National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Poverty Measure Alternatives

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Suggested Citation:"Poverty Measure Alternatives." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 248

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EFFECTS OF THE PROPOSED POVERTY MEASURE 248 DATA AND PROCEDURES An extract of the March 1993 CPS provided to the panel by the Census Bureau served as the primary database for our analysis for income year 1992. SIPP is an alternate data source and, indeed, we recommend that SIPP become the basis for official poverty statistics in place of the March CPS (see below).1 We did use SIPP data to impute some of the elements for deriving disposable income that are not part of the March CPS. Because we have estimates of aggregate poverty rates from the March CPS and SIPP, using the current gross money income definition of family resources, we are reasonably confident of the type of results that we would have obtained had we used SIPP (see below). Poverty Measure Alternatives For income year 1992, we conducted two analyses that compared the current measure with the official thresholds and the official definition of family resources (namely, gross money income) to the proposed measure. The first analysis was designed to illustrate the effects of the current and proposed measures on the kinds of people who are poor, holding constant the official 1992 poverty rate for the total population. For this exercise, we determined the two-adult/two-child family threshold that, together with the proposed threshold adjustments (with a 0.75 scale economy factor) and the proposed family resource definition, resulted in the same 1992 poverty rate as the official rate of 14.5 percent.2 The official reference family threshold for 1992 was $14,228; the threshold that gave the same result with the proposed measure is $13,175.3 The second analysis was designed to illustrate the effects—for the whole 1 We did not use SIPP in our analysis because the Census Bureau had not completed work to develop procedures for simulating income taxes and valuing in-kind benefits with SIPP (this work will be completed in the near future); we did not have the time or resources to undertake such work ourselves. By using the March CPS, we could take advantage of the Bureau's long-standing procedures for estimating taxes and valuing in-kind benefits with that data source. 2 The 1992 poverty rates that we tabulated from the March 1993 CPS for the current measure are consistent with rates published in Bureau of the Census (1993c). Subsequently, the Census Bureau revised the rates due to the introduction of new population weighting controls derived from the 1990 census results that incorporate an adjustment for the census undercount (see Bureau of the Census, 1995). Thus, the revised official 1992 poverty rate for the total population is 14.8 percent instead of 14.5 percent as previously reported and as we tabulated. 3 The value of $13,175 has no intrinsic meaning as a reference family poverty threshold. It is an artifact of the analysis, including not only the effects of the other threshold adjustments and definition of resources as disposable money and near-money income, but also the effects of the underlying data, including imputations. In other words, it is simply the result of implementing all other proposed changes and calculating what level of the reference family threshold is necessary to achieve the specified rate of 14.5 percent.

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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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