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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Summary

Poverty statistics are essential for determining the size and composition of the population whose basic needs are going unmet and for tracking how conditions facing this group are changing over time. Poverty statistics help society target resources to alleviate hardships experienced by disadvantaged populations and allow assessment of the effectiveness of programs designed to improve the wellbeing of these populations. The statistical construct serving the widest range of these research and policy purposes in the United States is the Supplemental Poverty Measure (SPM). The SPM was first published in accordance with a 2011 report by the Interagency Technical Working Group on Developing a Supplemental Poverty Measure. That report was based on a National Academies of Sciences, Engineering, and Medicine report, Measuring Poverty: A New Approach (NRC, 1995), and over a decade of research by the Census Bureau and the Bureau of Labor Statistics (BLS) to evaluate the methods recommended in the National Academies’ 1995 report.

In 2022, the Census Bureau reported both an increase and a decrease in poverty for families between 2019 and 2021. The poverty rate under the Official Poverty Measure (OPM), developed in the 1960s and methodologically unchanged since then, grew from an estimated 10.5 to 11.6 percent of the population. In contrast, the rate under the SPM declined from 11.8 to 7.8 percent. These poverty rates moved in sharply opposing directions primarily because the SPM counts income support received through the tax system which, during this period, included COVID-19 stimulus payments, while the OPM does not. In other words, the SPM reflected that the stimulus payments—along with regular in-kind government support programs such as the Supplemental Nutrition Assistance Program (SNAP) and tax benefits such as the Earned Income Tax Credit and Child Tax Credit—helped reduce poverty during the pandemic.

This study, requested by the Census Bureau, assesses the strengths and weaknesses of the SPM and provides recommendations for updating the methodology to more accurately reflect the basic needs of, and resources available to, households. The Census Bureau recognizes the need to periodically revisit SPM construction to account for changes in the population’s consumption patterns, social and economic norms, perceptions of wellbeing, and the goods and services needed to participate fully in the economy. In addition, public policies evolve over time, as do the data sources available for their evaluation.

The guidance provided in this report builds on recent changes to the SPM by the Census Bureau and BLS in defining basic needs categories and setting thresholds (the minimum level of resources required to cover basic needs), adjusting thresholds for geographic differences in living costs, estimating household resources, and imputing income and in-kind benefit levels. During the panel’s deliberations, which took place from spring 2020

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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through fall 2022, much of the focus was on improving measurement of SPM categories—most notably, medical care, childcare, and housing—for which conceptual and data questions have proven most difficult to resolve.

STATISTICAL ROLE OF THE SPM

Because its role in economic statistics extends well beyond a “supplemental” one, this report will refer to the next iteration of the SPM as the Principal Poverty Measure (PPM).

RECOMMENDATION 2.11: Due to its vital role in tracking the effects of public policies and programs on the size and composition of the population living in or near poverty, and its resulting status as the preferred measure of many researchers and policy makers, the Supplemental Poverty Measure should be elevated to the nation’s headline poverty statistic and renamed accordingly (e.g., to the Principal Poverty Measure).

In the panel’s judgment, given the essential statistical functions that it serves, the more comprehensive PPM (as opposed to the OPM) should feature most prominently in Census Bureau publications and announcements—a direction that the agency has already begun taking in its recent reports.

MODERNIZING THE SPECIFICATION OF BASIC NEEDS AND ECONOMIC RESOURCES

The measurement of economic poverty involves estimating two components: (1) a basic needs level—a budget or threshold; and (2) the economic resources available to families, individuals, or households. The SPM estimates the income and other resources (including government cash and in-kind assistance, subsidies, and tax credits) available to households to meet a threshold based on a well-defined concept of basic needs; if the resource estimate falls below the threshold, a household is considered to be living in poverty. The threshold is determined by the cost of acquiring a specific bundle of basic goods, as represented by the level of spending on the items. Because the threshold is set based in part on the distribution of people’s expenditures on the set of included budget items, the SPM was referred to as a “quasi-relative poverty measure” in the National Academies’ 1995 report.

