National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Expenditure Data

« Previous: Income Data in the Decennial Census
Suggested Citation:"Expenditure Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 290
Suggested Citation:"Expenditure Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 291
Suggested Citation:"Expenditure Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 292

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EFFECTS OF THE PROPOSED POVERTY MEASURE 290 possible to construct poverty estimates from census data with the proposed disposable income definition of families' resources. Yet, as we have demonstrated, poverty statistics that are based on gross money income cannot distinguish between groups that differ in important ways (e.g., working versus nonworking families) or capture the effects of important government policy changes. Hence, we believe it is critical for agencies to conduct research on methods to adjust census small-area poverty estimates to more closely approximate the estimates that would obtain with a disposable income resource definition. Again, the basis for such adjustments could be analysis of poverty rates with SIPP: for example, comparing rates estimated with a disposable money and near-money income definition to rates estimated with a gross money income definition for various groups. If key population groups (e.g., the elderly, minorities) were distributed about equally across the country instead of residing disproportionately in some areas, then it might not be necessary to conduct research on methods for adjusting census small-area poverty estimates to approximate a disposable income definition of resources. The reason is that most uses of census poverty statistics are relative in nature: for example, allocating shares of a fixed total amount of federal funding to areas according to their poverty rate relative to the nation as a whole. Also, while recognizing the constraints on the census questionnaire, we urge serious consideration of adding perhaps one or two simple yes-no questions that would facilitate adjusting the census poverty estimates. For example, questions on whether a family received food stamps or paid for child care in the past year or had health insurance coverage would be very helpful in developing appropriate adjustment factors.29 RECOMMENDATION 5.5. Appropriate agencies should conduct research on methods to construct small-area poverty estimates from the limited information in the decennial census that are comparable with the estimates that would be obtained under a fully implemented disposable income concept. In addition, serious consideration should be given to adding one or two questions to the decennial census to assist in the development of comparable estimates. Expenditure Data Unlike many other developed countries, the United States does not have adequate data with which to develop a poverty measure that uses a consumption- 29 At present, planning for the year 2000 census is exploring ways to reduce the content of the census questionnaire and to determine alternative sources of data, such as a continuing large-scale sample survey with most of the census content (see Edmonston and Schultze, 1995). Whether income questions are included in the census or in a census-like questionnaire that is fielded at more frequent intervals, the issue of obtaining information for developing appropriate poverty estimates remains.

EFFECTS OF THE PROPOSED POVERTY MEASURE 291 or expenditure-based definition of resources; hence, there is virtually no practical alternative to using an income-based definition. Of course, there are many arguments in favor of an income definition, but there are also strong arguments in favor of a consumption or expenditure definition. We believe it is important to consider improvements to the Consumer Expenditure Survey that would permit its use in estimating resources for poverty measurement purposes.30 We propose use of the current CEX for deriving and updating the poverty thresholds, for which the data requirements are not as demanding as they are for estimating resources (e.g., sample sizes can be smaller). However, even for this purpose, we believe it is important to consider improvements to the survey. In general, improvements to the CEX would be very useful to support research and policy analysis on consumption and savings behavior and the relationship of consumption, income, and wealth. The most costly improvement to explore would be an expansion of the sample size. A major expansion, from 5,000 households or consumer units (the number provided for analysis purposes by the Interview Survey component of the CEX) to 50,000-60,000 households (i.e., the sample size of SIPP or the March CPS) would be required for the CEX to serve as the vehicle for estimating resources. A more modest expansion—perhaps doubling the current sample size—would improve the quality of the data for updating the poverty thresholds under the proposed procedure. More generally, such an expansion would make the data more useful for analyzing trends in expenditures and consumption patterns across population groups. Another area to explore is the development of methods to reduce recall and other reporting errors and to improve the survey's response rate. We surmise that the length and complexity of the questionnaire may be major factors in impairing response. The CEX questionnaire is far more complex than the SIPP questionnaire. The latter has often been criticized for length and complexity, but the burden it poses is less than it would appear for the many people who have relatively few sources of income. In contrast, most people spend money on a wide variety of goods and services and hence must answer most of the detailed questions in the CEX. We understand that the current level of detail may be needed for purposes of respecifying the market basket for the CPI (which is done about once every 10 years); however, a more streamlined questionnaire might be more effective for the purposes of poverty measurement and other analytical uses of expenditure data. One possibility could be to embed a more detailed survey for a subsample of respondents within a larger, more streamlined survey. Yet another area to explore concerns the overall CEX design, which currently consists of two separate surveys (the Diary Survey and the Household 30 See Appendix B for details about the CEX.

EFFECTS OF THE PROPOSED POVERTY MEASURE 292 Interview Survey) that comprise separate samples and cannot be linked at the individual respondent level. It would be very useful to consider designs that provide more complete reporting of expenditures for individual families in the sample. Also, it would be useful to explore designs that follow family members over time, so that complete expenditure patterns are obtained on an annual basis. Currently, families that move are not followed; instead, interviews are conducted with the new residents. The kinds of changes to the CEX that could improve its usefulness for poverty measurement and other analysis purposes would not be easy to implement and would likely be expensive (particularly in the case of an increased sample size); however, the potential benefits could be great. A useful first step would be for BLS to conduct or commission a study that evaluates the CEX and assesses the costs and benefits of changes to the survey that could make it more useful for poverty measurement and other purposes. We urge prompt undertaking of such a study. Furthermore, we hope that improvements to the survey that stem from the review can be implemented in time to provide useful input to the next 10-year review of the poverty measure. RECOMMENDATION 5.6. The Bureau of Labor Statistics should undertake a comprehensive review of the Consumer Expenditure Survey to assess the costs and benefits of changes to the survey design, questionnaire, sample size, and other features that could improve the quality and usefulness of the data. The review should consider ways to improve the CEX for the purpose of developing poverty thresholds, for making it possible at a future date to measure poverty on the basis of a consumption or expenditure concept of family resources, and for other analytic purposes related to the measurement of consumption, income, and savings.

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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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