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Measuring Poverty: A New Approach
nondiscretionary expenses, such as child care.) These numbers indicate both that it would be appropriate to revise the level of the official thresholds and that there is room for debate about the extent of the realignment. For that debate, it would be important to consider the comparative merits of different concepts and the quality of the data underlying them, for two reasons: first, in order to reach consensus on a new reference family poverty threshold, and, second, to recommend improvements to the data and methods for various concepts so as to provide a sounder basis for repeating the realignment in the future.
There is yet a third alternative: an automatic mechanism for updating the thresholds on an annual basis for real changes in living standards. (The question of the price index is then irrelevant, except to account for lags in data availability.) In our view, this approach has several advantages over the approach of realigning the thresholds every so often. First, it avoids major breaks in the time series of poverty statistics that will inevitably occur with periodic realignments. Second, it ensures that an adjustment is in fact carried out and is not delayed or negated for political or other considerations. Third, it obviates the controversy that is likely to occur with periodic readjustments.
With a decision to update the poverty thresholds annually for changes in living standards, it becomes quite important to look at alternative concepts. Each of the concepts we reviewed, in our view, can contribute to the process of reaching consensus on a new threshold with which to initiate a new time series of poverty statistics. However, each concept has somewhat different implications for updating the poverty thresholds, particularly for the extent of the updating—that is, whether the thresholds are updated for real changes in all consumption or only in basic consumption. We believe it will be more acceptable to update the poverty thresholds in a "conservative" manner, that is, to update them for growth in consumption of basic goods and services that pertain to a notion of poverty, rather than to update them for growth in consumption of all goods and services.
Threshold Concepts: Assessment
Having reviewed the many possible concepts for deriving and updating the official reference family threshold in light of our criteria (see above), we acknowledge the strong attraction of the original SSA concept in terms of public acceptability and understandability. After all, food—more precisely, what is deemed a "minimally adequate" diet—is undeniably a necessary item of consumption. And developing a threshold that is food times a multiplier to allow for such other economic necessities as housing is a simple concept to understand. Also, the concept is easy to implement with available consumer expenditure data.
However, we question the use of expert-based standards of need even for