In the SPM, a “multiplier” is added to the budget to allow for the inclusion of other necessities not explicitly included in the bundle such as nonwork-related transportation, personal care products, and household supplies. In the calculation of resources, some types of expenditures (e.g., taxes or work expenses) are subtracted to reflect that not all incoming funds to an SPM resource unit (which, for readability, will be referred to as a household) are available to spend on the basic needs specified in the threshold.

Since its inception, the basic bundle spending categories in the SPM have been food, clothing, shelter, and utilities (FCSU); the multiplier has been set at 20 percent. Additional adjustments are applied to threshold levels to capture differences in needs related to the size, composition, housing tenure (renting, owning with mortgage, and owning without a mortgage), and geographic location of households.

SPM methodology, including specification of the threshold, requires periodic reexamination to reflect changing circumstances. One aspect of this reexamination involves consideration of how both the basic needs bundle and the resources available to households can be categorized intuitively and transparently. The Census Bureau clearly views the SPM as an evolving measure. For example, beginning in 2021, internet service was added as an explicit basic bundle category and telephone service was extracted from utilities to become a separate item, thus reformulating the threshold as food, clothing, shelter, utilities, telephone, and internet (FCSUti). The revised SPM can benefit from further refinement along these lines.

RECOMMENDATION 2.2: For the Principal Poverty Measure, the set of threshold categories should be expanded beyond the current food, clothing, shelter, utilities, telephone, and internet (FCSUti) to explicitly recognize that minimum basic needs—as well as policies designed to help households meet those needs—have evolved since the establishment of the Supplemental Poverty Measure.

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1 The numbering of recommendations reflects their locations in the body of the report—e.g., Recommendation 2.1 is the first recommendation in Chapter 2. This Summary includes only a selection of the recommendations included in the full report.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

Compelling cases can be made for establishing explicit categories in the basic needs bundle for medical care and, with further research, possibly childcare; and for updating the treatment of shelter. While medical care and childcare are by no means ignored in the current SPM methodology, they are incorporated indirectly as expenditure subtractions from household resource estimates.

Methodological research and development of data sources may, in the future, allow other basic needs categories to be considered for inclusion in the threshold bundle, as opposed to being part of the multiplier or handled exclusively on the resource-estimate side of the PPM. Transportation (both commuting and nonwork-related) is an obvious candidate, given its prominence in household budgets. Shifting such elements from the resource side to the threshold side of the calculation will likely raise threshold levels in the PPM. However, by accounting for health insurance benefits and childcare subsidies in the resource estimates, measured poverty rates will not necessarily be affected (at least for the population that receives those benefits and subsidies).

Given the recommendations to respecify the PPM threshold, the 20-percent multiplier would also need to be updated to account for changes in the basic bundle.

RECOMMENDATION 2.5: The Census Bureau and Bureau of Labor Statistics should conduct a review of the basis for the 20-percent multiplier. This review should include:

  • Assessing whether a multiplier set at a different level better matches current spending patterns on the basket of goods currently included in the Supplemental Poverty Measure threshold;
  • Evaluating the spending categories included in the threshold multiplier;
  • Recalculating the multiplier based on the new basic needs bundle; and
  • Developing a plan for updating the multiplier for future changes in spending patterns.

Alternatives to Exclusively Expenditure-Based Thresholds

The current method of estimating SPM thresholds is based on household spending as reported in the Consumer Expenditure Survey (CE). Even so, setting threshold levels requires an element of expert judgment—for example, in determining the appropriate subset of CE respondents on which to base spending estimates, or in establishing the point in the expenditure distribution to represent the base need level. Modifying the PPM approach to medical care and housing—and, at some point, childcare—as recommended in this report shifts the methodology further toward a hybrid model, wherein a mix of survey-reported spending levels and nonsurvey programmatic data are used to set basic needs thresholds. In is also worth noting that, by introducing medical care, and possibly childcare, into the threshold as elements that are not directly based on the distribution of the population’s actual reported expenditures, the hybrid methodology of the PPM could be interpreted to be a less “quasi-relative” measure than the current SPM.

