purposes by using the new thresholds updated only for price changes (rather than for changes in consumption of the basic goods and services in the poverty budget).

In summary, we see the following advantages to our proposed concept for the poverty threshold. First, the concept is readily described as ''food, clothing, and shelter, plus a little more." Although it is an oversimplification, as is a description of the original official concept as "food times a multiplier," it represents a clear and understandable level of need. Second, by relying on observed expenditure data, the concept avoids the difficulties of trying to develop and justify expert-based standards for a number of budget categories. Our approach explicitly links the measure of poverty to actual expenditures on basic goods and services. Finally, our proposed updating procedure has properties that we believe are desirable for the official U.S. poverty measure—namely, that the thresholds be updated on an automatic, regular basis, and that the updating be linked to spending on basic goods and services instead of total consumption.

Setting the Initial Threshold

In our empirical analysis (see below), we determined a two-adult/two-child reference family poverty threshold that, together with all of the other changes we recommend to the thresholds and family resource definition, produced the same overall poverty rate as the official rate for 1992. The purpose of this exercise was to illustrate the effects of the proposed measure, compared with the current measure, on the distribution of poverty among population groups and areas of the country.

The threshold for this exercise, however, is simply an artifact of the analysis. Thus, there remains the question of where to set the reference family threshold to serve as the starting point for a new series of poverty statistics with a new measure. Since we propose a new concept for the threshold, in which work and certain other expenses are subtracted from income rather than included in the poverty budget, one must allow for that concept in considering values for the reference family threshold. Data limitations make it difficult to convert threshold values developed on the basis of other concepts to the proposed concept with any exactitude, but it is possible to make rough estimates. Thus, a rough estimate is that the official 1992 threshold of $14,228 for a two-adult/two-child family is about $12,000 in terms of the proposed concept; see Table 1-4.13 This adjustment only transforms the one budget con-


The value of $12,000 is lower than the value of $13,175 that, together with the proposed changes to the poverty measure, produces the same overall poverty rate as the official rate for 1992 (see section below on "Effects"). The reason is that the threshold value for this exercise has to exactly offset the effects of all the other changes, not just the new threshold concept.

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