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Poverty In Minnesota
Testimony to Legislative Commission To End
Poverty In Minnesota By 2020
Tom Stinson, State Economist
Tom Gillaspy, State Demographer
August 2007
Who Are the Poor?
The poor are those unable to purchase a
minimum adequate market basket of
goods and services
2007 HHS Poverty Guidelines
Household Size 2007 Poverty Guideline
1 $10,210
2 13,690
3 17,170
4 20,650
6 27,610
Poverty Status Is Determined by
Money Income
Earnings Unemployment
Dividends Workers comp
Interest SSI
Rent and royalties Veterans benefits
Trust income Public assistance
Pensions Child support
Social Security Alimony
What Income Is Excluded?
• Non cash benefits – food stamps, housing
subsidies, Medicare, Medicaid
• Capital gains
• Money withdrawn from savings
Other Considerations
• Income is measured before taxes
• Combined income of all family members
• Incomes of non-relatives (roommates) are
not counted
• The same thresholds apply in all states
• No urban-rural or regional differences
• Not relative to other’s incomes
Who Is Not Counted In The Poverty
Statistics?
• People in institutions—nursing homes,
prisons
• People in group quarters but not
institutionalized—college students living
in dorms, group homes, shelters
• The homeless
How Was the Poverty Line Developed
• Poverty line was defined as 3 times the
cost of USDA’s economy food plan in
1963
• Since then the poverty line has increased
to match the increase in the Consumer
Price Index
Selected Inflation Rates 1963-2006
Pct Change
1963-2006
1500
1250
1000
750
500
250
0
CPI Food Shelter Fuel Medical Transp Apparel
Highest & Lowest Poverty Rate
States
1. Mississippi 21.3% 1. New Hampshire 7.5%
2. Louisiana 19.8% 2. Maryland 8.2%
3. Dist of Columbia 19.0% 3. Connecticut 8.3%
4. New Mexico 18.5% 4. New Jersey 8.7%
5. West Virginia 18.0% 5. MINNESOTA 9.2%
2005 ACS
Minnesota Poverty Rate Is Typically
Lower Than The Nation
16
14
Poverty Rate
12
US
10
Mn
8
6
4
80
82
84
86
88
90
92
94
96
98
00
02
04
19
19
19
19
19
19
19
19
19
19
20
20
20
CPS poverty rate with 90% confidence interval
Metro Area Has Highest and Lowest Poverty Rates
2005 ACS data by Public Use Microdata Area
State: 9.2%
2.0 to 4.9
5.0 to 9.1
9.2 to 14.9
15.0 to 29.0
Poverty Is Higher Inside The Beltway
And In Greater Minnesota
45% Greater Minnesota
41%
39% Roch/St. Cloud & Exurbs
40%
35% Suburban Ring
30% Mpls/St Paul & Inner Burbs
25%
20%
15% 11% 12%
10%
9%
10%
5%
5% 4%
0%
Percent of Poor Poverty Rate
Below Poverty
N
W
2005 ACS
10%
15%
20%
0%
5%
Va
lle
y
SW
11%
C
or
n
U
7%
p
N
C or
th
en
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13%
SE al
La
/C ke
R s
iv
9%
er
V
R al
oc ley
h/
St
10%
C
lo
Ex ud
ur
7%
ba
n
Su Ri
bu ng
rb
4%
an
R
in
In g
ne
4%
rB
ur
M bs
Greater Minnesota Also High
pl
7%
s/S
tP
au
l
19%
Highest Poverty In Minneapolis & St. Paul
Part Of The Difference Between Minnesota’s
Poverty Rate And The Nation Is Difference In
Racial And Ethnic Structure
12.4%
Mn Rates w/ US Population
9.2%
Total 13.3%
Hispanic/Latino
Mn
Asian
US
American Indian
Black/African American
White Not Hispanic
0% 5% 10% 15% 20% 25% 30% 35%
2005 ACS. Mn v US difference for Black /African American and American Indian
are not statistically significant at 90% confidence. All other differences are significant