The panel weighed tradeoffs among desirable statistical properties—accuracy, consistency, transparency, and feasibility—and concluded that this hybrid approach could be productively utilized on a case-by-case basis to improve the PPM. In terms of research foundations and data requirements, medical care has most clearly met the necessary criteria to warrant the shift away from expenditure-based estimates of basic need. Additionally, new methods are now available to address flaws in the current SPM approach. Specifically, due to both data and conceptual shortcomings, subtracting household medical out-of-pocket (MOOP) spending from resources, as is done currently, does not accurately reflect the true medical care needs of households.

Medical Care

Per capita expenditure on medical care exceeded $12,000 in 2020. Additionally, the federal government spends more than $1.2 trillion annually on medical care, nearly all of it on insurance, accounting for more than 15 percent of federal outlays and dwarfing the next-largest in-kind transfer program (the Supplemental Nutrition Assistance Program). The high level and rapid growth of spending on medical care and health insurance underscores the importance of explicitly and accurately incorporating this basic need into the measurement of poverty.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

Despite the central role of medical care in people’s wellbeing, the SPM does not currently itemize medical care and health insurance as basic needs in the threshold calculation; nor are the values of government- or employer-provided health insurance benefits counted toward household resources. Instead, MOOP expenses—including insurance premiums, copayments, deductibles, and other payments—are treated as nondiscretionary (like taxes or work-related expenses) and subtracted from each household’s resources. Because medical care is not included as a need category in the SPM threshold, this measure does not capture the unmet medical care need of persons who are uninsured or underinsured. Additionally, because the deduction of MOOP expenses from available resources is not capped, the SPM estimate implicitly assumes that a family’s medical care need is equal to the amount spent out of pocket on insurance and medical care, which is often not the case. Most medical care is paid for by insurance benefits, not out of pocket, and the uninsured may need more care than they can purchase out of pocket. For these and other reasons, the proposed PPM can improve upon the SPM through implementation of a new approach that explicitly adds a need for health insurance to the PPM threshold, while counting subsidies for health insurance (including those from the government and employers) as resources received by the household.

RECOMMENDATION 3.1: For the Principal Poverty Measure, the current approach to medical spending in the Supplemental Poverty Measure should be replaced with one that includes health insurance in the estimates of both the needs threshold and resources.

The research on and development of a medical-care-inclusive poverty measure is sufficiently advanced that the Census Bureau could immediately begin implementation of this recommendation. Indeed, the Census Bureau has already begun investigating the practical implications (e.g., data needs) of moving toward a health-inclusive poverty measure.

For nondisabled individuals younger than 65, the Affordable Care Act (ACA) benchmark plan provides a practical and conceptually valid answer to the question of how much cash income an uninsured person would need to obtain a basic health insurance policy.

RECOMMENDATION 3.2: For individuals under age 65 (excluding those who have Medicare due to disability), the Affordable Care Act (ACA) benchmark health insurance plan should be used to represent the basic health insurance need for a typical American household (or the designated resource-sharing unit for poverty measurement). The ACA defines a benchmark plan as the second-lowest-cost Silver plan available in the health insurance Marketplace in an individual’s geographic area. The Silver plan for those age 65 and over who are not covered by Medicare is also the basic health insurance need.

Just as the ACA represents a benchmark health insurance plan that provides financial protection and affordable coverage for an essential package of medical care, so too does the Medicare coverage for populations that are over 65 or disabled.

RECOMMENDATION 3.3: For the population age 65 and older covered by Medicare, as well as those under 65 who qualify for Medicare based on disability, the basic need level should be set based on the full cost of a Medicare Advantage plan that provides prescription drug coverage. The cost of this plan should be calculated as per-recipient federal spending on Medicare parts A, B, and D, plus the lowest-cost out-of-pocket premium for the Medicare Advantage plan that includes a prescription drug plan.

