National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Money Income

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Suggested Citation:"Money Income." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 218

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DEFINING RESOURCES 218 definition of resources rather than a definition that includes asset values. In addition, it is difficult to obtain accurate estimates of asset values in household surveys. Finally, as a practical matter, very few people who are income-poor on an annual basis have financial or other assets, with the exception of housing.14 We do recognize, however, that for some purposes, it may be desirable to have companion measures of poverty that take account of at least some types of assets. Thus, although we propose that the official poverty measure continue to be based on annual data, we believe it would be useful to develop measures for shorter and longer time periods as well (see Chapter 6). Measures for shorter periods (e.g., 4 months) may be more useful than annual measures to evaluate how effectively government assistance programs with short accounting periods target benefits to needy people. For consistency with program rules, short-term poverty measures would need to include financial asset values. In fact, it is likely easier, using SIPP data, to develop short-term measures that add asset values to income than to develop such measures on an annual basis. Fewer changes in family composition are likely to occur in a short time period and, hence, there will be less difficulty in attributing the asset values measured at the beginning of the accounting period to the appropriate family unit. Finally, we support research and development to improve the reporting and valuation of assets for such purposes as estimating the distribution of wealth in relation to the distribution of income. The economic poverty measure is just one important indicator of economic deprivation and well-being; other indicators are important to develop, both in their own right and to provide an added perspective through cross-tabulation with the poverty measure. PROPOSED RESOURCE DEFINITION The rest of this chapter details the components of the proposed definition of family resources. Money Income The proposed definition of disposable money and near-money income begins with gross money income as defined for the current poverty measure. In the March CPS, money income is the sum of about 30-odd sources that are identified separately in that survey—including, for example, wages, net self- employment income, Social Security, private pensions, cash public assistance, 14 See the discussion below of adding imputed net rent to the income of homeowners. This approach, which we urge be developed, treats housing as an in-kind benefit rather than an asset.

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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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