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Measuring Poverty: A New Approach
family resources—for comparison with the thresholds to determine who is in or out of poverty—that are consistent with each other and otherwise statistically defensible. The concepts underlying both the thresholds and the definition of family resources should be broadly acceptable and understandable and operationally feasible.
RECOMMENDATION1.2. On the basis of the criteria in Recommendation 1.1, the poverty measure should have the following characteristics:
The poverty thresholds should represent a budget for 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).
A threshold for a reference family type should be developed using actual consumer expenditure data and updated annually to reflect changes in expenditures on food, clothing, and shelter over the previous 3 years.
The reference family threshold should be adjusted to reflect the needs of different family types and to reflect geographic differences in housing costs.
Family resources should be defined—consistent with the threshold concept—as the sum of money income from all sources together with the value of near-money benefits (e.g., food stamps) that are available to buy goods and services in the budget, minus expenses that cannot be used to buy these goods and services. Such expenses include income and payroll taxes, child care and other work-related expenses, child support payments to another household, and out-of-pocket medical care costs, including health insurance premiums.
Table 1-1 contrasts the elements of the proposed measure and the current measure. Not only do we propose a different concept for the reference family threshold (and suggest a realignment of the level of that threshold), but we also propose different ways of adjusting the threshold by family type, by geographic area, and over time, as well as a different definition of family resources. The current definition is gross money income; the proposed definition is disposable money and near-money income, which recognizes the value of near-money in-kind benefits and the unavailability for consumption of taxes and other nondiscretionary expenses. We also recommend using a different data source with which to measure disposable money and near-money income, namely, the Survey of Income and Program Participation (SIPP).
These other elements of a poverty measure—that is, the elements besides the concept and level of the threshold on which attention so often focuses—have important implications for differences in poverty rates for groups and areas and over time. In contrast to poverty statistics that are produced with the