Introduction of a basic medical care need in the PPM threshold means that medical-related benefits received by households must be accounted for in the calculation of available resources.

RECOMMENDATION 3.4: The definition of resources in the Principal Poverty Measure should include a value for any health insurance benefits or subsidies received from an employer or from the government but must also reflect the fact that such transfers cannot be used to pay for nonhealth needs. This is achieved by capping the value of the transfer that is added to resources at an amount that is less than or equal to the health insurance need that is added to the threshold.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

Finally, medical out-of-pocket payments for nonpremium expenses should also be deducted from resources, subject to a cap, operationalized using the out-of-pocket limits specified in Marketplace plans or other information about actual health insurance status and household characteristics.

RECOMMENDATION 3.5: Medical out-of-pocket spending should be subtracted from resources in the Principal Poverty Measure. For individuals who are not covered by Medicare, this subtraction should be capped at the out-of-pocket maximum for Affordable Care Act Marketplace plans or lower, depending on health insurance status and other household characteristics. Medical out-of-pocket spending by Medicare recipients can also be capped starting in 2025 due to changes enacted under the Inflation Reduction Act, and the panel recommends doing so.

This approach allows variation in actual medical care spending needs associated with differences in health status to be captured without implicitly deeming an unlimited amount of MOOP spending to be necessary for basic care.

Childcare

Inclusion of medical care in the PPM thresholds suggests that the method might be fruitfully applied to other threshold needs categories. Prime among these are childcare and housing. As with medical care, childcare represents a large and rapidly growing component of families’ out-of-pocket spending. Among families who pay for it, childcare accounts for approximately 16 percent of direct expenditures, making it the third largest budget component after housing (29%) and transportation (18%) for such families. Childcare costs are even higher, and represent a larger share of household budgets, for families with preschool-aged children, and these costs vary greatly across the country. A complete and transparent accounting of childcare needs is therefore essential for understanding families’ economic wellbeing.

In the current SPM, paid childcare costs, like commuting costs, are deducted from a family’s resources as a work expense—and thus apply only to working parents. In the proposed PPM, assuming adequate data are available, childcare, like medical care and shelter, would be included as an explicit element of the basic needs bundle; the estimated threshold amount (adjusted for number and age of children and geographic location) would apply to all households with children. Subsidies for childcare, whether paid to families or directly to childcare centers, would be added to a household’s resources. Since unpaid childcare also has value, it too would ideally be accounted for in the resource estimation—however, an appropriate methodology for valuing unpaid care has yet to be determined.

As a first step, the Census Bureau could consider expanding the population of households credited with a childcare expense (and, hence, a deduction from available resources) in the SPM, beyond those who are employed, to include parents using paid care who are engaged in education or training, or who are disabled.

RECOMMENDATION 4.1: In households with children under the age of 13 (or, in line with current childcare subsidy rules, up to age 18 if disabled), parents who are in education or training should be treated like parents who are employed, and a parent who is not working and is disabled should not be assumed to be available to provide childcare while the other parent is working or in education/training.

This correction would be consistent with childcare subsidy rules that consider educational activities equivalent to work for the purpose of subsidy eligibility and would more accurately reflect families’ childcare needs.

The next step toward the conceptual ideal would be to create an explicit childcare category in the PPM threshold for those households utilizing paid childcare.

RECOMMENDATION 4.2: For households with children under the age of 13 (or up to age 18 if disabled) and that are using paid childcare (paid out of pocket and/or subsidized), a basic childcare need should be included in the threshold. In the near future, the Census Bureau should conduct research to develop and implement a methodology for defining the amount of this basic childcare need, varying by age and number of children, geographic location, and hours of paid care used.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

Placing childcare needs in the threshold alongside other elements of the basic bundle creates transparency by making explicit a more complete range of families’ basic needs. Childcare market rate surveys, conducted by each state as part of Child Care and Development Fund programs, provide a promising information source for setting the basic need amount, as does the National Database of Childcare Prices, an official (Department of Labor) data source that provides county-level price information by type of provider and age of children.

