Poverty and the Risk Calculator

Each year the U.S. Census Bureau estimates an annual rate of poverty, with the federal poverty line for a family of four drawn at approximately $24,500. In 2016, the overall poverty rate was 12.7 percent, representing 40.6 million people, or about one in every seven Americans. Among the industrialized countries, the United States is at the high end of the poverty spectrum.

Factors Associated with Poverty

Census data has shown that certain characteristics tend to increase the likelihood of experiencing poverty.  Among the most important are education, marital status, race, gender, and age.  Those with less education, not married, nonwhite, and who are women and younger tend to be at a higher risk of poverty.

Research has also shown that particular events often trigger a spell of poverty.  These include losing a job or having work hours cut back, changes in family structure, and experiencing a major illness or health emergency.  Each of these events has the potential to throw households into poverty.  Demographic analyses indicate that these events have become more commonplace, with the result being that greater numbers of Americans are facing economic insecurity and vulnerability in their lives.

As a consequence, many Americans may be asking themselves, “How much personal economic risk do I face in the future?”  Furthermore, “How does my risk differ from that of others?”  With these questions in mind, we set about to construct a new tool that allows individuals to look into the future and calculate their own economic risk in the years ahead.

The Logic Behind the Calculator

The idea behind this tool is similar to the logic behind the heart disease calculators that can be readily found on the Internet.  In using these calculators, one is asked to input various pieces of information, and based upon that information, the risk of having a heart attack over the next 10 years is calculated.  These estimates are derived from a very large sample of individuals that make up the Framingham Heart Study.

Our economic risk calculator works in a similar fashion.  Based upon hundreds of thousands of case records taken from an ongoing longitudinal study of Americans begun in 1968, we estimate the risk of falling below various levels of poverty during the next 5, 10, or 15 years.  Our analysis is based upon the Panel Study of Income Dynamics which has been tracking the economic fortunes of a nationally representative group of Americans over the past five decades.  A series of life tables are constructed in order to estimate the likelihood of experiencing poverty in the future.  Our focus is on the above mentioned five variables in differentiating poverty risk – education, marital status, race, gender, and age.

How It Works

The calculator allows one to enter their specific demographic characteristics in order to predict their risk of living at least one year in poverty during the next 5, 10, or 15 years.  In addition, we allow you to estimate your chances of experiencing one of three levels of poverty in the future – near poverty, poverty, or extreme poverty.  In some cases, the sample is too small to estimate a reliable poverty prediction. In these cases, the wording “Too few cases to compute a reliable percentage” will appear.

Comparisons can be made with differing individual profiles.  In this way, you can examine the effects that education, marital status, race, gender, and age have upon the risk of poverty.  Our hope is that such information will alert Americans to the magnitude of economic dangers that they may face in the future.

Go to Risk Calculator