Measuring Latino Poverty

By Daniel Salgado, NCLR Legal Fellow

We are hearing a lot of good news about the economy these days. In 2014, the U.S. economy recorded the largest job growth since 1999, while gas prices declined for a record four consecutive months. The Latino poverty rate is also steadily declining. In fact, Latinos are the only racial or ethnic group to show a significant drop in poverty rates over the past few years— from 25.6 percent in 2012 to 23.5 percent in 2013.

This decrease in poverty could be a sign that the economic recovery is finally reaching Latino communities, though it should be noted that the poverty rate for Latinos remains above its pre-recession level of 20.6 percent. In order to accurately track how far Latinos have to go to make up for the damage of the Great Recession, it is important to take a closer look at how poverty is measured. That requires examining the Supplemental Poverty Measure (SPM), which provides a more comprehensive measure of poverty taking into account the effects that government programs and tax credits, for example, have on a family’s income. Unfortunately, the SPM shows that the Latino poverty rate has actually remained relatively stagnant at 26 percent, significantly higher than the rates of poverty in White and Black communities.

Two Ways of Measuring Poverty

The Official Poverty Measure (OPM), which is the source used for determining eligibility for federal government programs, is calculated by comparing cash income before taxes to the poverty line, which was $23,834 for a family of four in 2013. Since the Census Bureau began tracking the OPM, the Latino rate has been the second-highest in the United States, only slightly lower than the Black poverty rate (see Figure 1).

However, in recent years, the Census Bureau acknowledged that the OPM does not paint a complete picture of poverty. By counting only cash income before taxes such as salary, workers compensation, Social Security, and public assistance, the OPM fails to consider noncash government programs such as nutrition assistance and housing subsidies. Also, the OPM overlooks the impact of refundable tax credits like the Earned Income Tax Credit and the Child Tax Credit.

That’s where the SPM comes in. The SPM calculation includes noncash government benefits and tax credits. It also considers tax payments and work expenses (see Figure 2). As a result, the SPM provides a better understanding of the impact of government programs on reducing poverty. Using the SPM, the census finds that Latinos actually have the highest poverty rate, 26 percent (see Figure 3). This has been the case ever since the census first started measuring the SPM in 2011.

The SPM paints a less rosy, albeit more complete, picture of Latino poverty, but it is a critical alternative measure to understand if we are to interpret the economic progress of the Latino community.