National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: The Overall Rate

« Previous: Effects with a Constant Poverty Rate
Suggested Citation:"The Overall Rate." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
×
Page 262
Suggested Citation:"The Overall Rate." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
×
Page 263

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

EFFECTS OF THE PROPOSED POVERTY MEASURE 262 appropriate metric for comparing poverty rates between the two measures. One such metric is to present results in terms of percentage changes in the poverty rate for each group; however, it is awkward to speak of percentage changes in a percentage. A method that is equivalent but more readily interpretable is to present results in terms of percentage point changes in the poverty rate in which these changes are standardized for each group to be comparable to the total population (see last column of Table 5-7).9 In standardized terms, the proposed measure increases the poverty rate by more than 1 percentage point for the following groups: people in two-person families, 1.2; people of other races (not white or black), 1.4; people in three-or four-person families, 1.7; Northeasterners, 1.8; Westerners, 2.1; Hispanics, 2.3; people in working families, 2.3; people in families not receiving AFDC or SSI, 2.6; and people in families without health insurance, 2.7. In contrast, the proposed measure decreases the poverty rate by more than 1 percentage point (in standardized terms) for the following groups: people in families with some health insurance, -1.2; Southerners, -1.3; blacks, -1.5; adults aged 65 or older, -2.4; people in families without workers, -2.4; people in families receiving AFDC or SSI, -3.8; and one-person families, -4.0. Effects with a New Threshold For our second analysis, we implemented the current measure with the official 1992 threshold of $14,228 for a two-adult/two-child family and the proposed measure with a threshold of $14,800 for this family type and two different scale economy factors—0.75 (alternative 1) and 0.65 (alternative 2). The value of $14,800 is the midpoint of our suggested range ($13,700–$15,900) for the starting reference family threshold. The purpose of this analysis was to determine the effect on the overall poverty rate, as well as the effect on groups, of raising the poverty threshold in real terms in addition to implementing the recommended adjustments to the threshold and family resource definition. The Overall Rate Under the proposed measure with a $14,800 reference family threshold and a 0.75 scale economy factor for 1992, 46.0 million people are poor, and the poverty rate is 18.1 percent, compared with the official count of 36.9 million and the official rate of 14.5 percent. With the same threshold and a 0.65 scale economy factor, the 1992 poverty rate is 19.0 percent. 9 The procedure is to determine the ratio of the current poverty rate for the total population to the rate for the group and apply that ratio to the percentage point change for the group. This procedure standardizes the percentage point changes by treating each group as if it had the same poverty rate as all people.

EFFECTS OF THE PROPOSED POVERTY MEASURE 263 The net effect of implementing the proposed measure with a higher threshold is to increase the number of poor, but not all of the movement is in the same direction. Under alternative 1 (0.75 scale economy factor), 4.2 million people are moved out of poverty and 13.3 million people are moved into poverty (32.7 million people are poor under both measures). As in the analysis with a constant poverty rate, most of the movement occurs near the poverty line. Thus, 93 percent of the 4.2 million people who are no longer categorized as poor move from the category of income between 50 and 100 percent of the poverty line to the category of income between 100 and 150 percent of the poverty line. Conversely, 72 percent of the 13.3 million people who are newly categorized as poor move from the category of income between 100 and 150 percent of the poverty line to the category of income between 50 and 100 percent of the poverty line. Below, we show in broad terms the effects of the proposed changes to the thresholds and to the family resource definition on the increase in the overall poverty rate, which is 3.6 percentage points for alternative 1 and 4.5 percentage points for alternative 2 (see "Marginal Effects" for a more detailed decomposition): Type of Change Alternative 1 Alternative 2 All changes +3.6 +4.5 $14,800 threshold +0.7 +0.7 0.75 scale economy factor -0.7 N.A. 0.65 scale economy factor N.A. -0 Housing cost index +0.1 +0.1 Proposed resource definition +2.0 +2.0 Net interaction effect +1.5 +1.7 The use of a higher reference family threshold accounts for only 0.7 percentage point of the increase in the poverty rate. The use of a 0.75 scale economy factor (alternative 1) offsets the effect of a higher reference family threshold: it decreases the poverty rate by 0.7 percentage point. In contrast, the use of a 0.65 scale economy factor (alternative 2) has no effect, which is why the overall increase in the rate is higher for alternative 2 than for alternative 1. (See the discussion below as to why the two scale economy factors have these different outcomes.) Adjusting the threshold for geographic area differences in the cost of housing has little effect on the overall poverty rate for the nation as a whole. In contrast, the changes to the family resource definition account for a large part of the increase in the poverty rate, 2.0 percentage points.10 There is 10 This amount is the sum of the effect of each specific change—e.g., adding the value of in- kind benefits to income or subtracting child care costs from income—considered alone.

Next: Groups »
Measuring Poverty: A New Approach Get This Book
×
Buy Paperback | $75.00 Buy Ebook | $59.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

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.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!