Real Cost Measure Methodology

Posted on 02/04/19 by United Ways of California


The Real Cost Measure is a poverty measure designed by United Ways of California. Unlike the official poverty measure which does not accurately account for local costs of living, the Real Cost Measure incorporates the cost of housing, food, health care, child care, transportation and other basic needs.

The Real Cost Measure is designed to measure the income a household needs to meet basic needs in a given community. These needs include the barest “essentials”—housing, food, health care, transportation—and does not account for the cost of electricity, school supplies, or investments like saving for college, or preparing for retirement. Many items that most people consider necessities, like Internet access, are not used to calculate these standards (beyond a small allowance for miscellaneous expenses). A basic needs budget approach is intuitive and easy for most people to understand, as it is grounded in a household budget composed of things all families must address such as food, housing, transportation, child care, out-of-pocket health expenses, and taxes. A basic needs budget approach also takes into account different costs of living in different communities and conveys a better sense of the hardship for families because it invokes the notion of tradeoffs between competing needs—if you have an inadequate level of income, do you sacrifice on food, gas, or child care?

Assessment of whether households can meet this measure is based on their self-reported income, which includes earned income as well as public assistance programs like CalFresh. The Earned Income Tax Credit, which is discussed later in the document, is not included, nor is any private assistance (such as a gift from a relative).

Struggling to Stay Afloat: The Real Cost Measure in California 2018 is a successor to two previous reports supported by California United Ways including Overlooked and Undercounted 2009 and Struggling to Get By: The Real Cost Measure in California 2015.

For more information, read the full Real Cost Measure methodology.

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