We recommend that the poverty threshold concept apply to a reference family of two adults and two children, with the thresholds for other types of families developed by means of a formal equivalence scale that recognizes the different needs of adults and children and the economies of scale for larger families. An alternative approach would be to develop thresholds for each family type on a separate basis, by building up a budget with specific assumptions about scale economies and the needs of different types of family members for each item (e.g., food, housing). The current thresholds were originally developed by Orshansky in this manner, although food was the only budget item specifically determined for each family type. Renwick (1993a, 1993b) also proposes such an approach for constructing budgets for a number of major commodities. This approach, however, involves making many specific judgements about each item and each type of family. Such judgements are inevitably arbitrary (as is evidenced by the anomalies in the current thresholds across family types), and, in our judgement, it is better to have the arbitrariness expressed in a formal equivalence scale. (See Chapter 3 for a detailed discussion of alternative equivalence scales with which to adjust the reference family threshold and methods to adjust the thresholds for geographic area differences in the cost of living.)
Any proposed equivalence scale will, of course, produce different thresholds for various types of families than the scale implicit in the current thresholds. Hence, it is desirable for the reference family to fall near the center of the family size distribution rather than at one of the extremes: this tends to reduce the sensitivity to the equivalence scale. Also, it is preferable for the reference family to be one that accounts for a relatively large proportion of the population because its spending patterns observed in a sample survey will be the basis for the poverty thresholds under the proposed concept.
The two-adult/two-child family meets these criteria. Although it is no longer the predominant living arrangement in U.S. society, it represents the largest number of people. Of all households (including family households and those headed by unrelated individuals), the single largest type today consists of one-adult households (25% of total households in 1992), followed by married couples with no other family member (22%). The four-person family, comprising a married couple and two other family members, is the third largest household type (13%). However, these four-person families are the modal type in terms of the number of people they represent: in 1992, they accounted for 20 percent of all people, compared with 17 percent for married couples with no other family members, and 10 percent for one-adult households (Rawlings, 1993: Table 16).