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Measuring Poverty: A New Approach
Yet, historically, poverty measures have tended to reflect their time and place. When it was adopted by OEO for official use, the SSA measure was viewed as a distinct improvement over a widely cited measure developed by the Council of Economic Advisers (CEA) for 1962. The SSA thresholds were based on an explicit concept of need and were adjusted for family size and other characteristics; the CEA measure had just one threshold for families of all sizes with a second, lower threshold for single individuals. The SSA measure also had the advantage that its central threshold for a family of four in 1963 was about the same as the CEA family threshold of $3,000. In turn, the CEA family threshold had been based on considering such factors as the minimum wage and public assistance levels; see Fisher (1992b:30). Gallup Poll data from the early 1960s, as analyzed by Vaughan (1993), suggest that public opinion would also have agreed with a four-person family poverty threshold of about $3,000. Also, such a level represented about one-half median after-tax four-person family income, which is a standard often used in comparative analyses of poverty across nations. In other words, the SSA thresholds accorded well with other views about what it meant to be poor in America in the mid-1960s.
Yet if the SSA approach of developing the thresholds as food costs times a food share multiplier were to be used today, it would produce a different result from the current thresholds—which represent the original 1963 thresholds adjusted for inflation—because changes in consumption patterns have increased the multiplier. Similarly, the use of the SSA approach for a period earlier than 1960 would have given a different result from the official thresholds extended back in time in real dollars because the multiplier would have been lower.
Two questions in evaluating the current poverty measure are whether it makes sense to continue to use the real value of the original 1963 thresholds and, if not, whether the original SSA approach or some other procedure should be used to update them. From the perspective of providing accurate comparisons of poverty status across population groups and across time, there is also the important question of whether other aspects of the current measure—namely, the adjustments to the thresholds for family size and type and the definition of family resources—remain relevant at the end of the twentieth century. Given the important role that the poverty measure and poverty statistics play in contemporary U.S. society, it seems imperative to make the most careful assessment possible of the current measure to determine its adequacy.
We find that the current official poverty measure has a number of weaknesses, involving both the thresholds and the definition of family resources. (Some of these problems were pointed out in the 1960s by Orshansky herself.) Although they were not necessarily important or obvious at the time the measure was adopted, these problems have become more evident and more consequential because of far-reaching social and economic changes, as well as