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Measuring Poverty: A New Approach
Although the evaluation of assistance programs is important, we view this use of the official poverty measure as secondary to its use as a key social indicator. Although there are arguments for shorter and longer accounting periods for indicator purposes, we believe that it makes most sense to continue to calculate the official poverty statistics on an annual basis. To supplement the annual statistics, we support initiatives to develop and publish shorter term measures of poverty that can facilitate evaluation of such programs as AFDC and food stamps. Because of the eligibility rules of these programs—specifically, their requirement that families use up most assets before applying for benefits—it will probably be necessary to include asset values in the family resource definition for poverty measures that use an accounting period of less than a year. Such shorter term measures may also serve as more timely indicators of trends in poverty (although other readily available measures, such as monthly unemployment rates and program caseloads, may serve the same purpose).
We also support work on developing longer term measures of poverty. This is an area that calls for more research and evaluation, given the lack of consensus about desirable measures. We note that by using the Survey of Income and Program Participation (SIPP) as the basis for poverty measurement in place of the March CPS, it becomes possible to develop both annual and subannual poverty measures on a consistent basis, as well as measures that use an accounting period of somewhat longer than a year. For measures with still longer time horizons, it is necessary to turn to a data source like the Panel Study of Income Dynamics (PSID).2
RECOMMENDATION6.1. The official poverty measure should continue to be derived on an annual basis. Appropriate agencies should develop poverty measures for periods that are shorter and longer than a year with data from SIPP and the Panel Study of Income Dynamics for such purposes as program evaluation. Such measures may require the inclusion of asset values in the family resource definition.
Short-term poverty, as Ruggles (1990) argues, is a meaningful concept. While it is probably impossible to be poor for only one day, no matter how limited one's resources, and quite possible to get by for a week in the face of limited resources, it is more difficult to delay expenses such as rent over periods as short as 1 or 2 months. Indeed, programs designed to provide short-term economic assistance, such as AFDC and food stamps, typically use a 1-month
The PSID, which began in 1968, is a long-running panel survey in which about 9,000 families are interviewed on an annual basis; see Appendix B.