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Measuring Poverty: A New Approach
appropriate metric for comparing poverty rates between the two measures. One such metric is to present results in terms of percentage changes in the poverty rate for each group; however, it is awkward to speak of percentage changes in a percentage. A method that is equivalent but more readily interpretable is to present results in terms of percentage point changes in the poverty rate in which these changes are standardized for each group to be comparable to the total population (see last column of Table 5-7).9
In standardized terms, the proposed measure increases the poverty rate by more than 1 percentage point for the following groups: people in two-person families, 1.2; people of other races (not white or black), 1.4; people in three-or four-person families, 1.7; Northeasterners, 1.8; Westerners, 2.1; Hispanics, 2.3; people in working families, 2.3; people in families not receiving AFDC or SSI, 2.6; and people in families without health insurance, 2.7. In contrast, the proposed measure decreases the poverty rate by more than 1 percentage point (in standardized terms) for the following groups: people in families with some health insurance, -1.2; Southerners, -1.3; blacks, -1.5; adults aged 65 or older, -2.4; people in families without workers, -2.4; people in families receiving AFDC or SSI, -3.8; and one-person families, -4.0.
Effects with a New Threshold
For our second analysis, we implemented the current measure with the official 1992 threshold of $14,228 for a two-adult/two-child family and the proposed measure with a threshold of $14,800 for this family type and two different scale economy factors—0.75 (alternative 1) and 0.65 (alternative 2). The value of $14,800 is the midpoint of our suggested range ($13,700–$15,900) for the starting reference family threshold. The purpose of this analysis was to determine the effect on the overall poverty rate, as well as the effect on groups, of raising the poverty threshold in real terms in addition to implementing the recommended adjustments to the threshold and family resource definition.
The Overall Rate
Under the proposed measure with a $14,800 reference family threshold and a 0.75 scale economy factor for 1992, 46.0 million people are poor, and the poverty rate is 18.1 percent, compared with the official count of 36.9 million and the official rate of 14.5 percent. With the same threshold and a 0.65 scale economy factor, the 1992 poverty rate is 19.0 percent.
The procedure is to determine the ratio of the current poverty rate for the total population to the rate for the group and apply that ratio to the percentage point change for the group. This procedure standardizes the percentage point changes by treating each group as if it had the same poverty rate as all people.