Agriculture (USDA) Economy Food Plan, which provided the estimated cost of a minimally adequate diet for adults and children of various ages and for families of different sizes. (The latter estimates reflect assumptions about economies of scale on food; see Peterkin et al., 1983.) Orshansky's food budgets were based on the USDA estimates, coupled with assumptions about the ages of the children in each size and type of family. She developed separate budgets for families on the basis of the sex of the family head, the family size, the number of family members under the age of 18, and, for one- and two-person units, the age of the family head (under age 65 or 65 and older).
According to the 1955 Household Food Consumption Survey, the average family of three or more spent approximately one-third of its after-tax money income on food. On the basis of this evidence, Orshansky created thresholds for families of three or more by multiplying her estimated food costs by three. She examined families of two separately, however, on the grounds that smaller families are less able to take advantage of economies of scale and so must absorb higher per capita fixed costs. The average family of two spent 27 percent of its income on food, so the multiplier for families of this size was set at 3.70 (1.00/0.27). Without using a food plan and a multiplier, she set thresholds for unrelated individuals, characterized by sex and age, at 80 percent of the corresponding threshold for two-person families. 1 This figure implies that two adults can live as well as one person on 125 percent as much income (1.0/0.8). Finally, she took 70 percent of her thresholds as the thresholds for farm families.
In 1969 the Bureau of the Budget adopted Orshansky's thresholds (and thereby her equivalence scale) for the official measure of poverty, with the modification that the farm thresholds were raised from 70 to 85 percent of the nonfarm thresholds. In 1981 the nonfarm thresholds were applied also to farm families; the thresholds for families headed by women and men were averaged; and the largest family size category for the thresholds was raised from families of seven or more to families of nine or more. With the exception of these fairly minor changes, the current equivalence scale comes directly from Orshansky's original work. Because of the way it was constructed, the scale has as many categories as the official poverty thresholds and is thus quite detailed. (There are 48 categories at present, reduced from 124 categories prior to 1981.) Most presentations summarize it using weighted averages: see Table 3-1, which expresses the weighted average thresholds for families of size two to size seven relative to the threshold for a single adult under age 65.
A key point to note is the essential arbitrariness of the equivalence scale
Unrelated individuals aged 15 and older are treated as separate one-person "families" in the U.S. poverty measure. Some of them live alone in their own households, but others live with other people not related to them (e.g., they may board with a family or live with one or more unrelated roommates).