PHILOSOPHY BEHIND THE METHODOLOGY
Since the War on Poverty began in 1965, the Federal Poverty Level (FPL) has provided a standard for determining the number and proportion of people living in poverty in the U.S.
Despite the FPL’s benefit of providing a nationally recognized income threshold for determining who is poor, its shortcomings are well documented. The measure is not based on the current cost of basic household necessities, and except for Alaska and Hawaii, it is not adjusted to reflect cost of living differences across the U.S.
The FPL is so understated that many government and nonprofit agencies use multiples of the FPL to determine eligibility for assistance programs. While other alternative measures have been established, none comprehensively measure the number of households who are struggling in each county in a state. The ALICE research fills that void.
The ALICE Household Survival Budget is the bare minimum cost of household basics necessary to live and work in the modern economy. These basic budget items include housing, child care, food, transportation, technology, and health care, plus taxes and a contingency fund (miscellaneous) equal to 10% of the household budget. The budget is calculated separately for each county and for different household types and is updated as costs and household needs change over time. For comparison to a budget that provides stability to a household over time, the Project also reports the ALICE Household Stability Budget, which provides an estimate of slightly higher standards than the Household Survival Budget, including a 10% savings category.
The ALICE Senior Survival Budget adjusts the Survival Budget to reflect reduced spending on food, as seniors eat less than younger adults; reduced spending on transportation, as seniors travel fewer miles for work and family responsibilities; and because seniors have increased health needs, the Senior Budget reflects increased spending on health care, which outpaces the benefits offered by Medicare.
The ALICE Threshold represents the minimum income level necessary for survival for a household. Derived from the Household Survival Budget, the ALICE Threshold is rounded to the nearest American Community Survey income category and adjusted for household size and composition for each county.
The ALICE Income Assessment is a tool that measures: 1) how much income households in a state need to reach the ALICE Threshold; 2) how much they actually earn; 3) how much public and nonprofit assistance is provided to help households below the ALICE Threshold meet their basic needs; and 4) the Unfilled Gap — the amount still needed for these households to reach the ALICE Threshold despite both income and assistance.
The ALICE Essentials Index is a national measure that tracks the increase in costs of specific basic necessities and can be seen as a companion or subset of the BLS’ CPI, which covers all goods and services people buy regularly. These are goods found in the Household Survival Budget and standardized to provide a way to track these goods for all households, whereas a budget focuses on a particular household composition. The ALICE Essentials Index is calculated for both urban and rural areas.
The Economic Benefits of Equity quantifies the benefits of raising the income of all household income to the ALICE Threshold. The analysis includes additional earnings; additional taxes paid on higher incomes and reduced usage of tax credits for low-income earners; savings on government programs that alleviate poverty; as well as the multiplier effect of each category on the state GDP.
SCHEDULE OF REVIEW
United For ALICE is committed to convening representatives from varying disciplines and geographies on a biennial basis to review the methodology and sources utilized in calculating the ALICE measures.
Every two years, a subset of individuals garnered from each state’s Research Advisory Committee comes together to review aspects of the methodology that require scrutiny or reevaluation. This process helps ensure our approach remains cutting edge and reflective of changes that could influence ALICE’s ability to navigate emerging family needs. To download the list of the members of this committee, click here.