[Poverty at Issue]

A Newsletter for Individuals Concerned About Poverty in Missouri

May 1996

In this issue:

What Does America Want?
National Dialogue on Poverty

Pathways from Poverty

Statistics to Ponder

Sizing up Poverty

Social Security Program Favors Low-Wage Earners

A Spur for Justice
Reform Organization of Welfare

Income Inequality in America
Are the Poor Getting Poorer?

This year, over $100 billion of the federal budget will be allocated to spending on a variety of welfare programs. In 1994, 38.1 million Americans, or 14.5% of the population, lived in poverty. As the debate over welfare spending continues in Washington, D.C., a number of Missouri citizens and organizations go quietly about the business of dealing with poverty every day. Regardless of what happens in Washington, their efforts will continue to evolve and adapt to meet the needs of impoverished Missourians.

This Poverty At Issue provides information about some of the organizations and efforts addressing the problem of poverty in Missouri. It also describes the method used to measure poverty, including criticisms and shortcomings of that method. Attention is given to trends in income distribution as well. Carole Prather's article on page 3 follows up on her article, Nothing Fair About Regressive Taxes, in the Winter 1996 Poverty at Issue.

I hope you find the information helpful.

Brenda Procter
Consumer and Family Economics Specialist

What Does America Want?

National Dialogue on Poverty

The National Association of Community Action Agencies (NACAA) has launched a year-long campaign to bring the voices of low-income citizens into the ongoing debate over poverty in America. The Missouri Association for Community Action (MACA) is coordinating Missouri's participation in NACAA's National Dialogue on Poverty. Its centerpiece will be a nationwide series of local dialogues about poverty_its causes and effects as well as ways to combat it.

Each local dialogue will involve people with low incomes and other community leaders in an open discussion about the realities of poverty. The information presented locally will be combined with other local reports and synthesized into state and regional summaries. In September, information from all states will be presented at NACAA's Annual Conference in San Francisco. NACAA will also work with local Community Action Agencies (CAAs) to ensure widespread sharing of the information with all people concerned about the issues that are raised.

Dialogues are being hosted by several local CAAs in Missouri. According to Elaine West, MACA's executive director, the goal of the dialogues "is to bring together community residents, including those experiencing poverty, to take an in-depth look at what we know about poverty." West thinks it is "easy to talk about putting people to work as the solution to poverty without looking into what caused the poverty condition." She hopes the dialogues will give communities the opportunity to go beyond placing blame and help them look for ways to strengthen all families.

Local dialogues have already been held in St. Louis County and in Hamilton. A number of dialogues are scheduled in May (see below). Call local agencies for times and locations. If your community is not included, you may want to check with your local CAA to find out if dialogues will be scheduled in your area.

May 9 Trenton, Green Hills CAA; 816-359-3907
May 14 Chillicothe, Green Hills CAA; 816-359-3907 Saline County, Missouri Valley Human Resource CAA; 816-886-7476
St. Joseph, Economic Opportunity Corporation CAA; 816-233-8281
May 15 St. Louis City, Human Development Corporation CAA; 314-652-5100
May 16 St. Roberts, Missouri Ozarks Community Action; 314-765-3263
St. Joseph, Economic Opportunity Corporation CAA; 816-233-8281
May 17 St. Charles, North East Community Action Corporation; 314-324-2231
May 21 Savannah, Economic Opportunity Corporation CAA; 816-233-8281
May 22 Kansas City Area, United Services CAA; 816-358-6868
May 23 Cameron, Economic Opportunity Corporation CAA; 816-233-8281

To find out more about the national campaign, contact Elaine West at MACA, 2410 Hyde Park Rd., Suite B, Jefferson City, MO 65109; 573-634-2969.

Pathways from Poverty

Missouri's Pathways from Poverty program is part of a national effort to address poverty in rural areas. The effort was an outgrowth of work done by the Rural Sociological Society Task Force on Persistent Rural Poverty. The W.K. Kellogg Foundation and the Farm Foundation have provided support for four regional meetings across the country.

A team from Missouri met in Collinsville, Illinois, recently with teams from 11 other states involved in the North Central Regional Center for Rural Development's Pathways from Poverty program. Teams came together in a regional forum to begin action plans for reducing rural poverty in their respective states. Each state team is made up of representatives from five partner groups: state government (including elected officials), local government (including elected officials), private sector, grassroots non-profit organizations, and university research and extension personnel.

