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Measuring Poverty: A New Approach (1995)

Chapter: A Crisis Definition of Resources

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Suggested Citation:"A Crisis Definition of Resources." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 214

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DEFINING RESOURCES 214 kinds of reporting errors. It would require a large commitment of funding to expand and improve the CEX to the point that it could be used for the ongoing measurement of poverty for both the total population and various groups. Of course, income surveys also have reporting problems, and, indeed, many studies using a consumption or expenditure resource definition have found lower poverty rates than those using an income definition. One reason for the differences is that consumption exhibits less variation across families than does income. As a consequence, and since average consumption and average income are close to one another, the poverty rate will usually be lower with a consumption definition than with an income definition. Another reason for the differences is that the comparisons have not used the best available income data. Poverty measures constructed with CEX income data are much higher, and those constructed with March CPS income data are somewhat higher, than those obtained from CEX expenditure data. However, poverty measures constructed with SIPP income data are almost as low as those obtained from CEX expenditure data (see Chapter 5), largely because of improved reporting of many sources of income in SIPP for lower income people, compared with either the March CPS or the CEX (see Appendix B). We conclude that the measurement of poverty in the United States must continue, at least for some years, to be based on an income definition of resources. As discussed further in Chapter 5, we urge work on improving the CEX so that it would be possible to consider seriously the use of a consumption- or expenditure-based definition of family resources for measuring poverty in the future. Finally, we note that if a consumption-based resource definition is adopted for the poverty measure at some future time, there will still be the need for consistency between the resource definition and the threshold concept. As an example, with the proposed threshold concept, the consistency principle would require that work expenses not be considered as part of families' consumption, just as they are excluded from disposable income. The CEX, as currently designed, can produce consumption estimates that make most of the adjustments that we recommend to the resource definition for consistency with the proposed threshold concept. Thus, the CEX obtains information on most types of in-kind benefits, taxes, out-of-pocket medical care expenses, child care costs, and child support payments. However, commuting costs cannot be separated from other transportation expenses, and imputations are required for subsidized housing. A Crisis Definition of Resources In addition to their current income, many families have some cash on hand, and some families may have available one or more assets (e.g., savings accounts,

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Measuring Poverty: A New Approach Get This Book
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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

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