What is the Poverty Line?

Poverty is measured by the number of people who fall below a certain level of income—called the poverty line—that defines the income one needs for a basic standard of living. 

The US poverty line has traditionally been based on the cost of a healthy diet. That is, how much it would cost to feed a nutritionally adequate diet to a family or the amount one requires to buy a nutritionally adequate diet, given the size of the family, multiplied by three.

The current U.S. poverty line is essentially this metric, but the government adjusts the dollar amounts to represent the same buying power over time. 

The poverty line is based on cash income, which means it does not account for government programs that provide assistance to the poor in a non-cash form, like Medicaid (health care for low- income individuals and families) and food aid. Also, low-income families can qualify for federal housing assistance. 

Related Topics

• Market Competition and Innovation
• New Technology and Positive Externalities

• Externality
• Network Externality
• Pigovian Tax
• Coase Theorem
• Agglomeration Diseconomies

• Education - Private and Social Rate of Return
• Government Approaches to Encouraging Innovation
• Public Good
• Public, Private, Club, Common Goods
• Excludable and Rivalrous Goods
• What is the Free Rider Problem for Public Goods?
• Free Rider
• Social Loafing
• Role of Government in Paying for Public Goods
• What is the Tragedy of Commons for Common Resources?
• Income Inequality
• Poverty Line?
• Poverty Trap
• Public Safety Net
• Measuring Income Inequality
• Lorenz Curve
• Ladder of Opportunity
• Tradeoff between Incentives and Income Equality