AARP appreciates the opportunity to submit a statement in support of updating the Census poverty measure.  We commend Chairman McDermott and Representative Weller for holding a hearing to examine the inadequacies of the current poverty measure, and applaud Chairman McDermott’s commitment to update the definition of poverty. It is important that we have a measure that is accurate, non-ideological and reflects current living conditions. 

The poverty measure is one of the most important social indicators used by both the public and private sectors to asses how well we are doing as a society in improving the lives of people with meager resources, young and old. The poverty measure is used for domestic policy formulation and research, and influences public perceptions of well-being in America. Yet the way the United States measures poverty today is greatly outdated.  Because it focuses only on income rather than needs, it does a poor job of accurately accounting for necessary and rising living expenses, such as health and energy costs, that put an enormous strain on the incomes of most households, both those that are currently defined as poor and those that are not.  The current measure also fails to account for income assistance from public programs that have made great strides in ameliorating poverty.

The current measure has not changed in more than 40 years and is outdated. During that time, changes in the nation’s economy have affected family economic well-being, yet these changes are not reflected in the poverty calculation. For example, health care costs as a share of total spending have risen markedly since the current poverty measure was adopted.  Adjusting for out-of-pocket medical expenses (subtracting them from income) would increase the 2006 poverty rate for all Americans by 0.1 percentage points (from 12.3 to 12.4 percent); but it would increase the poverty rate among older Americans by 5.8 points (from 9.4 to 15.2 percent).  Adjusting for medical expenses and geographic variations in the cost of living would reduce the overall poverty rate to 12.2 percent; but it would increase the rate among persons aged 65 and over to 14.7 percent.  Other types of adjustments might also be appropriate.  Measuring poverty more accurately is a prerequisite to addressing the needs of those households that are most in need.

Even under the current incomplete measure of poverty, too many in our nation are poor. The poverty rate for older persons in the United States has not declined in many years, remaining at around 9 percent to 11 percent for the past decade.  The total poverty rate for older individuals obscures wide variation by sex, race, and living arrangement.  Women aged 65 and older had a poverty rate of 11.5 percent in 2006 compared to 6.6 percent for men in the same age group.  Similarly, the poverty rate for older non-Hispanic whites was 7.0 percent, but for Hispanics it was 19.4 percent and for blacks 22.7 percent.  Rates were even higher for minority women, and older women living alone are among America’s poorest residents. 

However, focusing only on those who are poor under the current poverty measure overlooks the large number of near-poor older persons at risk of falling into poverty for any number of reasons—the death of a spouse, unexpected health care expenditures, or rising utility bills, for example.  One of the more restrictive definitions sets “near poor” at 125 percent of the current poverty measure.  Using that definition, some 3.4 million persons aged 65 and older in the United States were poor in 2006 and another 2.2 million were near poor.

Recently, the AARP Foundation, AARP’s affiliated charity dedicated to confronting the economic challenges that Americans face as they age, issued Poverty & Aging in America, a report that profiles older Americans living in poverty or at risk of falling into poverty.  The AARP Foundation also hosted a symposium on poverty and aging in America.  The AARP Foundation’s goal in holding this symposium was to explore avenues to improve the quality of life for older persons living in poverty or who are at high risk of falling into poverty.  Clearly, a more accurate measure of poverty would allow all of us, both in the public and private sectors, to better assess who is most in need, and what are the best pathways for improving the quality of their lives.

Even applying an outdated measure of poverty, Poverty & Aging in America provides a sobering portrait of the lives of older poor and near poor individuals.   A few of the key findings of the AARP Foundation’s report include the following:

-         Social Security is critical to keeping people out of poverty – The poverty rate for persons age 65 and over would have increased from 9.4 percent to an astonishing 44.9 percent in 2006 without Social Security.

-         Only 62.5 percent of persons ages 50 – 64 who are living in poverty have any public or private health insurance coverage. Almost one-quarter of persons age 50 and older living in poverty said they could not see a doctor in the last 12 months because of cost.

-         Families headed by women make up the majority of older families in poverty and are most at risk of falling into poverty. 

-         Continuing to work increases income and helps keep people out of poverty – among persons age 50-64 living in poverty, only one quarter are in the workforce compared to over three quarters of people in this age group with incomes at or above twice the poverty level.

-         Older people with low income also have few other financial resources.  The median net worth of families age 50 and older living in poverty in 2004 was just $10,000. Older persons living in poverty are unlikely to receive retirement income from a traditional pension, 401(k) or similar plan.  And while many older poor households own homes, those owners struggle to meet home-related expenses.

-         A significant percentage of older families living in poverty have heavy debt burdens – Almost 1 in 5 families age 50 and older living in poverty have debt payments in excess of 40 percent of total income.

The overall portrait of persons age 50 and older living in or at risk of poverty that emerges from Poverty & Aging in America is of a population in economic distress.  The report also highlights the critical role Social Security and other public programs play in preventing poverty among older persons and mitigating the effects of poverty. 

Developing and implementing a more accurate measure of poverty would greatly contribute to a better understanding of the conditions under which all poor persons in America live.  An updated poverty measure would also allow a more accurate assessment of the impact programs such as Social Security have on the lives of vulnerable populations, and would lead to the development of better-informed solutions to the special challenges that face specific sub-groups of the poor and near-poor, such as women, the elderly and minorities. 

AARP supports the efforts of the Ways and Means Subcommittee on Income Security and Family Support to examine and reform the current poverty measure. We look forward to working with you in the future to reach the goal of establishing a modern poverty measure.