based on research on the cost of children: the threshold of a single parent with a child should be roughly similar to one of a childless couple because shelter costs for a single parent with a child may exceed those of a childless couple, even if other costs (e.g., food) are lower for the former.

Thus, Betson offered an alternative “three-parameter” scale (see Betson, 1996), to be applied to the reference family threshold, consisting of food, clothing, shelter, and utilities. The scale is similar to the NRC-recommended scale, except that the third parameter provides more similarity between the expenditures of families that consist of one parent and a child and those of childless couples, and it also has larger economies of scale between single people and childless couples. Mathematically, the three-parameter scale is defined as follows:

single individual: 1.00

childless couple only: 1.41

single-parent families: (A + α + P*(C – 1)) F

all other families: (A + P*C) F,

where α = 0.8, P = 0.5, and F = 0.7. As before, A is the number of adults in a family, and C is the number of children.

Many workshop participants voiced support for the three-parameter scale to set thresholds for different family types.1 Timothy Smeeding (Syracuse University) noted: “It seems to me that this three-parameter scale that David [Betson] has worked on produces sensible results….” The participants also voiced support for continued research on equivalence scales. Topics for future research include the effect of alternative equivalence scales on poverty rates over time, whether there are changes in economies of scale over time, the appropriateness of the parameter values adopted, and whether more factors should be taken into account in equivalence scales in the future, such as the ages of children and the value of household production by stay-at-home parents.

1  

It was noted by Betson and others that if the basic bundle of goods included in the thresholds changes (such as by including medical out-of-pocket expenses), then the exact form of the equivalence scale may need to be modified.



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