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OTHER ISSUES IN MEASURING POVERTY 293 6 Other Issues in Measuring Poverty The formulation of a poverty measure requires decisions about several issues in addition to the concept and method by which to set and update the thresholds and the appropriate definition of family resources. In this chapter we address three such issues: the time period over which poverty is measured; the unit of analysis on which the measurement occurs (e.g., family or household) and the related issue of the unit of presentation of analysis; and the types of summary measures that are reported to indicate the extent of poverty across time and among population groups. We conclude with a discussion of some of the limitations of any economic measure of poverty. TIME PERIOD The current U.S. poverty rate is an annual rate.1 It uses an annual accounting period in which an annual need standard is compared with an annual measure of resources. Operationally, families are interviewed each March in the Current Population Survey (CPS) and asked about their income for the preceding calendar year. The resulting calculation of the poverty rate is reported to the nation in a Current Population Report, P-60 series, each fall for the preceding year. Recommendation There are several arguments for retaining the annual accounting period, and overall, we find them persuasive. First, not doing so would interrupt the time series of annual poverty rates extending back to the 1960s. Second, an annual 1 Poverty measures in other countries (which typically do not have official status) are also in most instances annual; the measures in the United Kingdom are exceptional in their use of a subannual (weekly/monthly) need standard and resource definition.
OTHER ISSUES IN MEASURING POVERTY 294 period for measuring income seems natural. People file tax returns that pertain to their income and deductions for a calendar year. Assistance programs that are geared to the tax system (notably, the Earned Income Tax Credit) also use an annual accounting period. Third, there is widespread acceptance of the view that families can smooth consumption and accommodate fluctuations in income over the period of a year. One would not necessarily want to have a poverty measure that counts as poor such people as teachers, who use winter savings to tide them over the summer, or construction workers, who use summer savings to tide them over the winter. Of course, no one accounting period or measure is right for all purposes, and the use of the poverty measure should affect the choice. One important use is as a general social indicator for evaluating the socioeconomic health of the nation and for measuring progress toward reducing economic insufficiency for the whole population and for particular groups. For this purpose, the length of the measurement period may matter less than whether different time periods result in different trends over time or different poverty rates for key groups, such as the elderly and children. An annual measure is arguably as appropriate as any other for this important purpose. Another important use of the poverty measure is as a benchmark against which to evaluate the effectiveness of government assistance programsâin terms of whether benefits are provided primarily to people who are poor (on a pretransfer basis) and whether the benefits move recipients out of poverty. For such programs as Supplemental Security Income (SSI), which assists low- income elderly and disabled people who commonly remain in the program for long periods, determining the proportion of program participants who are poor or not poor on an annual basis is quite appropriate. In contrast, for such programs as food stamps and Aid to Families with Dependent Children (AFDC), which use a short accounting period and may provide benefits to people for periods as short as a few months, an annual calculation is not always appropriate. As an example, consider the case of someone who loses a job and has few other resources, applies for and receives food stamps for, say, a period of 3 months, and then obtains a job that pays good wages for the remainder of the year. Such a person would be classified as a food stamp recipient during the year but with an annual income that might be well above the annual poverty level. Hence, it would look as if the program had provided benefits inappropriately, when, in fact, it had served its goal of helping someone with a short-term need. For analyses of these kinds of programs, one would like to have a shorter term poverty measure, either in place of or as a supplement to an annual measure. Other programs, which are designed to address such root causes of poverty as low levels of education and lack of training, may need to be assessed on a longer term basis than a year. For these programs, one might want a poverty concept applicable to a segment of the life cycle.