Since the current measure was adopted, data sources and procedures for estimating income have improved substantially. In 1980, the March CPS income questions were expanded, and questions were added about major in-kind benefits. In 1983, the Survey of Income and Program Participation (SIPP) was initiated to obtain more complete information on economic resources.2 Also, methods were developed to adjust the March CPS income estimates in various ways (e.g., by subtracting taxes), and work is in progress on similar methods for SIPP. Yet, there has been no change in the data source or the definition of resources that is used to measure poverty.

Not only does the current poverty measure violate the consistency principle, but so does much work to date to investigate alternative measures. For example, the Census Bureau over the past decade has published a series of "experimental" poverty rate estimates from the March CPS: they are based on changes to the family resource definition but not on changes to the thresholds (see, e.g., Bureau of the Census, 1993a, 1995).3 In some instances, this approach makes good sense: thus, the Census Bureau's estimates in which federal and state income taxes are subtracted from resources reflect a definition that is more consistent with the original threshold concept than is the current before-tax resource definition. In other instances, the changes to the resource definition are not consistent with the official thresholds. In particular, estimates by the Census Bureau (and others) in which the value of public and private health insurance benefits is added to families' resources violate the consistency principle. Since the official thresholds were first developed, medical care costs have escalated greatly, so it is inconsistent to add the value of health insurance benefits to resources without also increasing the thresholds.

The effect of just adding insurance values without also raising the thresholds is to ignore the added costs of staying out of poverty. It is also to assume that health insurance benefits are fungible (i.e., that they can be spent for other goods, such as food and housing) when this is not the case, except insofar as such benefits may free up other resources. Also, medical care costs vary significantly across the population, so that for appropriate comparisons of poverty among groups (e.g., the elderly versus younger people), it is not sufficient to increase the thresholds by an average amount for medical care.

2  

SIPP is a panel survey. Under the design used for the 1984–1993 panels, a new sample of 12,000–20,000 households was started each February and the members interviewed eight times at 4-month intervals, for a total of 32 months. Beginning in 1996, SIPP will be designed to have panels that last 48 months each and have larger samples of households (see Chapter 5 and Appendix B).

3  

The Census Bureau has been constrained in that Congress requested publication of estimates on the basis of alternative resource definitions (specifically, definitions that added the value of in-kind benefits), but the U.S. Office of Management and Budget did not change the thresholds.



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