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Measuring Poverty: A New Approach
The Poverty Measure and AFDC Benefit Standards
State AFDC benefit standards vary even more widely than do state AFDC need standards, and no state provides benefits as generous as the official poverty thresholds. From time to time, there have been efforts to enact a federal minimum benefit standard for AFDC. These efforts have invariably come to naught, largely because of the cost implications of raising the benefit standard in states with low-benefits. Changes in the percentage of benefits that the federal government will reimburse the states have been enacted with the intent of providing incentives for low-benefit states to increase their benefits; however, these changes in the matching formula have had little effect on the variation in benefit levels among the states (Peterson and Rom, 1990).
AFDC recipients are eligible for food stamps, and the nationalization of the Food Stamp Program has served to reduce the disparities in combined AFDC and food stamp benefits across the states.33 However, significant differences still remain that exceed what can be reasonably attributed to cost-of-living differences among the states. Thus, the maximum combined AFDC and food stamp benefit for a three-person family in January 1994 varied from $1,208 in Alaska to $415 in Mississippi; the median benefit was $658, which is 69 percent of the corresponding official 1993 poverty threshold (U.S. House of Representatives, 1994: Table 10-11).
Currently, a de facto national minimum level of available benefits exists for AFDC recipients, namely, the maximum food stamp allowance combined with the maximum AFDC benefit in the lowest benefit state. (In January 1994, this amount for a three-person family was 43% of the corresponding official 1993 poverty threshold.) Hence, the issue of a national minimum benefit standard for AFDC really comes down to an issue of raising this de facto standard. Arguments for adopting such a nationwide minimum benefit standard for AFDC have been made on the basis of equity—namely, that low-income families with children should not be disadvantaged simply by reason of their state of residence. Arguments have also been offered that differences in benefits encourage low-income families to migrate from low-benefit to high-benefit states. The studies that have been done on the migration effects of AFDC suffer from serious data and methodological problems, but they suggest that the effect on migration of low-income families is quite small.
The question of how or if the proposed poverty measure, for which the thresholds vary much less across states than do AFDC need and benefit standards, should be linked with program benefits (for AFDC or a combination of assistance programs) is a difficult one. There are several reasons that a benefit
This evening-out occurs because the food stamp benefit formula decreases food stamp benefits by 30 cents for every dollar increase in AFDC benefits and, conversely, increases food stamp benefits by 30 cents for every dollar reduction in AFDC benefits.