If childcare needs are incorporated into the PPM threshold, childcare assistance from programs funded by federal and state governments would need to be added to household resources.

RECOMMENDATION 4.3: To accurately assess a household’s ability to meet its needs, for households that have children and that use paid childcare, in the near future, the Census Bureau should research, develop, and implement a methodology for valuing assistance received by the household for childcare, so that it can enter into the calculation of the household’s available resources.

Even with the proposed expansions, a poverty measure may still be incomplete given that all young children require care—including school-aged children outside of school hours—even if childcare is not obtained through the market. In a very real sense, all households with children expend resources on childcare, regardless of whether they use paid services. Such an acknowledgment would impart consistency with other parts of the PPM, for example, the assumption that all households have the same basic housing need, independent of how they obtain it. Estimating resources using this inclusive approach would require further research into the value of nonmarket childcare—specifically parent care, family (e.g., grandparent) care, and informal collective care.

Housing

Housing is often the largest component of a household’s spending. In 2020, about 30 percent of U.S. households paid more than 30 percent of their incomes for housing. The figures for renters and households with lower incomes are even higher. Given their magnitude, the methodological and data choices used in estimating housing costs have major implications for the performance of economic statistics like the SPM.

An accurate poverty measure will reflect whether households have adequate resources to obtain a basic level of shelter while still being able to afford other necessities such as food, clothing, childcare, transportation, and medical care. A straightforward way of representing this basic need is to establish the cost, based on geographic location and family size, to rent an “acceptable quality” house or apartment. For low-income households, rental housing is typically more attainable than is homeownership. Unsurprisingly, renting is the dominant tenure mode—ahead of owning a home with a mortgage or owning without a mortgage—for families with low incomes. In this sense, renting represents the baseline housing need.

RECOMMENDATION 5.1: The Principal Poverty Measure housing thresholds should be set based on shelter costs for renters only. Rental levels should be based on the Department of Housing and Urban Development’s annual Fair Market Rent estimates for various shelter unit sizes, which are anchored to the 40th percentile of gross rent for a recently available “standard quality” two-bedroom unit in a given local area (metropolitan area or nonmetropolitan county).

Conceptual clarity is an important advantage of this approach. The Department of Housing and Urban Development’s (HUD’s) Fair Market Rents (FMRs) are, in principle, the baseline cost that any household must be able to afford to obtain basic shelter. Statistical transparency is enhanced by eliminating the tenure-adjustment feature of the current SPM thresholds, which is complicated as it conflates the asset value of home ownership with the flow of services derived. The FMR approach is also feasible in terms of PPM publication timelines, because it is based on American Community Survey (ACS) data for every county, which are available on an annual basis from HUD. The proposed approach also lends consistency, in that it introduces a threshold already used by HUD to estimate local rents for those who receive housing assistance. Finally, the FMR approach echoes the proposed approach for medical care, in that it uses a preexisting standard of basic need currently in use by government programs.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

The SPM currently specifies separate sets of poverty thresholds based on tenure status. However, consistent with Recommendation 5.1, it will no longer be necessary to distinguish between renters and homeowners on the threshold side of the PPM.

RECOMMENDATION 5.3: The Principal Poverty Measure should discontinue the practice of maintaining separate thresholds for homeowners with a mortgage, homeowners without a mortgage, and renters. While owners without mortgages face lower monthly housing costs, these differences can be accounted for on the resource side.

The rationale for such a methodological switch again rests on simplicity and transparency. There is little difference found in monthly costs between owners with mortgages and renters and, conceptually, the basic shelter need is the same regardless of renter/owner status.

