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Measuring Poverty: A New Approach
only for inflation. Historical evidence suggests that poverty thresholds—including those developed according to "expert" notions of minimum needs—follow trends in overall consumption levels. Because of rising living standards in the United States, most approaches for developing poverty thresholds (including the original one) would produce higher thresholds today than the current ones.
Finally, because the current measure defines family resources as gross money income, it does not reflect the effects of important government policy initiatives that have significantly altered families' disposable income and, hence, their poverty status. Examples are the increase in the Social Security payroll tax, which reduces disposable income for workers, and the growth in the Food Stamp Program, which raises disposable income for beneficiaries. Moreover, the current poverty measure cannot reflect the effects of future policy initiatives that may have consequences for disposable income, such as changes in the financing of health care, further changes in tax policy, and efforts to move welfare recipients into the work force.
The Panel on Poverty and Family Assistance concludes that the poverty measure should be revised to reflect more accurately the trends in poverty over time and the differences in poverty across population groups. Without revision, and in the face of continuing socioeconomic change as well as changes in government policies, the measure will become increasingly unable to inform the public or support research and policy making.
It is not easy to specify an alternative measure. There are several poverty concepts, each with merits and limitations, and there is no scientific basis by which one concept can be indisputably preferred to another. Ultimately, to recommend a particular concept requires judgement as well as science.
Our recommended changes are based on the best scientific evidence available, our best judgement, and three additional criteria. First, a poverty measure should be acceptable and understandable to the public. Second, a poverty measure should be statistically defensible. In this regard, the concepts underlying the thresholds and the definition of resources should be consistent. Third, a poverty measure should be feasible to implement with data that are available or can fairly readily be obtained.
RECOMMENDATION: A NEW POVERTY MEASURE
The official U.S. poverty thresholds should comprise a budget for the three basic categories of food, clothing, shelter (including utilities), and a small additional amount to allow for other needs (e.g., household supplies, personal care, non-work-related transportation). Actual expenditure data should be used to develop a threshold for a reference family of four—two adults and two children. Each year, that threshold should be updated to reflect changes in