Analysis of government data on households’ self-reported spending shows that the share of the population living on resources below half of the federal poverty threshold has trended downward over the past three decades, falling from roughly 2 percent to less than 0.5 percent of the total population. The greatest improvements occurred among the group directly affected by welfare reform: single-parent families.

To assign the poverty status of a given family, the Census Bureau compares its aggregate money income to the corresponding federal poverty threshold for its structure and size.

The means-tested welfare system consists of the total spending on cash, food, housing, medical care, and social services in programs targeted toward poor and nearly poor persons. The federal government runs 89 separate means-tested aid programs.

Nearly all state government welfare expenditures are contributions to federal welfare programs.

Ignoring these matching state payments into the federal welfare system results in a serious underestimation of spending on behalf of the poor.

While the Census Bureau imputes income to some respondents in an attempt to adjust for the underreporting of earnings from formal employment, it cannot adjust for earnings if the work is never reported to the government at all, even by the employer.

Read the full article on extreme poverty by Jamie Hall and Robert Rector at The Heritage Foundation