tigate the pros and cons of making such an adjustment and its computation in an SPM.
The SPM includes a set of poverty thresholds. They are developed and calculated at BLS based on 5 years of data from the Consumer Expenditure Survey and include spending on food, clothing, shelter, and utilities. There are separate thresholds by housing status: owners with and without mortgages and renters.
The Census Bureau obtains from BLS a threshold for a two-adult, two-child family, which is adjusted for families of different sizes and compositions using an equivalence scale. That threshold is then adjusted for geographic differences in the cost of housing, using the American Community Survey.
The unit of analysis in the SPM attempts to be consistent with the unit of data collection in the Consumer Expenditure Survey and is slightly different from the official poverty measure. It uses the idea of the census family, although cohabiters and foster children are also included.
The resources used to compare these thresholds are gross money income plus the value of in-kind nonmedical benefits—such as the Supplemental Nutrition Assistance Program; free or reduced-price school meals; the Special Supplemental Nutrition Program for Women, Infants, and Children; housing subsidies; and the Low Income Home Energy Assistance Program—that families can use to meet their food, clothing, shelter, and utility needs minus income taxes, payroll taxes, and other nondiscretionary expenses. The expenses that are subtracted are taxes, medical out-of-pocket expenses, child support paid, and child care and other work-related expenses.
Short next showed the impact on the poverty rates of the additions and subtractions to people’s income in order to move from the official poverty measure to the SPM. Looking at the aggregate numbers across the entire population, not much is added to income, but subtractions are substantial in terms of income taxes before credits, payroll taxes, work expenses, and medical out-of-pocket expenses that are very large.
For those who are classified as poor under the official poverty measure, the picture is more balanced, because most of the transfers added in the supplemental measure—food stamps, school lunch, housing subsidies, the earned income tax credit—are aimed at people at the lower end of the income distribution. There are also some subtractions; the main item being subtracted for this group of people is medical out-of-pocket expenses.
The official poverty rate in 2009 was 14.5 percent using the official definition. The poverty rate using the SPM rate is slightly higher at 15.8