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Measuring Poverty: A New Approach
levels, and any changes in the need standard over the preceding 3 years. The Center on Budget and Policy Priorities analyzed the questionnaire responses (California, Minnesota, and Texas did not respond).
Larin and Porter (1992:5) conclude, as did USR&E in its earlier study, that "the majority of states cannot demonstrate that their need standards represent an amount of money necessary to purchase basic necessities." Larin and Porter document and evaluate six types of methods for setting AFDC need standards by the states in effect as of 1990 (see Table 8-2):
Federal Poverty Guidelines Fourteen states reported relating their need standard in some way to the HHS poverty guidelines.15 Of these, four states reported using the HHS poverty guidelines as is. Ten states modified the guidelines in such ways as subtracting the cost of the Thrifty Food Plan, subtracting average food stamp and Medicaid benefits, subtracting the cost of "nonessential commodities," setting their need standard as a percentage of the guidelines, or allowing their need standard to decline as a percentage of the guidelines because of not adjusting for inflation.
BLS Lower Level Budget or Living Standard Six states reported using the BLS lower level budget or living standard—last published in 1982 and developed with expenditure data from the early 1960s—as the basis for their need standards. (Another state was considering the use of a modified lower level budget for its need standard, and the welfare department in another state develops a modified lower level budget as guidance for the state legislature.) Two of the six states modified the BLS standard (e.g., by omitting men's haircuts, household supplies, and occupational costs, as well as making changes to other components of the lower level budget). These states have priced the various budget components by using BLS data or conducting local price surveys; however, none of them has adjusted the standard to keep pace with inflation.
Local Market Basket Surveys Fourteen states reported basing their need standard on local market basket surveys, but many of these states have not conducted such a survey recently.
Expenditure Ratio (or Multiplier Method) One state reported using Consumer Expenditure Survey (CEX) data to determine a ratio of all expenditures, other than housing, to apply to the cost of the Thrifty Food Plan. Housing standards were calculated separately on the basis of the actual housing costs of AFDC recipients, with three different standards used for different regions of the state. Another state reported a similar type of method, but developed its multiplier on the basis of CEX data for the lowest quintile of the household income distribution.
The HHS poverty guidelines represent a smoothed version of the official poverty thresholds.