Measuring Poverty A New Approach (1995) / Chapter Skim
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SUMMARY AND RECOMMENDATIONS
SUMMARY AND RECOMMENDATIONS
Pages 1-16
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For example, for 1992, the year for which the panel had data available for analysis, the proposed measure, compared with the current measure, finds a lower poverty rate for people in families on public assistance and a higher poverty rate for people in working families.
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· First, because of the increased labor force participation of mothers, there are more working families who must pay for child care, but the current measure does not distinguish between the needs of families in which the parents do or do not work outside the home. More generally, the current measure does not distinguish between the needs of workers and nonworkers.
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· Finally, because the current measure defines family resources as gross money income, it does not reflect the effects of important government policy initiatives that have significantly altered families' disposable income and, hence, their poverty status. Examples are the increase in the Social Security payroll tax, which reduces disposable income for workers, and the growth in the Food Stamp Program, which raises disposable income for beneficiaries.
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measure of poverty should be revised to reflect more nearly the circumstances of the nation's families and changes in them over time. The revised measure should comprise a set of poverty thresholds and a definition of family resources for comparison with the thresholds to determine who is in or out of poverty that are consistent with each other and otherwise statistically defensible.
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Such expenses include income and payroll taxes, child care and other work-related expenses, child support payments to another household, and out-ofpocket medical care costs, including health insurance premiums.
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poverty statistics should be derived from Consumer Expenditure Survey data for a reference family of four persons (two adults and two children)
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We recommend that the reference family threshold be adjusted by means of an "equivalence scale" to determine thresholds for other family types. There is no consensus in the scientific literature on the precise form of an appropriate equivalence scale, although there is agreement on some properties of such a scale and that the scale implicit in the official poverty thresholds is flawed.
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As a first and partial step, we recommend that the housing component of the poverty thresholds be indexed to reflect variations in housing costs across the country. This adjustment can be made by analyzing decennial census data with the methodology developed by the U.S.
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More precisely, the definition should include money income from all sources, as well as the value of such in-kind benefits as food stamps and public housing. It should exclude out-of-pocket medical care expenditures, including health insurance premiums; income and payroll taxes; child care and other work-related expenses; and child support payments to another household.
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Specifically, resources should be calculated as follows: · estimate gross money income from all public and private sources for a family or unrelated individual (which is income as defined in the current measure) ; · add the value of near-money nonmedical in-kind benefits, such as food stamps, subsidized housing, school lunches, and home energy assistance; · deduct out-of-pocket medical care expenditures, including health insurance premiums; · deduct income taxes and Social Security payroll taxes; · for families in which there is no nonworking parent, deduct actual child care costs, per week worked, not to exceed the earnings of the parent with the lower earnings or a cap that is adjusted annually for inflation; · for each working adult, deduct a flat amount per week worked (adjusted annually for inflation and not to exceed earnings)
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In one set of comparisons, we kept the overall poverty rate the same for both measures-14.5 percent in 1992. The results show important distributional effects on the makeup of the poverty population under the proposed measure: most strikingly, higher poverty rates for families with one or more workers and for families that lack health insurance coverage and lower rates for families that receive public assistance.
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RECOMMENDATION 5.2. To facilitate the transition to SIPP, the Census Bureau should produce concurrent time series of poverty rates from both SIPP and the March CPS by using the proposed revised threshold concept and updating procedure and the proposed definition of family resources as disposable income.
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The review should consider ways to improve the CEX for the purpose of developing poverty thresholds, for making it possible at a future date to measure poverty on the basis of a consumption or expenditure concept of family resources, and for other analytic purposes related to the measurement of consumption, income, and savings.
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For example, the proposed definition of family resources may add administrative burdens in programs that currently obtain crude measures of applicants' gross money income to assess eligibility because more information is needed to determine applicants' disposable income. In these instances, it may be preferable to implement a less detailed definition.
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to determine eligibility for benefits and services should consider the use of the panel's proposed measure. In their assessment, agencies should determine whether it may be necessary to modify the measure for example, through a simpler definition of family resources or by linking eligibility less closely to the poverty thresholds because of possible budgetary constraints to better serve program objectives.
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