threshold as we calculated it are the same for the base year for Orshansky's original work.9

There are at least two ways of expressing the comparison between columns 1 and 2 of Table 2-1. First, since the method of setting the threshold was applied only once, the base year for which it was applied is critically important. If the official poverty level had been defined for 1950 instead of for 1963, the threshold would have been considerably lower than it is—about 18 percent lower—throughout the past 40 years. Yet if the official level had been defined for 1972-1973 instead of for 1963, using the identical logic and relevant data, the threshold would have been consistently higher than it is—about 19 percent higher—throughout the past 20 years.10 Thus, pegging the threshold at one point in time—whether 1950, 1963, or 1972-1973—and then only updating for price changes means that the level of the threshold will be affected by the historical accident of the base year for which it is set.

Second, if the method of setting the threshold had been applied annually or periodically, the threshold would have risen dramatically as real income rose over the past 40 years. That is, the application of the same method for 1950 and for 1991 would have yielded a reference family poverty threshold of $11,681 for 1950 and $20,659 for 1991.

Even if the method for determining the poverty threshold for 1963 is considered flawless, there is no logical argument why 1963 was the historically correct time at which to apply that method to set a level for all years thereafter. Yet to apply that same method in subsequent years would have had a very large impact on the threshold. So one is faced with the uncomfortable conclusion that the current U.S. poverty threshold today cannot be right: if it was right for 1963, a year selected by historical accident, then it cannot also be right today.

For comparison purposes, we also developed two sets of relative thresholds (drawing on Vaughan, 1993): one set represents one-half the median before-tax four-person family income and the other set represents one-half the median after-tax four-person family income (see Table 2-1). Both thresholds are considerably below the 1950 equivalent of the official threshold (by 25-29%), while they are reasonably close to the official threshold for 1963 (the before-tax threshold is 15% above and the after-tax threshold is 1% below the official threshold for that year). Subsequently, both relative thresholds exceed

9  

That year was 1963; for our calculations, we assumed that the multiplier she used would have been the same for 1960 as for 1963.

10  

These percentage increases are somewhat higher than would result from applying an estimate of the change in the food multiplier to poverty thresholds that were updated by the change in the cost of the Economy/Thrifty Food Plan instead of the CPI (see below). However, they are lower than would result from applying an estimate of the change in the food multiplier to poverty thresholds based on an update of the Economy/Thrifty Food Plan to reflect new data on food-buying patterns of lower income families.



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