Is the real “poverty line” $140,000 annually?

One analysis asserts that a family of four is below the true “poverty line” if they earn less than $140,000 annually, far more than the official federal threshold of $32,150.

Michael Green, chief strategist and portfolio manager at Simplify Asset Management, wrote this week about how household finances have changed since 1963, when the Census Bureau created the formula used to measure the poverty line — the amount of income below which a household cannot afford the necessities of life.

Then and now, the government considers a family below the poverty line if its income is less than three times the minimum amount of money needed to buy food. This number is adjusted for inflation each year. This formula is based on surveys conducted in the 1950s that showed that approximately one-third of the household budget was allocated to food.

But other expenses, such as housing, health care, and child care, now take up much larger portions of the family budget, crowding out food. Food spending accounted for 12.9% of typical household expenses in 2023, according to the most recent data available from the Bureau of Labor Statistics.

Using the logic of the original formula but changing the amounts to reflect modern household budgets, Green calculated that the true poverty line is actually 16 times the amount needed to buy food, or between $130,000 and $150,000.

To illustrate his point, Green compiled typical living expenses based on national averages and found that a family of four would spend $136,500 annually on child care, housing, food, transportation, health care, taxes, and other necessities.

Green is an outlier when he asserts that $140,000 is the true poverty line. That’s significantly more than the median household income of $105,000, and it’s possible to spend less than the national average on categories measured in green.

The Census Bureau itself, after decades of debate over how to measure poverty, has developed an alternative measure called the Supplemental Poverty Measure that takes into account a broader set of necessities such as food, shelter, clothing, utilities, telephone and Internet. The SPM poverty line for renters in 2023 was $37,482, well below Green’s estimate.

Whether or not a family making $140,000 is truly poor, Green’s analysis highlights the fact that rapid increases in the cost of living since the pandemic have placed significant pressures on families, even for those with above-average incomes.