The Definition of Poverty
The poverty thresholds, as determined by the United States Census Bureau, vary by the size of a household and typically increase from year to year. In 2025 it is $15,060 for a household of one person (thresholds in Hawaii and Alaska are higher). A family of three is considered poor if it earns less than $25,820 in 2025, and it is $31,200 in 2025 for a family of four (these amounts may vary a little bit depending on the make-up of the family). For larger families, the thresholds are higher. The Bureau looks at the amount an average family spends on necessary food and multiplies this by three to arrive at the poverty line. The U.S. Census Bureau does not distinguish between the different areas of the country, even though the cost of living varies widely within the United States.
When measuring a household’s income, the U.S. Census Bureau includes all forms of monetary income, such as earnings, unemployment compensation, cash welfare payments, Social Security benefits, pensions, interest, rent, alimony, and child support. The official poverty rate does not include non-cash benefits, such as food stamps, housing subsidies, and health care assistance. However, since 2014, the Census Bureau began to publish an unofficial poverty rate which includes the above mentioned forms of income plus income from earned-income tax credits, housing subsidies, school lunch and home heating subsidies. It also adjusts income for taxes, child care, health insurance and out-of-pocket medical costs. In addition, it reflects regional cost of living differences.
According to the official definition and based on a Census Bureau survey of approximately 100,000 United States households, 11.1% of the population was considered poor in the most recently released year as of this writing (2023). In 2019, 10.5% of the population lived in poverty. It was 11.8% in 2018. During most years, the poverty rate declines. In 2011 and 2012 it was 15%, in 2016 it was 12.7%, and in 2017 12.3%. The 2020 pandemic caused large parts of the economy to significantly stagnate and the poverty rate has increased slightly compared to what it was in 2019. The expectation is that in the near future, the rate will decrease again. For more detailed information about the United States poverty rate, including rates among varying demographic groups, visit http://www.census.gov/econ/ (then select “Income and Poverty”).
How the Government Uses the Poverty Line
The government uses the poverty line to determine who receives financial handouts and in-kind assistance. Many poor qualify for programs such as TANF (Temporary Assistance to Needy Families), housing subsidies, food stamps, Medicare or Medicaid, Social Security and disability benefits, school lunch vouchers, child care assistance, and a host of other state or federal programs. Households are eligible for certain programs if they fall below the poverty line, or within a factor of the poverty line (for example, below 150% of the poverty line).
Median Household Income
Real (adjusted for inflation) median United States household income was $80,610 in 2023 (this amount does not include government welfare benefits and tax distributions). This means that 50% of all households earned more than this amount. In 2019 it was $69,560, in 2018 it was $63,324, and $61,400 in 2017. In 2016 it was $59,039, $57,230 in 2015, $53,046 in 2013, $50,502 in 2011, and $49,777 in 2009. In 1965, real median income in the United States was $36,847. As you can see, real median household incomes in the U.S. have steadily risen during most years.
Incomes vary significantly across different racial and other demographic groups. For more information about median and mean incomes in the United States, including distributions among racial groups, please visit http://www.census.gov/econ/ (then select “Income and Poverty).
Median incomes also vary quite a bit across geographic areas. Median household income was lowest in Puerto Rico, West Virginia and Mississippi (approximately 30%, 62%, and 64% of the U.S. median, respectively), and highest in Maryland, Washington D.C., and Massachusetts (approximately 118%, 117% and 116%, respectively). Across the world, highest poverty rates were observed in various African countries, as well as Syria, Haiti, and Venezuela. Comparisons of poverty rates across different countries may be tricky because not all countries use the same definition for what they consider poverty and not all countries measure accurately.
In general, real (adjusted for inflation) median incomes in most industrialized countries increase and poverty decreases during non-recessionary, peaceful years.
How to Reduce Your Chances to Fall into Poverty
While some causes of poverty relate to factors beyond a household’s immediate control (economic conditions in a certain area, medical hardships, societal failings, discrimination), a portion of today’s poverty can be prevented by better individual decision-making. Individuals who make sound personal decisions in their private, academic, and professional lives fare significantly better than individuals who don’t. The following are keys to sound economic decision-making, which has helped many households avoid poverty:
1. Live a healthy lifestyle.
People who live healthy life styles (those who exercise, eat well, avoid harmful addictions, allow reflective time for themselves, have a positive outlook on life, and are interested in learning and improving themselves) usually do better in their careers and generally have incomes higher than those who fall short in several of these areas.
2. Learn a trade.
People who invest in themselves by learning a marketable trade or skill (by teaching yourself, or by going to school, or through on-the-job training), experience higher earnings than people who don’t.
3. Invest wisely.
People who save and make sound financial decisions experience a greater degree of financial success. Examples include investing in diverse and financially sound assets, not going into excessive debt, building a sound credit rating, and purchasing health, disability, and life insurance. Many individuals and households who borrowed an irresponsibly large amount of money in order to buy a house during the housing boom and the sub-prime mortgage years found themselves in financial difficulty and sometimes without their house and without a place to live. When you borrow money to purchase a house or any other asset, be sure that you can afford to make payments in the future, even when asset prices decrease and/or interest rates increase (if you negotiated a variable rate).
