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Measuring Poverty: A New Approach
With respect to the threshold or need standard component of the proposed measure, program agencies must consider whether to use 100 percent of the thresholds as the cutoff for eligibility or a multiple of them, as is now specified in many programs. Obviously, there are budgetary implications of this choice, particularly for entitlement programs that must provide benefits for all applicants who meet the eligibility criteria (in contrast to programs with a legislatively set budget that requires program administrators to put eligible applicants on a waiting list once the budget is exhausted). In this regard, it is critical to consider the implications for programs of the recommendation to update the thresholds each year for real changes in consumption of basic goods and services. The thresholds developed under this procedure will not likely increase as fast as would a purely relative set of thresholds (because the procedure considers only the categories of food, clothing, and shelter, not all goods and services). However, the thresholds developed under the proposed procedure will likely increase faster than thresholds that are simply adjusted by the CPI, like the official ones, if real growth occurs.
There are ways to address the budgetary consequences of poverty thresholds that are updated in real terms. For example, program eligibility could be limited to families with resources below a fraction of the thresholds. This type of strategy is not a contradiction in terms. Although updating the poverty thresholds for real growth in basic consumption makes a great deal of sense for a statistical measure, the design of government assistance programs must take into account many factors, only one of which is a statistical standard of need. Other considerations, such as funding constraints and competing uses for scarce tax dollars, may dictate assistance program eligibility levels that are lower than the statistical poverty thresholds.
Finally, there are some other features of the proposed poverty measure that may not be suitable for program use. For example, we propose that need be measured on an annual basis and that asset values not be included in family resources. However, many programs (e.g., food stamps) use a subannual accounting period together with an asset test because they are intended to provide immediate assistance to people who are in a crisis situation. Also, we propose that the unit of analysis be the family, as defined by the Census Bureau, but programs differ in their target populations and hence often in their definition of an eligible unit. Such differences from the proposed statistical poverty measure are quite appropriate in light of program objectives.
RECOMMENDATION7.1. Agencies responsible for federal assistance programs that use the poverty guidelines derived from the official poverty thresholds (or a multiple) to determine eligibility for benefits and services should consider the use of the panel's proposed measure. In their assessment, agencies should determine whether it may be necessary to modify the measure—for example, through a