While the panel views cost variation associated with housing tenure as somewhat independent from the question of basic shelter need, adjusting PPM thresholds for rental cost differences across geographic areas remains sensible. The conceptual goal of geographic adjustments is to ensure that all families can purchase comparable basic bundles of necessities, regardless of geographic location. Housing is the most impactful component of cross-area variation in the cost of living. Geographic adjustment of housing thresholds needs to be consistent with the broader methodology proposed for using FMRs to represent the basic housing need.

RECOMMENDATION 5.5: Principal Poverty Measure thresholds should continue to reflect geographic differences in housing costs. Geographic adjustments should apply to owners and renters based on official Fair Market Rents, which are set at the individual metropolitan area or nonmetropolitan county level.

Using FMRs to make geographic adjustments in costs of living offers two advantages over the current method. First, FMRs incorporate price variation across metropolitan areas and rural counties, eliminating the need for the Census Bureau to perform geographic adjustments. Second, FMRs offer more refined, sub-state-level geographic estimates, particularly for rural areas.

The proposed approach of determining housing needs requires that resource estimation also be modified. For renters, housing assistance should continue to be accounted for in PPM resource estimates. Subsidies are typically set at the difference between market rent and expected tenant payment (i.e., the greater of 10% of household gross income and 30% of household net income). This structure mirrors the approach that the Census Bureau currently uses to calculate housing subsidies.

For homeowners, implicit rental income earned should factor into PPM resource estimates. Homeowners receive a benefit from “renting to themselves” or, perhaps more accurately, from not having to pay monthly rent, which frees up resources to cover other needs.

RECOMMENDATION 5.6: For estimating Principal Poverty Measure unit resources, implicit rental income should be included for households that own homes. In the short run, this implicit rental income could be the local Fair Market Rent (FMR) value for the particular family size, minus user costs—implying that implicit rental income will automatically be capped at the housing cost threshold. The Census Bureau should also analyze how the estimated implicit rent would differ under the FMR approach compared with alternative approaches of estimating rental equivalence based on self-reported home value or average American Community Survey rents for units of the same structure type in the local market. For these alternatives, the panel recommends that implicit rent be capped at the FMR value for the relevant consumer unit size, but the Census Bureau should research the alternative of capping net implicit rent at the FMR value.

In addition to benefits, homeowners incur real costs that factor into their monthly budgets, which should also be reflected in the estimate of resources.

RECOMMENDATION 5.7: Homeowners’ user costs in the local area—including mortgage interest payments, property taxes, insurance, and other maintenance expenses—should be netted out of the implicit

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
×

rental income when estimating Principal Poverty Measure (PPM) unit resources. The PPM should continue estimating user costs separately for homeowners with and without mortgages as is currently done for the SPM. For consistency with FMRs, user costs could be estimated as the average of the 37th–43rd percentiles of costs for homeowners with and without mortgages. Also, if the Census Bureau accounts for within-market differences in the size and quality of homes in its estimates of rental equivalence, then it should similarly allow user costs to vary with home size and value. User costs should be capped at the value of the rental equivalence, so net implicit rental income cannot be negative.

The choice to include (or exclude) mortgage principal payments as part of user costs hinges on whether housing is viewed as a good for immediate consumption or as an asset with a projected future return on investment. The Census Bureau should conduct further research into this aspect of the treatment of housing.

DATA AND STATISTICAL ISSUES

As the methodology underlying the SPM/PPM is updated to keep pace with changing economic conditions, social norms, and policy environment—perhaps once a decade as recommended in Measuring Poverty: A New Approach (NRC, 1995)—the data infrastructure must likewise be modified to respond to challenges and opportunities. Investing in the PPM data infrastructure creates benefits that extend well beyond improving the usefulness of the measure; these include more accurate measurement of income and expenditures, improved resources to assess the effectiveness of antipoverty assistance programs and other policies (e.g., increases in the minimum wage), and better economic statistics to analyze income distribution/inequality at the household level.

