in after-tax terms for comparison with the thresholds).40 However, there are only a few examples of efforts to develop poverty thresholds that consider the different needs of working parents and workers generally in comparison with nonworkers or the variations in people's health care needs (Renwick and Bergmann, 1993, is an exception). Yet if these different needs (e.g., of working parents for child care in order to earn income) are not recognized, the poverty measure will not appropriately describe the differences in poverty among important population groups.

We propose to deal with these kinds of circumstances by subtracting such expenses as child care from family resources (see Chapter 4). The implication for the discussion here is that the proposed threshold concept is not quite the same as the concepts reviewed above. The proposed budget includes such categories as food that apply to all family types, as do all budgets, but most other budgets explicitly or implicitly include an average for such expenses as child care for which the need varies across otherwise similar types of families. This difference in the proposed concept must be considered, along with the real increase in consumption that has occurred since the early 1960s, when evaluating the level of the current threshold and whether it is appropriate for the United States today.

IMPLEMENTING THE PROPOSED APPROACH

To implement the proposed concept and updating procedure for the reference family poverty threshold is straightforward once the values of two parameters have been specified: (1) a percentage of median expenditures by two-adult/two-child families on the sum of food, clothing, and shelter (including utilities); and (2) a multiplier to apply to the amount for food, clothing, and shelter so as to add a small fraction for other needed spending. As a hypothetical example, suppose that median expenditures on food, clothing, and shelter by two-adult/two-child families are $15,500 in year T and $15,650 in year T + 1 (in constant dollars), for a real increase of 1 percent. Also suppose that, for deriving the reference family poverty threshold, the percentage of the median is specified as 80 percent and the multiplier as 1.20. Then, the initial threshold in year T is [0.80(15,500) × 1.20], or $14,880 and the threshold in year T + 1 is [0.80(15,650) × 1.20], or $15,024—also a real increase of 1 percent. By assuming, as has occurred historically, that total spending increased by more than 1 percent between year T and T + 1, then the reference family poverty threshold would have been updated in real terms in a quasi-relative rather than in a completely relative manner.

The recommended procedure is somewhat more complicated than the

40  

The appropriateness of using after-tax income data was recognized when the official thresholds were originally developed, but such data were not available at the time.



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