The following HTML text is provided to enhance online
readability. Many aspects of typography translate only awkwardly to HTML.
Please use the page image
as the authoritative form to ensure accuracy.
Measuring Poverty: A New Approach
3.4 derived from the 1965-1966 survey. In 1979-1980, an interagency committee was asked to consider possible small changes in the thresholds (not including the use of a higher multiplier) and recommended the following minor changes discussed by Fendler and Orshansky, which were adopted in 1981: the nonfarm thresholds were applied to all 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 persons (Fisher, 1992b:64-68).
Overall, except for the minor changes in the number of different thresholds and the change in the price index for updating them, the poverty line has not been altered since it was first adopted in 1965. In the language of poverty measurement, the United States has an "absolute" poverty threshold that is updated for price changes but not for real growth in consumption. Thus, the poverty line no longer represents the concept on which it was originally based—namely, food times a food share multiplier—because that share will change (and has changed) with rising living standards. Rather, the poverty threshold reflects in today's dollars the line that was set some 30 years ago.
Each year, the official thresholds are compared with an estimate of resources for each family (or individual) in the March Current Population Survey (CPS), which includes about 60,000 households, to determine the number and proportion poor (the poverty rate). Resources are defined as before-tax money income from all sources—for example, earnings, pensions, interest, rental income, other income from assets, cash welfare. Although the multiplier of three used in constructing the poverty thresholds was based on after-tax income, there was no methodology for calculating taxes from the March CPS, so income is defined on a before-tax basis. No valuations for in-kind benefits, such as food stamps, are included in income, nor are asset holdings accounted for in any way. Since 1982 the Census Bureau has published poverty estimates that do exclude most taxes from income and do include the value of major in-kind benefits, but these estimates are labeled "experimental" and do not represent the official statistics (see, e.g., Bureau of the Census, 1993a, 1995). The official poverty statistics for the United States, based on the March CPS, are currently published each fall as a Current Population Report in the P-60 Series (for the latest such report, see Bureau of the Census, 1995).
Adequacy of the Current Measure
There are several different approaches to developing a measure of poverty, both for the thresholds and for the definition of family resources, each of which has some merit and none of which is without difficulties. So one might ask why the United States should consider replacing a measure that has served for many years. Moreover, it will undoubtedly be disruptive to an important statistical time series if a different measure is adopted.