Outdated Measures Mean Millions Face Hidden Poverty in America Today

Patrick Harker, president of the Federal Reserve Bank of Philadelphia, recently stirred discussion by suggesting that poverty in the United States may be more severe than official numbers indicate. His remarks, delivered on Tuesday, point to a growing concern among economic leaders: the tools used to measure poverty might not capture the full scope of hardship faced by millions of Americans.

Harker’s observation comes at a time when rising living costs and persistent income inequality are squeezing households across the country. For many, the gap between income and expenses feels wider than ever, yet federal poverty metrics often paint a rosier picture. This disconnect has sparked renewed debate about how poverty is defined and what it means for families struggling to make ends meet.

The issue isn’t just academic. Poverty measurements shape who qualifies for government assistance, influence policy decisions, and guide public perceptions of economic health. If the true extent of poverty is understated, as Harker suggests, it could mean millions are slipping through the cracks of an already strained social safety net.

To understand this, it’s worth exploring why current metrics might fall short, how economic pressures are hitting households, and what experts propose to better reflect reality.

The U.S. relies on two main tools to measure poverty: the Official Poverty Measure (OPM) and the Supplemental Poverty Measure (SPM). The OPM, created in the 1960s, calculates poverty based on a family’s pre-tax income compared to a threshold tied to the cost of a basic food budget, adjusted for inflation. In 2025, this threshold is $32,150 for a family of four. The SPM, introduced in 2011, takes a broader approach, factoring in non-cash benefits like food assistance, tax credits, and expenses such as healthcare and childcare, while also adjusting for regional cost differences.

Both measures have critics. The OPM is widely seen as outdated, rooted in a formula that assumes food accounts for a third of a family’s budget, a ratio that no longer holds as housing, healthcare, and childcare costs have soared. It also ignores geographic variations, meaning a family in costly California faces the same poverty line as one in rural Mississippi. The SPM addresses some of these issues but still struggles with incomplete data on expenses like medical costs and doesn’t fully capture material hardships, such as food insecurity or eviction risks.

Researchers, including those from the National Academy of Sciences, argue that neither measure fully reflects economic reality. Some advocate for a consumption-based approach, which would track what households actually spend rather than their income. However, collecting reliable consumption data is challenging, and such a shift could complicate comparisons over time. The debate underscores a key point: current metrics may undercount the number of Americans who can’t afford basic needs.

Beyond measurement issues, economic conditions are making life harder for many. Inflation, which spiked after the pandemic and remains a concern, has eroded purchasing power. By 2023, the average household was spending $709 more per month than two years earlier to maintain the same standard of living, with essentials like groceries, rent, and fuel driving much of the increase. Lower-income families, who spend a larger share of their budgets on these necessities, feel the pinch most acutely.

Housing costs are a particular pain point. Families earning less than $30,000 a year spend over 41% of their income on housing, compared to 33.8% for the average household. Rising mortgage rates and rents have also pushed homeownership further out of reach, deepening wealth gaps. Meanwhile, tariffs introduced in 2025 have added an estimated $3,800 annually to the average household’s costs, with poorer families losing a disproportionate share of their income.

Income inequality adds another layer. Over the past four decades, incomes for the top 1% have grown six times faster than for the bottom 20%. In 2021, the lowest-earning fifth of households averaged $22,500, while the top fifth earned $418,100. Wealth is even more concentrated: the richest 10% own 67% of U.S. wealth, while the bottom half holds just 2.5%. These disparities mean that while some thrive, others struggle to cover basic expenses.

Harker’s comments echo a broader shift within the Federal Reserve, which has increasingly acknowledged the limits of its tools in addressing poverty. The Fed’s primary levers—interest rates and credit policies—aim to boost employment and stabilize prices, but they don’t directly tackle structural issues like wage stagnation or access to education. Fed leaders like Raphael Bostic of the Atlanta Fed have emphasized the need for quality jobs and worker mobility to build wealth, particularly for historically marginalized groups.

Outside the Fed, advocates for policy reform argue that poverty metrics must evolve to guide effective solutions. Groups like the Center on Budget and Policy Priorities highlight how the SPM better captures the impact of programs like SNAP and tax credits, which lifted 27.6 million people out of poverty in 2023. Yet they also warn that expiring pandemic-era aid, like expanded child tax credits, has pushed child poverty rates back up, with 13.7% of children in poverty in 2023, compared to 5.2% in 2021.

On the other side, some economists caution against overhauling poverty measures too quickly, citing the risk of disrupting program eligibility or public trust in data. They argue for incremental improvements, like refining the SPM to include medical expenses, while maintaining consistency for long-term tracking. This tension reflects the challenge of balancing technical precision with real-world impact.

Harker’s remarks highlight a critical moment for rethinking how poverty is understood in America. With 36.8 million people officially poor in 2023, and likely more facing economic insecurity, the stakes are high. Updating poverty measures could better target aid and inform policies, but it requires navigating complex trade-offs. For families, the immediate reality is clear: rising costs and stagnant wages make stability feel out of reach, regardless of what the numbers say.

As debates over measurement and policy continue, the human cost of poverty remains front and center. Whether through better data, targeted programs, or broader economic reforms, addressing the gap between official statistics and lived experience will be key to ensuring no one is left behind.