National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Child Care

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Suggested Citation:"Child Care." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 240
Suggested Citation:"Child Care." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 241

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DEFINING RESOURCES 240 asks about tax payments for the previous year. (SIPP panels also generally obtain information about dependent care and housing costs.) Questions on tax filing status, number of exemptions, type of form filed (joint, single, etc.), and schedules filed (A, C, etc.) are answered by more than 90 percent of respondents, but questions on adjusted gross income, itemized deductions, tax credits, and net tax liabilities have high nonresponse rates. The primary reason for the nonresponse is that respondents are asked to produce their tax form and use it as the basis for answers to these questions, but only about one-third do so; see Bureau of the Census, no date(a). The Census Bureau has begun work to develop a tax estimation model for SIPP similar to the one used for the March CPS. The SIPP tax information, even with quality problems, should make possible improved estimates of income tax liabilities for families in the survey. Work-Related Expenses The current poverty measure takes no explicit account of expenses, such as child care and commuting costs, that are necessary to earn income. As originally developed, the official poverty thresholds implicitly included some allowance for such costs (through the multiplier), but the thresholds have never been adjusted to reflect increases in these costs due to changes in societal work patterns. In particular, many working families face sizable child care expenses that would not have been necessary 30 years ago. Perhaps more important, the fact that the allowance in the official thresholds for work-related expenses is averaged over all families means that the thresholds do not adequately distinguish between the needs of working and nonworking families. To properly assess poverty for both working families and nonworking families, we believe it is incumbent either to develop thresholds that appropriately account for needed work-related expenses or to deduct such expenses from income.31 Our proposal is to deduct child care and other work-related expenses from income (rather than creating additional thresholds, for the reasons that we presented above). Child Care In 1960, an estimated 72 percent of families with children had a parent who could care for the children at home, while the remaining 28 percent had both parents in the work force or were headed by single parents. The situation was just the reverse in 1990, when an estimated 69 percent of families with children had both parents in the work force or were headed by single parents 31 Not discussed here are various arguments for distinguishing between working and nonworking families in terms of the value of time, see Appendix C.

DEFINING RESOURCES 241 and only 31 percent had a parent at home (estimated from Bureau of the Census, 1992d: Tables 56, 67, 618, 620). While only a fraction of families with both parents (or the only parent in the work force) pay out of pocket for child care, the estimated share of their income that is spent on child care can be significant. Thus, in 1987, one-third of all employed mothers and almost three- fifths of employed mothers with a child under age 5 paid for child care. The average amount they spent accounted for 7 percent of their total family income. Of employed mothers with family income below or near the official poverty line, one-quarter paid for child care, and the average amount they spent accounted for 22 percent of their total family income (O'Connell and Bachu, 1990: Table 7). In order to more appropriately characterize the poverty status of working versus nonworking families, we propose to deduct weekly out-of-pocket child care costs from the income of families with both parents or the only resident parent in the work force, for each week worked in the year. We further propose to limit the deduction to the earnings of the parent with the lower earnings or to the value of a cap that is adjusted annually for inflation, whichever is lower (see below). To make this adjustment to income in the March CPS requires imputing child care expenses because the survey does not ask about expenditures, whether for child care or other items. However, information is available on the numbers and ages of children and on the work status of parents with which to make a reasonable imputation. In contrast, SIPP has regularly asked about child care costs, either as part of a detailed child care module or as a single question in one of the other modules. Indeed, we used SIPP data to impute child care costs to the March CPS to analyze the effects on poverty rates of implementing the proposed measure (see Chapter 5). On the question of how high to set the cap for child care expenses, one possibility is to set it at a percentage of median expenditures, following the procedure that we recommend to derive the food, clothing, and shelter component of the poverty thresholds. Data from the 1990 SIPP indicate that median weekly child care expenditures for working families with such expenses were $44 for families with one child and $51 for families with two or more children.32 However, amounts that are below these medians may be too low to serve as a cap, particularly for larger families, for several reasons. For example, they do not make allowances for such factors as the age of the children, and child care expenditures for children under 5 are considerably higher than for school-age children (see O'Connell and Bachu, 1990: Table 7). Indeed, the relatively low median expense by families with two or more children relative to families with one child is undoubtedly because more families in the former group have older children. 32 Based on tabulations prepared for the panel; dollar amounts are for 1992.

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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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