The incidence of economic stress in affluent areas: devising more accurate measures

American Journal of Economics and Sociology, The, April, 1994 by Leonard Gaines, Pearl M. Kamer

I

Introduction

SEVERAL GOVERNMENTAL PROGRAMS are designed to relieve economic stress for given segments of the population. Some programs attempt to improve the general economy in areas containing large concentrations of economically-distressed households. Funding for such programs is often contingent upon how much economic stress can be identified in given areas. Thus, the means used for identification are of real importance.

Several measures of economic stress are used to locate economically-distressed households. The most common indicator is the poverty rate or a related measure, such as the proportion of persons with incomes below 150% of the designated poverty threshold. In 1989, for example, the poverty threshold for a four-person family containing two persons under age eighteen was $12,675. Four-person families with annual incomes below this amount were considered to be poor.

Some governmental programs are predicated upon a more generous definition of poverty. They may define as poor those four-person families with annual incomes below 150% of the poverty threshold or, in this case, $19,012. These poverty thresholds are determined nationally and do not take account of local family or household income levels or local variations in living costs.

This paper explores an alternate method for identifying the incidence of poverty and applies it to Nassau and Suffolk Counties, two relatively affluent suburban counties located on Long Island, adjacent to New York City. This methodology relates family income in each census tract to median household income in the county. A census tract is a sub-county geographic unit used by the U.S. Census Bureau. On average, it contains 4,000 persons. This method could be used across the country if it is judged more useful than present methods.

County median household incomes tend to reflect local living costs. That is, wages and salaries and, by extension, median incomes, tend to be higher in counties with higher living costs and lower in counties with lower living costs. Therefore, by relating family income to median household income in each county, the analysis incorporates interarea cost-of-living differences by proxy.

II

Poverty on Long Island Based on National Poverty Thresholds

THE DECENNIAL CENSUSES are the best source of information concerning the geographic dispersion of households in given income classes, Census Bureau income and poverty statistics are used by most government programs that attempt to allocate funds to needy individuals and households. The U.S. government computes poverty thresholds, those income levels below which individuals or households are deemed to be poor, for the nation as a whole. The 1989 poverty thresholds for given size families are summarized in Table 1.

Unfortunately, these nationally-determined poverty thresholds do not consider regional differences in living costs. For example, in 1989, the Elmira, New York Metropolitan Statistical Area had a median family income of $32,014|1~ and a comparative cost-of-living index of 107.9.|2~ By contrast, the Nassau-Suffolk, New York Primary Metropolitan Statistical Area had a median family income of $56,614|3~ and a comparative cost-of-living index of 157.2.|4~ But with a single national standard, the weighted poverty threshold was $12,675 for a family of four persons in both areas. This practice implies that Nassau-Suffolk, Long Island will automatically show fewer households in economic distress than the Elmira area. However, due to the higher cost of living on Long Island, one would expect that a family there with the same income and composition as a family in Elmira would be under more economic stress.

Table 1

NATIONAL POVERTY THRESHOLDS FOR 1989

Size of Family                             Weighted Average Threshold

1 Unrelated Individual                               $6,314
Under 65 Yrs.                                         6,452
65 Yrs. and over                                      5,947

2 Persons                                             8,075
Householder Under 65 Yrs.                             8,341
Householder 65 Yrs. & Over                            7,503

3 Persons                                             9,890

4 Persons                                            12,675

5 Persons                                            14,994

6 Persons                                            16,927

7 Persons                                            19,127

8 Persons                                            21,256

9 Persons or More                                    25,296

Source: U.S. Census Bureau. 1990 Census of Population and Housing. Summary
Tape File 3, New York. Washington, D.C. 1992.

In fact, the 1990 census results showed a significant decline in the incidence of poverty on Long Island during the past decade. According to the Census Bureau, the number of persons with incomes below the poverty level declined from 62,236 to 47,192 in Nassau County and from 82,087 to 61,389 in Suffolk County during the 1979-89 period. As of 1989, only 3.7% of all Nassau residents and 4.7% of all Suffolk residents were considered to be below the poverty line. These findings are summarized in Table 2.