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Measuring Poverty: A New Approach
small sample sizes for two-adult/two-child consumer units in single years of the CEX. Also, it appears that the thresholds are not as responsive to economic ups and downs as are relative and subjective thresholds reviewed above (see Tables 2-3 and 2-4). A reason may be that people at or below the median alter their consumption of other items in response to economic ups and downs before they alter their consumption of the basic bundle of food, clothing, and shelter.
Our last calculation was to smooth the thresholds for 1980-1991 by constructing 3-year moving averages for 1983-1992 (see Table 2-7). The smoothed series behaves quite reasonably, increasing slowly but steadily over the period by about 5 percent in real terms.
We strongly believe that the principles underlying the proposed threshold concept and updating procedure are an improvement over both the original concept (food times a large, changing multiplier) and that concept as actually implemented (adjusting the thresholds only for price changes). The proposed concept, in contrast, updates the thresholds for real changes in consumption of a bundle of necessities rather than of all goods and services. The concept also retains a normative cast, with its emphasis on food, clothing, and shelter (plus a little more).
We are reasonably confident that the CEX data for implementing the proposed concept and updating procedure will produce thresholds that behave in the intended manner. However, we would obviously have preferred to have a longer time series with which to evaluate the likely behavior of the thresholds. We also would have liked to assess the effects of some methodological improvements that we believe should be made in using the CEX data (e.g., construct annual estimates for each consumer unit, use imputed rent for homeowner shelter expenditures). Finally, we believe that it is very important to improve the underlying data—for example, expanding the sample size of the CEX and reducing the extent of underreporting would make more robust the estimates needed to update the poverty thresholds. More generally, the United States would benefit from improvements in data on consumer expenditures, savings, and wealth, which are needed for many important purposes, including the measurement of poverty (see Chapter 5).
One concern with using a continuing survey to update the poverty thresholds is the effects that changes in data quality or other aspects of the survey may have on estimates of the required parameters over time. This concern applies to the proposed concept, which relies on 3 years' worth of CEX data to update each year's reference family poverty threshold. (It also applies to relative concepts that peg the thresholds at, say, one-half median adjusted family income or expenditures, and to subjective concepts that make use of