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Census report doesn't capture extent of poverty

Nearly 1 in 6 Americans, or 46.2 million people, lived below the poverty line in 2011, according to the U.S. Census Bureau. Spencer Platt/Getty Images

(MoneyWatch) The U.S. Census Bureau's latest poverty report offers a broad overview on conditions in the U.S., but it is far from a complete picture. The methodology has come under such regular attack that the agency puts out another report every year using a different set of measurements.

One problem with the Census report is that it uses the same income threshold to determine if a person or household is impoverished that has been in use since 1964. The only changes have been to adjust income levels for inflation. Currently, anyone earning less than $11,484 per year is considered to be living in poverty. For a family of four, the earnings threshold is $23,021 per year.

This amount was originally set as the earnings line below which a family of three or more would have to spend more than a third of its income on food. Notably, the report does not consider other major expenses, such as housing, transportation, medical care and child care, in gauging the nation's poverty rate.

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At first glance, this might seem like an effort to make poverty look less prevalent than  it is. But it is also important to note that the Census report also leaves out "transfer credits, which can increase income, when calculating total earnings. Transfer payments are things like food stamps, the Earned Income Tax Credit and unemployment insurance.

The Recovery Act of 2009 increased funding for these and other programs. The Center for Budget and Policy Priorities, a Washington think tank, estimates that the stimulus program kept close to 7 million people out of poverty in 2010 alone. As The Washington Post points out:

In 2011, the poverty rate not including unemployment insurance or Social Security would have been 7.8 percentage points higher, and it would have been 3.1 points lower if you take food stamps and EITC into account. So all told, these four government programs reduced poverty by 10.9 percent, or 33.6 million people.

While the Census report did show a 1.7 percent decline in income between 2010 and 2011 for most working- and middle-class earners, it did not include several another telling fact: The decline in income came despite an enormous increase in worker productivity.

According to the Department of Labor, in the last 10 years worker productivity in non-farm, manufacturing and business jobs has increased an average of 2.59 percent each year, or nearly 26 percent total. Yet median income has fallen over that same period. In 2011, U.S. median income was $50,100 -- that's the lowest level since 1996.

This is only the second time on record that productivity went up while wages decreased. The other time was between the brief recession of 2000-01 and the start of the Great Recession in 2007. The poverty rate went up in seven out of the last 11 years despite the fact that recessions took place in only four of those years.

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