Poverty among single parent families: A "Basic Needs Budget" approach

In 1989 the official poverty rate (as calculated by the Census Bureau) for single parent families was almost five times greater than the poverty rate for married couple families. Half of all poor families in the United States today are headed by a single parent. As dismal as these statistics appear, they in fact understate the problem because they are derived using an outdated approach to measuring poverty. This paper proposes a new approach to setting the poverty line and estimating poverty rates for single parent families using a "Basic Needs Budget" which calculates on an item-by-item basis how much single parent families need to make ends meet. In 1989, the before-tax income need to support the Basic Needs Budget for a central city family consisting of a single parent employed outside the home and two preschool children was almost $18,000, almost twice the official poverty threshold. Unlike the official thresholds, the Basic Needs Budgets make allowances for the additional resource needs of families in which the single parent is employed outside the home--most importantly the cost of child care services. The budgets are adjusted to reflect the reduced income needs of families who receive in kind benefits--i.e., food stamps, school lunches, public housing, energy assistance, Medicaid, Title XX child care and employer-provided group health insurance. When these thresholds are used to recalculate the major poverty statistics, the poverty rate of single parent families increases by 18 percent from 44 percent to 51 percent. The poverty rate of AFDC recipients declines slightly (due to the importance of noncash benefits for this subgroup) while the poverty rate of full time workers triples. The Basic Needs Budgets show that unless subsidized child care is available, most women cannot earn enough to make going off welfare rational choice.