Another issue is that, in being restricted to cash, money income excludes the value of noncash benefits, which have become increasingly important in sustaining a segment of the population. Benefits from the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) have an explicit cash value, which recipients use to purchase food. The free and reduced-price meals that students receive through the National School Lunch and School Breakfast Programs have an explicit monetary value as well, although their value is more restricted in its use than SNAP benefits. Housing subsidies are another type of noncash assistance that can be assigned a value. For decades, researchers and the Census Bureau itself have used the reported value of SNAP benefits and assigned cash values to other noncash benefits in order to develop alternative measures of income for the purpose of measuring the contribution of federal and state programs to combating poverty (see, for example, DeNavas-Watt, Cleveland, and Webster, 2003; Smeeding, 1982).
As a general concept, disposable income subtracts taxes from a pretax measure of income. The Census Bureau’s concept of disposable income, as used in the SPM, adds the cash value of noncash benefits while subtracting not only taxes, but also work-related expenses (including child care), child support payments to another household, and medical care out-of-pocket expenses (including premiums).2 Disposable income is intended to reflect the income that is actually available to families to meet their economic needs for food, clothing, shelter, utilities, and other basic necessities.
Limitations of CPS Income Concepts
Chapter 5 discusses a number of issues that affect the quality of income measured in household surveys. This chapter focuses on conceptual issues that contribute to the CPS ASEC underestimating income from two sources: retirement and self-employment.
As people approach age 65, they reduce their work hours at an increasing rate, and many move into formal retirement. As this process unfolds, earnings decline as a share of total family income and are replaced by a variety of types of retirement income. The vast majority of retirees receive
2 Work-related expenses are capped at the amount of the secondary earner’s earnings.