cies (and private ones) in influencing deprivation. It provides one measure of economic well-being. A poverty measure can be absolute or relative. The United States uses an absolute standard that has not changed since originally designed. In most other developed countries, a relative measure is used, such as 40 to 60 percent of median income. Here we focus only on a measure that focuses on economic or material well-being. Some argue for a broader measure that encompasses other aspects of deprivation, such as exclusion. This might be particularly useful when focusing on health, as persons with certain chronic conditions or disabilities might in fact face more isolation. Nevertheless, that is not the focus of this paper. Our task here is to address an already complex issue: how to capture medical risk for purposes of more accurately capturing deprivation.
A measure of poverty serves to identify those in need of assistance by helping set up eligibility standards for programs targeted at those with insufficient resources. It serves as motivation to design policies to reduce deprivation. And it serves as a potential measure of the effectiveness of public policies in alleviating deprivation. It allows comparison across groups in the population defined by age, family structure, race/ethnicity, health or disability status, and geography; and it can provide information on the dynamics of deprivation or poverty by providing trends over time.
Review of Current Poverty Measure and Related Core Issues
The current poverty measure has two components: a set of poverty thresholds or lines specific to family size and a definition of family income to be compared with the thresholds. These thresholds have been the federal government’s official statistical measure of poverty since 1969. They originated with the work of Mollie Orshansky, who based her thresholds on multiplying the cost of a minimum adequate diet for families of various sizes and then multiplying this value by a factor of three. The minimum adequate diet is based on the U.S. Department of Agriculture’s Economy Food Plan; the factor of three was based on a 1955 survey by that department. The thresholds are updated annually, so that the real value of the thresholds has remained unchanged since 1963.2 A family’s before-tax money income is compared with these thresholds to calculate whether or not its income is above or below the poverty threshold. The official poverty rate is calculated using the March Current Population Survey (CPS). It is calculated for the nation as a whole, for subgroups of the population, and for geographical areas. It is used to determine eligibility for needs-based public-sector programs.
2 Although the real value has remained the same, relative to median family income, the threshold has fallen from 48 percent of family income in 1963 to 28 percent in 2005 (Smeeding, 2006).