How the ALICE Threshold Aims to Redefine the Federal Poverty Line

What is ALICE (Asset Limited, Income Constrained, Employed) in economics?

ALICE (Asset Limited, Income Constrained, Employed) is an acronym for workers who earn just above the federal poverty level but less than they need to cover basic living expenses. These people work a wide range of jobs that pay below average in sectors such as retail and food service.

The acronym was developed by United Way and is based on the ALICE threshold. Some consider it an alternative to the federal poverty line. The nonprofit has established a standard ALICE threshold for each U.S. state and country.

Of the 129 million U.S. households, 54 million (42%) fall below the ALICE threshold, according to United for ALICE, a grassroots movement led by United Way of Northern New Jersey. At least one-third of households in every state fell below that threshold in 2022. The organization’s 2024 update found that the number of ALICE households continued to grow from 2021 to 2022, continuing a decade-long upward trend.

How the ALICE threshold is calculated

The ALICE threshold is established using the organization’s household survival budget, which includes the minimum costs of essentials such as housing, child care, food, transportation, health care and technology, taxes, and miscellaneous costs. The methodology involves using basic cost-of-living factors to determine the number and proportion of households that cannot afford the cost of living in a given area. The budget is calculated separately for each U.S. county and for different types of households.

Two thresholds are calculated: one for households headed by a person under the age of 65, and one for households headed by a person over the age of 65 (the second threshold is based on the survival budget for seniors, which takes into account different costs for older households, reflecting lower expenditure on food and transport and higher expenditure on health care).

The threshold is rounded to the nearest income category in the American Community Survey, a survey conducted by the U.S. Census Bureau to measure the changing social, economic, demographic and financial status of the U.S. It is then adjusted for household size and composition in each county.

ALICE workers struggle

ALICE households, as defined by the United by ALICE group, earn enough to be above the poverty line but still struggle to get by on a minimum budget. This is partly because they face high living costs but cannot access as much public assistance as those living below the poverty line.

Families face higher living costs every year. For example, in 2023, 54% of ALICE households reported to the U.S. Census that they had trouble paying for basic necessities like food, rent or mortgage, car payments, and medical expenses—more than the 50% who reported the same challenges in 2020 amid the economic devastation caused by the COVID-19 pandemic. And in 2022, 39% of households living below the ALICE threshold said their housing costs had increased in the previous 12 months.

During this time, many of these families did not receive enough assistance to make ends meet. Only 18% of ALICE households received Supplemental Nutrition Assistance Program (SNAP) benefits in 2022, and 16% of ALICE households were behind on rent payments in October 2023.

The ALICE parameters not only calculate basic living costs—housing, child care, food, transportation, health care, technology, and other expenses and taxes—and measure households that are unable to meet these basic needs. They also consider contextual conditions, such as fewer job opportunities, longer commutes from work to cheaper housing, and the stress of overusing primary care emergency rooms.

ALICE households often face difficult choices and struggles every day. For example, childcare is one of the highest costs for families with children. The latest Household Pulse Survey conducted by the U.S. Census Bureau found that in 2022, about 61% of parents living with at least one child had no formal childcare arrangements. When asked what families do when childcare facilities are closed, unavailable or unaffordable, 34% of ALICE respondents said they reduce their working hours, 31% said they take unpaid leave and 21% said they care for at least one child while working.

Households of color are often disproportionately affected by financial hardship compared to their white counterparts. For example, a study by the National Library of Medicine suggests that racial and ethnic minorities were less able to cope with the economic shocks caused by the COVID-19 pandemic due to their lack of preexisting wealth.

In 2022, 59% of Black households, 55% of American Indian/Alaska Native households, 52% of Latino households, and 48% of Native Hawaiian/Pacific Islander households were below the ALICE threshold, while the percentages for white households and 35% of Asian households were lower.

The beginnings of the ALICE project

Project ALICE is a grassroots movement led by United for ALICE. Although the movement began at United Way of Northern New Jersey in 2009, it has spread to United Ways, corporations, nonprofits, and foundations in Washington, D.C., and 31 states, including:

• Arkansas
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Louisiana
• Maine
• Maryland
• Michigan
• Minnesota
• Mississippi
• New York
• New York
• North Carolina
• ohio
• Oregon
• Pennsylvania
• South Carolina
• Tennessee
• Texas
• Virginia
• Washington
• West Virginia
• Wisconsin.

The project aims to use research to raise awareness of a major segment of the U.S. population that struggles to meet basic needs. United for ALICE produces reports, facilitates forums for fundraising strategies and more, and builds relationships with communities and government officials to support the ALICE community.

Industries where you can find ALICE employees

ALICE workers can be found in many industries, although they often work in service jobs. In 2022, 55% of personal care workers, 51% of cashiers, 49% of janitors and cleaners, and 46% of fast food and counter workers lived below the ALICE threshold. Other professions with high ALICE workers include:

• Accountants and auditors
• Assemblers and manufacturers
• Accountants and auditors
• Customer service representatives
• General and operational managers
• Maintenance and repair workers
• Removals
• Nurses
• Administrative and Office Support Managers
• Office workers
• Retailers
• Secretaries and administrative assistants
• Software developers
• Warehousemen and order makers
• Truck drivers
• Waiter and waitresses

Many of the above jobs pay incomes that are slightly above the federal poverty level, but not enough to make ends meet.

ALICE household advocacy groups

There is a wide range of initiatives and programmes aimed at supporting ALICE households. Some of them include:

• In 2021, United Way of Northwest Arkansas partnered with organizations to provide 100 desktop computers and computer hotspots to ALICE students.
• In 2022, philanthropic organizations including the Winthrop Rockefeller Foundation, Hope Policy Institute, and Arkansas Community Foundation raised more than $225,000 to help forgive $35 million in medical debt for Arkansas residents.
• United Way of the Ouachitas offers free tax preparation services to low- and moderate-income households.
• In 2023, Asset Funders Network hosted the ALICE Champions Conversation, where leaders from politics, business, philanthropy, and nonprofits discussed how to use their influence to help ALICE communities and drive policy change.

Advocates are also pushing for policy changes using ALICE data and United for ALICE research. For example, in 2019, early childhood advocates used ALICE data to highlight the need for legislation promoting affordable day care. Hawaii Governor Josh Green recently signed legislation expanding the Family Tax Credit, which is intended to provide relief to families covered by the ALICE program.

Summary

ALICE households are those in which working people are unable to meet their basic needs but still live above the federal policy threshold. They face rising living costs but often cannot access the same level of financial assistance as those living below the poverty line. In 2022, 42% of U.S. households—54 million households—fell below the ALICE threshold.