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Measuring Poverty: A New Approach
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.
RECOMMENDATION1.3. The U.S. Office of Management and Budget should adopt a revised poverty measure as the official measure for use by the federal government. Appropriate agencies, including the Bureau of the Census and the Bureau of Labor Statistics, should collaborate to produce the new thresholds each year and to implement the revised definition of family resources.
RECOMMENDATION1.4. The Statistical Policy Office of the U.S. Office of Management and Budget should institute a regular review, on a 10-year cycle, of all aspects of the poverty measure: reassessing the procedure for updating the thresholds, the family resource definition, etc. When changes to the measure are implemented on the basis of such a review, concurrent poverty statistics series should be run under both the old and the new measures to facilitate the transition.
SETTING AND UPDATING THE POVERTY THRESHOLD
We propose that the poverty-level budget for the reference family start with a dollar amount for the sum of three broad categories of basic goods and services—food, clothing, and shelter (including utilities). The amount should be determined from actual Consumer Expenditure Survey (CEX) data as a percentage of median expenditures on food, clothing, and shelter by two-adult/two-child families. This sum should then be increased by a modest additional amount to allow for other necessities. The allowance for "other expenses" is intended to cover such goods and services as personal care, household supplies,