High Poverty For Children & Young Adults
Rises Again Over Age 75
20% 19%
Below Poverty
15%
11% 11%
10%
7%
5% 6%
5%
0%
Under 18 18-24 25-44 45-64 65-74 75+
Age Group
2005 ACS
Families With Children Have Higher
Poverty Rates; Family Type Also Matters
Female Headed, No 5%
Child 11%
Male Headed, No 5%
Child 8%
Married-Couple, No 2%
Child 3% Mn
Female Headed w/ 30% US
Child 38%
Male Headed w/ 14%
Child 18%
Married-Couple w/ 4%
Child 7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
2005 ACS. Families only. Does not include people living alone. All differences
Between Mn and US are statistically significant at 90% confidence
Poverty Declines As Education
Increases
25%
20%
Poverty Rate
15%
US
Mn
10%
5%
0%
Less Than High Some Bach Grad or
high School School College Degree Prof Degree
Grad
2005 ACS. Rates for population age 25 and older.
Differences significant at 90% confidence
Not All Poverty Is the Same
• Business Cycle
– Temporary lay-off
• Life cycle
– College students
– Retirees
• Event
– Disability
Minnesota Poverty Rate Trends
Higher During Economic Downturns
16
14
Poverty Rate
12
Recession
10 Mn
US
8
6
4
80
82
84
86
88
90
92
94
96
98
00
02
04
19
19
19
19
19
19
19
19
19
19
20
20
20
CPS poverty rate with 90% confidence interval
Much Poverty Is Episodic
Results of Panel Study of income Dynamics 1996-1999
• A third (34%) of Americans were poor for
at least 2 months during the 4 year period
• 2% were poor every month of the 4 years
• Half (51%) of poverty spells last 4 months
or less
• 80% of poverty spells last 1 year or less
Some Types of Poverty Are Long
Lived
• Chronic
– Insufficient skill base
– Weak local/regional economy
• Intergenerational
An Alternative View Based On
Characteristics Of The Householder
• Circumstances & characteristics of
householders say much about poverty of
household members
• Multiple poverty risk characteristics
dramatically increases likelihood of poverty
Eight Characteristics Of Householders
Account For Three-Fourths Of
Minnesota’s Poor
Characteristic of Percent Of
Householder Poor Poverty Rate
Disabled 38% 19%
High School Dropout 36% 26%
Never Married Mom 19% 42%
College Student 18% 23%
Unemployed 15% 31%
Divorced/Sep Mom 12% 20%
Not Citizen 10% 19%
Older Widow 6% 14%
Poverty Rate of People In Selected
Households With Householder
Experiencing Multiple Risk Factors
Never Married Mom College Student 46%
Disabled divorced mom 49%
Unemployed with Less Than high School 51%
Unemployed divorced mom 59%
Never Married Moms with Less Than high
59%
School
Unemployed never married mom 71%
Disabled divorced mom with less than High
85%
School
0% 30% 60% 90%
Poverty Rate
2005 ACS micro data. Each of the above groups comprise more than 5,000
Minnesota households
Alternative Definitions of Poverty
• Multiples of the existing poverty line
• Adjusting for assets
• Adjusting for access to publicly provided
goods and services
• Basic needs studies
Numbers of Poor & Near Poor Have
Changed Little Since 1990
Below Poverty 100-200%
Minnesotans Below 200% of Poverty
1,200,000
1,000,000
800,000 694,828 684,900
654,447
600,000
400,000
200,000 435,331 380,476 410,200
0
1990 2000 2005
1990 & 2000 Census & 2005 ACS
Highest Poverty Rates In Minneapolis
& St. Paul—Greater Minnesota Also
Higher
40%
Below 200% of Poverty
35% 100-200%
30% Below Poverty
17%
25%
20% 21% 16%
21% 18% 16%
15% 13% 12%
10% 13% 19%
13% 9%
5% 11% 9% 10%
7% 7% 7%
4% 4%
0%
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an
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s/S
p
ba
al
St
W
er
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U
rb
tr
pl
h/
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N
In
bu
en
M
oc
R
Ex
Su
C
R
/C
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2005 ACS
Highest Poverty Rates Among
Minnesota Young Adults But Near
Poverty Is High Among Elderly
45%
40%
Below 200% of Poverty
100-200% of Poverty
35% Below Poverty
30%
18%
25% 30%
20% 16%
15% 13% 16%
10% 19% 8%
5% 11% 11%
7% 5% 6%
0%
Under 18 18-24 25-44 45-64 65-74 75+
Age Group
2005 ACS
And In Conclusion
• Minnesota has one of the lowest poverty
rates in the nation
• Poverty is transient for some; more chronic
for others
• Our low rate is not quite as good as we
might think
• Sharp differences in poverty rates exist
between groups and regions
A Few Alternative Measures Of
Poverty
1. Current (2003) official US rate 12.5%
2. Official + capital gains minus income &
payroll taxes 12.0%
3. #2 plus value of non cash benefits 9.7%
4. Official rate adj for cost of living diff &
medical out of pocket expenses 13.2%
5. Food insecure (2005) 11.0%
Sources Of Income For Minnesotans
Below Poverty In 2005
Interest, Dividend
& Rent, 1.9% Social Security
Income, 19.5%
Public Assistance
Income, 4.3%
SSI, 8.1%
Wage & Salary
Income, 55.5% Other Income,
5.8%
Self Employment
Income, 4.9%
2005 ACS
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