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Experimental Poverty Measures: Summary of a Workshop
given the differences in how resources are measured (Citro, 2004:19). That is, if alternative poverty measures were to add medical out-of-pocket and work-related expenses (including child care expenses) to the thresholds rather than subtract them from people’s incomes (the latter is currently done in most of the alternative measures in published reports), then thresholds are indeed significantly higher in the new measures.
Two main options for annually updating the reference family threshold were discussed at the workshop: (1) using the CPI or (2) following the original NRC recommendations of using 3 year’s worth of data on people’s actual expenditures on the items contained in the threshold from the CE. The advantage of using the CPI is that it provides an easy way to update the thresholds. However, as the 1995 NRC report argued, the advantage of using the CE-based thresholds is that they rely on a “quasi-relative” updating mechanism, with the thresholds updated on the basis of changes in real expenditures on basic expenditure items. The NRC-recommended measure is termed “quasi-relative” because the proposed update would be based on consumption expenditures for only basic categories of goods and services, which would be expected to rise less rapidly than total expenditures or median income. Three years of CE data were recommended by the NRC so that the thresholds would not be affected as much by random annual fluctuations in the data.
In short, the 1995 NRC report held that the quasi-relative aspect of the recommended thresholds would make them less likely to become outdated over time than the CPI-based thresholds. Public opinion, for example, has indicated that the current official poverty thresholds are too low, even though they once had broad acceptance (see NRC, 1995:137-140; an updated version is in Iceland, 2003). Many workshop participants agreed with the NRC’s recommended method of annually updating the thresholds—that is, to use the most recent 3 years of data on expenditures on the threshold items from the CE. They also generally voiced support for the NRC recommendation for continued research on the behavior of CE-based thresholds over time.