4. Make sound relationship decisions.
People who choose a responsible partner and have children at a financially appropriate time (or do not have children) experience better financial and emotional health.
People who have made unwise decisions, or who have fallen victim to poverty for reasons beyond their control (the economy, natural disasters, disabilities) often find themselves applying for government assistance. Many programs provide temporary relief; however, many of the government anti-poverty programs also discourage many people from working. Welfare recipients are often financially better off continuing to receive the government benefits as compared to having a job. Some welfare programs (see the next section for a description of welfare programs) encourage family break-ups by awarding more generous benefits, such as housing, food stamps, and child care assistance, to single mothers. The Welfare Reform Act of 1996, which implemented stricter eligibility requirements and limits on the number of years someone can be on welfare, has been a step in the right direction, and has provided more families with the incentive to get off welfare and work. But has it done enough?
You misspelled the country Haiti in the Median Household Income section.
Thank you for letting me know, Laila!
Would you be interested in discussing this portion “1. Live a healthy lifestyle.
People who avoid addictions, such as gambling, alcohol, drugs, and eating disorders, function more effectively in their professional careers.” with me via email? I’m trying to understand why you chose these illnesses as examples.
Hi Katelyn, thank you for your message. Feel free to email me.
Okay but realizing that the U.S Census Bureau only defines the poverty line by multiplying average family food expenses and multiplies it by three was a super big red flag for me. Not only does it not take into account things such as housing/living expenses (which are way more than 3x the amount of food expenses – one person working the federal minimum wage can’t even afford the cheapest of apartments), but also other expenses. Not to mention (as stated) that different areas have vastly different costs of living. Idk, it just rubs me the wrong way. Thank you for including it in this chapter, though.
Thank you, TJ.
John do you really think people CHOOSE to live in poverty? That whole “how to avoid poverty” section is so out of touch and a slap to the face to actual poor people who definitely don’t have the time to “exercise and reflect” because they’re too busy working to survive. This whole unit is so incredibly tone-deaf and I can’t believe HCC students are paying to take classes that make us read such biased and invalid sources as our “textbook”.
Hi Saraf, please see my reply to one of your earlier comments regarding the importance of reading this text. To summarize, if you only read what you want to read, you will not grow and learn much.
Regarding choosing to live in poverty: I mentioned that some things are beyond people’s control and in some cases being in poverty is not within your control. However, in many instances it is and people taking personal responsibility goes a long way to avoiding poverty.
thank you oh my god. i wish they would use a real textbook i feel like im going insane
Hi Darryl, here is a copy of my reply to one of your comments in section 4:
Hi Darryl, thank you for your feedback. I am sorry to read that you are not happy with this text. I started writing these two texts (macro and microeconomics) 25 years ago per a request from the college to help save text book costs for our students. Before the first edition I read and analyzed twelve then popular standard economics text books, in addition to studying several texts to which I was heavily exposed during my graduate studies (Reisman, Hazlitt, Friedman, Ayn Rand). Each year since then, I have revised these online texts. Along the way, I have received peer comments from a variety of economics professors and colleagues in general, as well as many students. I have made many changes based on their feedback. These two texts are also full of source citations. I understand that you may not agree with some or a lot of things in these texts because everyone has their own beliefs. You stated somewhere that the text is very biased. It is true that I a am a believer in the free market, but that doesn’t right away mean that the content is not true. What I mean by that is that there are advantages and disadvantages of any system and I happen to believe that there are more advantages to the free market than disadvantages. I respect that you disagree with this belief because eventually it comes down to subjective preferences. I can actually relate to what you are saying because before entering grad school I thought like you and was radically opposed to the free market and supported a socialist economy. This is because I was heavily influenced by my economics courses in the Netherlands, which had a strong socialist bias. When I was exposed to another point of view in grad school, I had a chance to see different viewpoints and I tried to be open-minded about accepting these different ideas. Eventually, I put the two schools of thought next to each other and (after also reading a lot more about classical and Austrian economics) concluded that the latter made a lot more sense. The reason why I am not afraid to insert my support for the free market in these texts is because the vast majority of standard economics texts are biased the other way (pro socialist ideas, pro Keynesian). My guess is that you like these texts better because you happen to support these ideas and therefore they do not appear to be biased to you. However, I ask you to be open minded and consider other points of view (which is the definition of critical thinking). Now, if there is something factually untrue in my texts, please let me know and I will gladly accept your feedback. But when it comes to subjective viewpoints, I do believe that it is very beneficial to read many different ones and then draw your conclusions accordingly. I am proud of the texts, the knowledge it has instilled to students around the world (inflateyourmind.com has nearly 3 million page views as of this writing) and the combined total of millions of dollars it has saved our students. In unit 7 of the macro part, I express my dissatisfaction with our government’s (Federal Reserve) creation of inflation. Inflatyourmind.com comes at price of zero dollars. What a way to fight inflation!