National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Development of the Measure

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Suggested Citation:"Development of the Measure." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 24

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INTRODUCTION AND OVERVIEW 24 THE OFFICIAL U.S. POVERTY MEASURE Development of the Measure The poverty thresholds that are used in estimating the official U.S. poverty statistics were originally developed by SSA staff economist Mollie Orshansky as the cost of a minimum diet times a "multiplier" (or factor) of three to allow for other needed expenses, such as housing and clothing. The diet was constructed by the U.S. Department of Agriculture (USDA), by examining data on the food-buying patterns of lower income households from a 1955 Household Food Consumption Survey, modifying the patterns to develop a nutritionally balanced food plan, and costing out the items included in the plan. The USDA developed several food plans at varying cost levels; the one used as the basis of the poverty thresholds was the "Economy Food Plan," the lowest cost plan designed for "temporary or emergency use when funds are low."5 The plan allowed for no eating at restaurants, called for careful management of food storage and food preparation, and was acknowledged by its developers to provide a nutritious but monotonous diet. The multiplier of three was derived from the same 1955 survey, which showed that the average family of three or more persons—the average of all such families, not the average of low-income families—spent about one-third of its after-tax money income on food. The poverty thresholds were varied to account for the differing food needs of children under age 18 and of adults under and over age 65 and to account for economies of scale for larger households. Originally, the thresholds also varied by the gender of the family head and whether or not the family resided on a farm and could be expected to grow some of its own food. The thresholds are the same across the nation; there are no allowances for differences in cost of living in different geographic areas. Each year the thresholds are updated for price inflation by the Census Bureau. In 1969 the Bureau of the Budget gave official status to the following two changes in the poverty thresholds, which were adopted by an interagency committee: to use the overall Consumer Price Index (CPI) to update the thresholds for price changes instead of the Economy Food Plan cost index and to raise the farm thresholds from 70 to 85 percent of the nonfarm thresholds. (Turned down was an SSA proposal to revise the thresholds to reflect newer data from the 1965-1966 Nationwide Food Consumption Survey; see Fisher, 1992b:38-49.) In 1979 Carol Fendler of the Census Bureau wrote a paper with Orshansky describing various possible changes that could be made in the poverty thresholds, including a revision of the thresholds using a multiplier of 5 Orshansky also developed a set of poverty thresholds on the basis of the Low-Cost Food Plan, the second lowest cost of four USDA plans, but these thresholds were never adopted for official use.

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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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