In fact, economists at the Bureaus of Census and Labor Statistics have been working on new, improved poverty measures for nearly two decades.

Last year, they rolled out a new Supplemental Poverty Measure (SPM) that addresses three major shortcomings of the official poverty indicator.

What are those shortcomings? How might re-defining poverty affect Arkansas?    And, how does altering the rate with these new measurements change Arkansas’ position in the rankings?

Click here to read more of Pakko’s analysis.