The meaning of the word "poverty," of course, is relative. For the purposes of simplicity, I will use the term "poor people" to refer to the economically poor, defined as those who live in families with incomes below the Federally determined poverty level. Although this definition of poverty is the most widely used in the United States, its history suggests that it probably understates the number of people who live in what most Americans consider poverty.

The "official poverty level" first seeped into government parlance in 1961 when the Social Security Administration needed an objective measure of poverty for statistical purposes. A staff economist chose to develop a standard based on the cost of food. Since it was estimated at the time that the average American family spent about a third of its income on food, the poverty level was defined as the cost of a minimum adequate diet multiplied by three. The poverty levels (which increase with increasing family size) have subsequently been updated annually for price inflation. To determine a family's poverty status, its resource—defined as cash income before taxes—are compared with the appropriate threshold for its size. In 1998, the poverty level for a single individual was an income of $8,050 per year; for a family of four, the level was $16,450.

The poverty level has been criticized both for being too low and too high. Because it excludes non-cash income (most importantly food stamps and housing subsidies), it can be criticized as too high for those who receive those benefits. On the other hand, the average American family in 1999 spends closer to one-fourth of its income on food than the one-third estimated in 1961, so it would be reasonable to reset the level by multiplying the least expensive food plan by four rather than by three. From a more practical point of view, the government fair market rent of $692 for a one-bedroom apartment is over 60% of the poverty level for a family of three. If food should cost 33% of that budget, that leaves 6% or $68 a month for all other expenses, including childcare and health care.

In 1998, after almost a decade of economic boom times, when unemployment was at its lowest level in decades, 13.3% of all Americans, more than one out of every eight people lived below a poverty level that underestimates what most of us would consider poverty. Almost 20% of all American children (and over 50% of African-American children) live in poverty. Why?

In the next pages, we will look at some answers.