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Measuring Poverty: A New Approach
in the year. The amount deducted should not exceed the person's earnings. For working families with children, the earnings of the parent with the smaller amount of earnings should limit the combined deduction for child care expenses and that parent's own other work-related expenses.
The reason to deduct a flat amount, rather than actual expenses, is because of the tradeoff that people often make between housing and commuting costs—by choosing a more expensive home closer to work or a less expensive one farther away. The adjustment to the poverty thresholds for geographic area differences in housing costs will be the same for all families in an area (see Chapter 3). For example, within a large metropolitan area that, on average, has higher housing costs relative to smaller areas in a region, the families of people who commute from outlying suburbs with cheaper housing costs will have the same housing cost adjustment as the families of people who commute short distances from more expensive, closer-in neighborhoods. For consistency, then, each worker needs to have the same work expense deduction.
Tabulations that we obtained from Wave 3 of the 1987 SIPP panel provide a basis for designating a flat weekly amount of work-related expenses. 34 They indicate that 84 percent of workers drove to work; 10 percent had parking or public transportation expenses; and 30 percent had other work expenses (e.g., for uniforms). Summing the three categories (driving, other transportation costs, and all other work expenses), 91 percent of all workers had some type of work expense. For workers with low to moderate family incomes (specifically, with per capita family income below the third decile), 74 percent drove to work; 10 percent had parking or public transportation expenses; and 25 percent had other work expenses. In all, 85 percent of these workers incurred some type of work-related expense.
In 1992 dollars, the mean weekly amount for combined work-related expenses for all workers (including those with no expenses) was $29 ($1,450 for a 50-week work year); the median weekly amount was $17 ($850 for a 50-week work year).35 We believe it would be reasonable to develop an amount for the work expenses deduction as a percentage of the median. For our empirical analysis in Chapter 5, we deducted about $14.40 per week ($720 for a 50-week work year), which represents 85 percent of the median.
Child Support Payments
Since the current poverty measure was developed, the number of parents who live apart from their children has grown, and a large fraction of them incur
The 1984-1987 SIPP panels included a work expense module. It would be useful to repeat such a module periodically, to determine if there is a need to realign the amount of the work expense deduction in real terms.
Combined work-related expenses were calculated for the first job reported by each worker in Wave 3 of the 1987 SIPP panel by summing the reported weekly amount for parking and public transportation, the reported annual amount divided by 12 for all other expenses (e.g., uniforms), and the reported weekly miles driven to work times the 1987 IRS mileage allowance of 22.5 cents per mile. Mean and median values for all workers were then updated for price changes to 1992.