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Measuring Poverty: A New Approach
cept into the other; we believe that the adoption of a new measure should also occasion a reevaluation of the appropriate level of the threshold.
We have recommended that, once adopted, the new reference family threshold be updated on an annual basis for real growth in the consumption of three categories of basic goods and services—food, clothing, and shelter. Consistent with this recommendation, we conclude that it is appropriate in setting the initial threshold to consider the real growth in the standard of living since 1963 when the current threshold was fixed in real terms.
RECOMMENDATION2.4. As part of implementing a new official U.S. poverty measure, the current threshold level for the reference family of two adults and two children ($14,228 in 1992 dollars) should be reevaluated and a new threshold level established with which to initiate a new series of poverty statistics. That reevaluation should take account of both the new threshold concept and the real growth in consumption that has occurred since the official threshold was first set 30 years ago.
Over the period 1963-1992, median before-tax money income of four-person families increased by 36 percent in real terms (the real increase in median after-tax income was 28%; the real increase in average expenditures was 45%; see Chapter 2), but the poverty threshold did not change. There is, of course, a judgement to be made about how much to adjust the current poverty threshold. An adjustment that is somewhat less than the real increase in total consumption would be consistent with the proposed updating procedure, given our earlier observation that real growth in spending on food, clothing, and shelter has been less than real growth in total spending.
Because of the limitations of historical data on family expenditure patterns, one cannot readily apply the proposed updating procedure over time to determine a value for the threshold today (see Chapter 2). Even if the data were adequate for this purpose, however, the decision about the appropriate level for the reference family threshold for a particular time and place would remain inherently a matter of judgement.
For this reason, we concluded that we would not make a formal recommendation about the initial threshold for the two-adult/two-child reference family. However, we do offer our conclusion about what we believe is a reasonable range for that initial threshold. This conclusion is informed by our analysis of thresholds that result from a variety of approaches and concepts in the published literature, as well as our judgement.
We conclude that reasonable values for the starting threshold for a two-adult/two-child family lie in the range of about $13,700 to $15,900 (in 1992 dollars). Compared with the range of threshold values of $17,200 to $21,800 shown in Table 1-3, the values we suggest appear to represent little or no updating in real terms of the official 1992 threshold of $14,228 for a two-