Cheryl Zimny, Missouri's Pathways from Poverty team leader, is excited about the potential for the program. "We have been provided seed money to develop a comprehensive proposal to reduce rural poverty in Missouri and we're off to a good start," she says. "We have identified obstacles we need to address as well as a vision for our work. We are in the process of laying out a plan of action to address rural poverty in a collaborative framework." The team plans to expand membership to include representatives from other geographic locations in Missouri and to widen the range of expertise on the team.

The Pathways from Poverty team's overall vision is:

With respect for cultural diversity, eliminate poverty by providing an environment where each and every member of the community can fully develop his/her economic, physical, psychological, social and spiritual potential.

Zimny is anxious to hear from any and all Missourians who have ideas about reducing rural poverty or who have suggestions for the Pathways team. To contact her, write Cheryl Zimny, Pathways from Poverty Missouri Team Leader, Missouri Valley Human Resource Community Action Agency, P.O. Box 550, Marshall, MO 65340-0550; 816-886-7476, Ext. 813 (or Ext. 810 for fax).

Statistics to Ponder

Effective March 4, 1996, the poverty threshold for a family of four is $15,600. (Federal Register)

As a percentage of total 1992-1993 expenditures, U.S. families receiving public assistance spent about:

Sizing Up Poverty

The poverty threshold measure created over thirty years ago will determine who gets over $100 billion in federal welfare spending this year. The threshold is the level of income below which a family is considered "poor." Based on the current poverty measure, the number of Americans living in poverty declined in 1994 by 1.2 million people. There were 38.1 million Americans in poverty in 1994, or 14.5%_down from 15.1% in 1993. Critics fault the current poverty measure on two counts-the way it defines the poverty threshold and the way it defines income.

Based on food buying patterns documented by the USDA in low-income households in 1955, the concept for the poverty threshold was created in 1963. Government experts created a no-nonsense, "thrifty food plan" that was meant to temporarily sustain a family who spent wisely and cooked from scratch. They priced what that diet would cost and multiplied by three to determine the poverty threshold. Why? Because the 1955 research showed that a low-income family spent a third of its income on food.

According to American Demographics, if the same logic were used based on current food buying habits, the poverty threshold for a four-person family in 1992 would have been $30,600. Why? Because the typical four-person household devoted only 14 percent of its spending to food. Because it is still based on 1955 buying habits, the four-person poverty threshold was actually $14,228 in 1992. Critics say this disparity shows the flaw of such logic to begin with.

Other critics point out that certain kinds of income are not included when figuring a family's eligibility for benefits. A report from the Panel on Poverty and Family Assistance released last year recommends including some noncash benefits that are not now counted-the value of food stamps, subsidized housing and school lunches. On the other hand, they would adjust income to allow for certain expenses not now considered-work-related costs like child care; child support payments of noncustodial parents; out-of-pocket medical expenses, and taxes (by using after-tax income).

The Panel on Poverty and Family Assistance recommends a new measure of poverty that would be a percentage of the median family expenditure on food, clothing and shelter, plus extra for household supplies and personal-care items. The new measure would not change the overall poverty rate by much, but it would cause a rise in the poverty rate for working-age adults, a decline in the rate for the elderly, and a decline in the poverty rate for recipients of public assistance. It would also change the poverty rates across regional, racial and ethnic lines.

The full report published by the National Research Council is entitled Measuring Poverty: A New Approach, Constance F. Citro and Robert T. Michael, eds.

Social Security Program Favors Low-Wage Earners

by Carole Prather, State Consumer and Family Economics Specialist, University Extension

In the last issue of Poverty at Issue, the article discussing regressive taxes which appeared on page 4 used the OASDI portion of the social security tax as an example of a regressive tax. Though it is true that OASDI is regressive in nature because there is a cap on the amount of earnings subject to the OASDI tax, the article may have been misleading because it failed to mention that there is also a cap on benefits to be paid out under the same program. For many, the fact that benefits are capped justifies the regressive nature of the tax itself. Limiting the benefits then would justify the cap placed on the amount of earnings subject to the tax which funds those benefits.

The use of OASDI as an example of a regressive tax may have left the false impression that the Social Security program in some way penalizes low-wage earners while favoring high-wage earners. In fact, though OASDI can be legitimately called a regressive tax, the program supported by that tax actually favors workers at the lower end of the earnings continuum.

