We Need to Know the True Cost of Living in New York City
David R. Jones, The Urban Agenda
Come November, as New Yorkers elect their representatives for office, they will also be asked to vote on several ballot initiatives, one of which requires the city government to develop a metric that captures the “true cost of living” in the city. The proposal follows from the recommendations of the Racial Justice Commission (RJC)—an independent and diverse body of civic leaders that was formed in March 2021 to examine structural racism in NYC Charter.
Tasked with taking a close look at impediments faced by minorities and people of color in their pursuit of economic security and well-being, the RJC recommends that the City calculate a true cost of living: “The true cost of living would include essential needs such as housing, food, childcare, transportation, clothing and much more without counting public, private, or informal assistance. It would be used to inform program and policy decisions.”
The need for a metric that accurately captures economic deprivation in the city has been long overdue, especially given the woeful inadequacy of the Federal Poverty Level (FPL). The FPL, devised in the 1960s and largely unchanged since, is set at three times the estimated annual expenditure on food and adjusted for inflation and family size. For 2022, the FPL for a family of four—two adults and two children—is set at $27,750.
Benchmarking present day needs of a family living in New York City solely against the cost of food has proved meaningless in a city where there are many other necessities needed to survive. The costs of housing, energy and medical care have outpaced the cost of food and now constitutes a much larger share of a family’s annual budget than food. Additionally, the FPL is not adjusted geographically, further underestimating the minimum level of resources needed to live in expensive cities like New York. Since the FPL is used to determine eligibility for most federal safety net programs, the result is that it leaves out millions of New Yorkers who are struggling to make ends meet but are denied city, state and federal assistance since their incomes put them above the FPL.
In addition to providing a rough estimate of the resources needed to survive, the federal poverty measure is also used to count the number of people falling below the poverty threshold. Since the federal poverty measure takes into account only pre-tax cash income in determining one’s poverty status, it fails to gauge the impact of anti-poverty programs (e.g., Supplemental Nutritional Assistance Program (SNAP, formerly Food Stamps), housing assistance.) and tax credits (e.g., the Earned Income Tax Credit, the Child Tax Credit).
To address some of these glaring shortcomings of the federal measure, the Census Bureau launched the Supplemental Poverty Measure (SPM) in 2011. The SPM’s need thresholds go beyond food to include expenditures on clothing, shelter and utilities, as well as other miscellaneous expenses. The SPM also adopted a more sophisticated definition of family resources, accounting for taxes, transfers, and expenses related to work, childcare, and healthcare. Finally, the SPM built in adjustments for geographic price variation and families’ housing status.
Around the same time as SPM was launched, the City began publishing its own poverty measure, known as the NYCgov poverty rate, which is similar to the SPM at its core but has some differences, including in the treatment of housing costs. The City’s own poverty measure has been a useful metric in tracking poverty reduction efforts, including the impact of raising the minimum wage to $15 for most workers.
Despite significant improvements to the federal poverty threshold, both SPM and NYCgov measures include the value of public assistance (both in cash and in kind) in its income measure, it is implicitly contingent on the federal poverty measure.
All this is to say that the FPL and the SPM fail to capture the true cost of living, working, and caring for a family in today’s NYC (or anywhere in the nation, really). But because the inherently flawed federal poverty measure underpins most safety net programs and policies, it undermines their reach and impact. The use of this outdated metric also serves to reinforce historic inequities along racial, gender and ethnic lines: by underestimating economic need it prevents the assistance programs from providing the appropriate level of support.
An alternative approach to measuring poverty starts with creating a more realistic picture of the cost of a decent standard of living beyond mere survival, which this year’s ballot measure proposed by the RJC seeks to set New York on a path to pursue.
To overcome the systemic inequities in our public assistance systems and to ensure an accurate measurement of economic need, we should favor a radical overhaul and work towards assessing the true cost of living.
A key first step would be ensuring New Yorkers are aware of the true cost of living ballot measure this year and a robust civic engagement campaign to ensure New Yorkers vote in favor.