National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Other Work-Related Expenses

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Suggested Citation:"Other Work-Related Expenses." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 242

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DEFINING RESOURCES 242 An alternative would be to use the caps specified for the federal income tax dependent care tax credit.33 Currently, the IRS limits eligible dependent care expenses to $2,400 a year for one dependent, or $46 per week, and $4,800 a year for two or more dependents, or $92 per week. By comparison, the AFDC program currently allows a maximum deduction of $175 per month ($40 per week) for work-related child care expenses for each child aged 2 years or older and a maximum deduction of $200 per month ($46 per week) for each younger child, giving a maximum deduction for families with two children of $86 per week. The Food Stamp Program has the same limits, and also allows deductions for day care expenses incurred for adult dependents and expenses incurred so that the caretaker can attend school. Whatever cap is set, the guiding principle that we recommend is that it should represent a reasonable level of expenses necessary to hold a job, excluding additional expenses that parents may elect in order to provide enrichment for their children. In other words, we propose treating child care costs solely from the viewpoint of calculating a measure of disposable income that recognizes that some portion of the earnings of working families is not available for consumption. We are very much aware that there are many other aspects of child care beyond out-of-pocket costs that are important to examine in order to measure well-being of children (and their parents) in a broader sense. The quality of the care is one key aspect. Families with high child care costs may be less well off in terms of resources available for consumption, but they may have a higher level of overall well-being if their expenditures are for a high-quality program that enhances the development of their children and correspondingly increases the mental comfort of the parents. Indeed, families with high child care costs may be better off on some dimensions than families with no such costs, if the latter situation results from leaving the children at home unattended (rather than because child care is donated by a grandmother or other loving relative or because the family receives a subsidy). As with the treatment of medical care expenditures, we believe that it is important to develop measures of the adequacy of child care, but we underline the necessity of keeping such measures separate from the economic poverty measure. Other Work-Related Expenses Most workers incur commuting and other costs (e.g., union dues, licenses, permits, tools, uniforms) to hold a job and, consequently, have less than the full amount of their earnings available for consumption. Hence, we propose to subtract a flat weekly amount for other work-related expenses (updated annually for inflation) from the earnings of each adult for each week worked 33 Watts (1993) recommends this approach, and we adopted it for our analysis in Chapter 5.

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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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