Individuals with lower earning histories actually receive a proportionately higher benefit under OASDI than workers with higher earning histories. For example, an individual who had an average indexed monthly earnings (AIME) of $800 in 1994 would qualify for a retirement benefit of $500 a month if they retired at age 65. Their retirement benefit was the equivalent of 62 percent of their average earnings over their adult years.

At the highest end of the earnings table, an individual with average indexed monthly earnings of $4,900 would qualify for a retirement benefit of $1,412 a month or 29 percent of their average adult earnings. Clearly, workers with a history of lower earnings receive a proportionately higher benefit than do workers with higher earnings. Therefore, the cap on earnings subject to the social security tax may indeed be justified.

A Spur for Justice

Reform Organization of Welfare

Reform Organization of Welfare (ROWEL) is a statewide organization of Missourians "with low incomes and their allies who work for positive changes in the laws and policies that affect all our lives." The group's acronym, ROWEL, is the word for the little spiked wheel on a riding spur. According to Jeanette Mott Oxford, ROWEL's executive director, "the Missouri mule sometimes requires spurring to keep moving forward for social justice."

ROWEL was officially formed in 1972 following a series of ecumenical and interfaith discussions about welfare and poverty. Its founders felt that those with low incomes needed a united voice to influence decision-making about the poor. A steering committee made up of representatives from many different denominations identified a goal "to establish an effective statewide interdenominational church lobbying force to secure adequate welfare programs."

Since 1989, ROWEL has made a commitment to having a Board of Directors that consists of at least 50% representation from people living in poverty (185% of the federal poverty threshold for their purposes). The group has more than 1,000 members statewide.

ROWEL is a constant presence in Jefferson City and has gained a national reputation for effective lobbying and advocacy. It has also gained recognition for the Life in the State of Poverty welfare simulation developed in the early 80s by the ROWEL Education Association (REA). In the simulation, 30-75 participants are each given the opportunity to "walk in the shoes" of a Missourian experiencing poverty by role playing the part of a citizen with low income.

Participants are divided into typical poverty families. For four fifteen-minute "weeks," they struggle to keep their families fed, their bills paid, their utilities turned on and a roof over their heads, all without the benefit of adequate resources. Volunteers create a low-income community within which participants live and interact. The community includes a welfare office, food pantry, grocery store, employment office, police station, school, pawn shop and other services and resources. Following their "month" in poverty, participants and volunteers share their experiences in a debriefing session. Needed improvements to existing anti-poverty policies are identified, and the importance of advocacy is stressed.

In cooperation with University Extension, REA will present ROWEL's Life in the State of Poverty welfare simulation as a preconference workshop at the National Linking Family and Community Strengths Conference in Louisville, Kentucky, on June 12, 1996. Oxford will also serve as a presenter at the conference. For more information about ROWEL, REA or the conference, contact Jeanette Mott Oxford, executive director of ROWEL, 5300 Delmar, St. Louis, MO 63112; 314-361-3400; or Brenda Procter, 162 Stanley Hall, Columbia, MO 65211, 573-882-3820.

Income Inequality in America

Are the Poor Getting Poorer?

Between 1993 and 1994, the poverty rate dropped in the United States. About 1.2 million fewer Americans were below the poverty line in 1994 than in 1993. Using our current poverty measure, the actual poverty rate fell from 15.1% to 14.5%. Good news, right? Some critics of the current poverty measure (see Sizing Up Poverty, above) argue that it does not tell the whole story. Only the wealthy have benefited from the growth in the U.S. economy over the past three years. In fact, the median household income of $32,264 in 1994 is almost the same as in 1993. Income has remained below 1989 levels in spite of sustained economic expansion. Since 1989, the poorest 20% of Americans have lost ground in terms of their share of total income. They went from a 3.8% share in 1989 to 3.6% in 1994. The middle 60% also lost ground, from a 49.3% share in 1989 to a 47.3% share in 1994. What about the richest 20%? Their group is the only group that saw a gain in their total share, from 46.8% in 1989 to 49.1% in 1994. The top 5% went from 18.9% of total income to 21.2%.

Sources and Acknowledgements
Russell, Cheryl. Who's Poor?, American Demographics, March 1996.

Old Flaws Undermine New Poverty- Level Data, October 5, 1995, Wall Street Journal.

Poverty Measure Declined in 1994; Income Stagnated, October 6, 1995, Wall Street Journal.

Back to Poverty At Issue policy briefs

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Jeanne Bintzer, HES Extension Site Administrator

Brenda Procter, Consumer and Family Economics Specialist, Content Provider