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Measuring Poverty: A New Approach
k A subjective scale applying to households in which the head is under age 65, derived from the 1979 ISDP Research Panel by estimating the log of the answer to a survey question regressed on the log of income, the log of family size, and the age and sex of the family head (in Danziger et al., 1984: Table 2).
l A subjective scale derived from Gallup Poll data on the amount needed to get-along by estimating the log of the annualized get-along income amount regressed on the log of income, the log of family size, and the respondent's age (Rainwater, 1990:19).
m A subjective scale based on 1986 data (in Wolfson and Evans, 1989:55).
fied), a girl of 8, and a boy of 13; and (2) a retired couple aged 65 or older, in reasonably good health and living independently. BLS developed an equivalence scale to adjust these budgets for other family types, by applying the Engel methodology (discussed below) to data from the 1960-1961 Consumer Expenditure Survey (CEX). The key assumption of this methodology is that families spending an equal proportion of income on food have attained an equivalent level of living.
The USDA also developed its own equivalence scale to determine adjustments to its food plans for the economies of scale of larger families. (The food plans themselves were constructed for adults and children of different sexes and ages.) The resulting scale values, applied to the cost of the Thrifty Food Plan for a reference family of four persons (husband and wife aged 20-54 and two children aged 6-8 and 9-11) are used in setting benefit levels in the Food Stamp Program. (The Thrifty Food Plan is the successor to the Economy Food Plan that formed the basis of the original poverty thresholds.) The USDA scale was originally developed in 1962 and revised in 1975 on the basis of data from a 1965 survey of food consumption of nonfarm households (Kerr and Peterkin, 1975). The scale has not been changed since 1975 because, according to an evaluation study (Greger, 1985:26), "the superiority of alternate adjustment factors was not clear." The USDA scale, which applies to food consumption only, is more generous for larger families than the BLS scale, which, in turn, is more generous than the scale implicit in the official poverty thresholds (see Table 3-2).
Other organizations have dealt with the equivalence scale issue by proposing simple formulas, in the same general spirit as our own recommendation. Most notably, the Organization for Economic Cooperation and Development (OECD) (1982) has used an administratively convenient scale in which the first adult counts as 1.0, an additional adult counts as 0.7, and children count as 0.5 of an adult (see O'Higgins and Jenkins, 1990, for an application of the OECD poverty measure). Although there is no explicit recognition of economies of scale in these numbers, they are built into the scale, most obviously in the "discount" for the second adult.