For surveys that contribute to the PPM, impaired data quality arising from growing problems of nonresponse, coverage error, and reporting error must be further addressed. For example, underreporting is significant and imputation rates are high for many sources of income. These defects skew poverty rates and other economic measures. To increase the accuracy of income and benefit estimates, programs integrating survey and administrative data sources should continue to be expanded. For many applications, a mixed-data approach, combining tax reports with survey reports, is preferable to either source alone. Specifically, the Census Bureau would benefit from an aggressive exploration into using federal and state administrative records to improve models for imputation in cases of item nonresponse, including for nonreporting of receipt as well as amounts.

RECOMMENDATION 6.2: The Census Bureau should expand the use of administrative data (income and program benefits) to improve estimates of resources in the Principal Poverty Measure (PPM). Methods should be developed to incorporate state-level administrative data to improve survey-based PPM estimates, and to extrapolate from currently available state data to other states. In particular, the Census Bureau should aggressively explore the strategy of using federal and state administrative records to improve models for imputation for item nonresponse, including nonreporting of receipt as well as amounts.

The expanded use of administrative data, the depth of geographic adjustments for housing, and the common need for geographic and race/ethnicity detail make it challenging to produce a public-use microdata file for researchers to use in evaluating the PPM. Currently, the Census Bureau releases all the variables necessary to replicate SPM calculations on the Current Population Survey Annual Social and Economic Supplement (CPS-ASEC). It is vitally important that the Census Bureau continue to release high-quality public-use data sets for the CPS-ASEC and the ACS, including all the variables necessary to replicate PPM calculations on the two data sets. While some detailed information may need to be accessed within secure research data centers, the Census Bureau should continue to assess the appropriate tradeoffs between new disclosure-avoidance methods and the usefulness of PPM data for researchers and other users.

Among improvements to the surveys contributing data to the PPM, it would be desirable to increase the sample sizes of the CPS-ASEC and CE to improve estimates of subnational geographic areas. One simple modification to effectively increase the CE sample would be to include in PPM estimation all CE units (households) that may

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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be experiencing a period of low income. To use the broadest and most representative group of respondents, single persons, couples, and all other CE unit types could be included in the PPM sample for threshold calculation.

RECOMMENDATION 6.5: For calculating Principal Poverty Measure thresholds, the Census Bureau and Bureau of Labor Statistics should use all consumer units captured in the Consumer Expenditure Survey (CE; not just those with children) to determine the median values for basic needs categories (e.g., food, clothing, internet). Equivalence scales should then be used to adjust each CE unit to the two-adult, two-child reference (as is done currently for consumer units with children).

Since the basic bundle proposed for the PPM only includes food, clothing, telephone, and internet (FCti), the economies of scale experienced by families of various sizes will differ. The PPM will likely necessitate the creation of separate equivalence scales for food and clothing, which is important because greater economies of scale are expected for housing. Given the recommendations to respecify the PPM threshold, the 20-percent multiplier would also need to be updated to account for changes in the basic bundle.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2023. An Updated Measure of Poverty: (Re)Drawing the Line. Washington, DC: The National Academies Press. doi: 10.17226/26825.
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An accurate measure of poverty is necessary to fully understand how the economy is performing across all segments of the population and to assess the effects of government policies on communities and families. In addition, poverty statistics are essential in determining the size and composition of the population whose basic needs are going unmet and to help society target resources to address those needs.

An Updated Measure of Poverty: (Re)Drawing the Line recommends updating the methodology used by the Census Bureau to calculate the Supplemental Poverty Measure (SPM) to reflect household basic needs. This report recommends that the more comprehensive SPM replace the current Official Poverty Measure as the primary statistical measure of poverty the Census Bureau uses. The report assesses the strengths and weaknesses of the SPM and provides recommendations for updating its methodology and expanding its use in recognition of the needs of most American families such as medical care, childcare, and housing costs.

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