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\$54.95

• #### INDEX 489-501

family is 60 percent (1.49/2.5) of the threshold for the two-adult/two-child family.

We are confident that this equivalence scale has an appropriate form; however, the selection of the two key parameters—for the proportionate needs of children and the scale economy factor—involves judgement. In selecting the values for these parameters, it is important to recognize the interaction between them. For example, several studies and advisers to the panel have suggested the use of a scale economy factor of 0.50 (implying greater economies than our suggested range of 0.65-0.75), but coupled with the assumption that children cost the same as adults. Given a scale, such as we propose, in which children are assumed to need less than adults, it is appropriate to raise the scale economy factor closer to a value of 1, although how much closer is, to repeat, a matter of judgement.

RECOMMENDATION 3.1. The four-person (two adult/two child) poverty threshold should be adjusted for other family types by means of an equivalence scale that reflects differences in consumption by adults and children under 18 and economies of scale for larger families. A scale that meets these criteria is the following: children under 18 are treated as consuming 70 percent as much as adults on average; economies of scale are computed by taking the number of adult equivalents in a family (i.e., the number of adults plus 0.70 times the number of children), and then by raising this number to a power of from 0.65 to 0.75.

Figure 1-2 portrays the equivalence scale for selected family types under our proposal compared with the scale implicit in the current poverty thresholds. The graph indicates the percentage by which a single person's poverty threshold is increased when that person acquires a spouse and when the couple subsequently has a first, second, third, and fourth child. The figure makes clear the irregularities and anomalies in the current scale. For example, under the current scale, a spouse adds only 29 percent to family costs; the first child adds almost as much (26%), and the second child adds a yet greater amount (40%). These patterns are not consistent with the view that adults need more than children nor with economies of scale for larger families. In contrast, our proposed scale adds 57-68 percent for a spouse (depending on whether the scale economy factor is 0.65 or 0.75), 34-42 percent for the first child, and a decreasing percentage for each additional child.