National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Long-Term Measures

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Suggested Citation:"Long-Term Measures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 298
Suggested Citation:"Long-Term Measures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 299
Suggested Citation:"Long-Term Measures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 300

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OTHER ISSUES IN MEASURING POVERTY 298 (see Chapter 5 and Appendix B). David and Fitzgerald (1987) suggest that a 4- month accounting period could be optimal, given the SIPP design of interviews at 4-month intervals. Some publication issues arise with the use of a subannual accounting period for the poverty measure. For example, if the accounting period is 4 months, 4-month poverty rates could be reported every 4 months (with a likely lag of 5-6 months to allow for data processing and analysis). Such rates might serve as more timely indicators of economic distress in the population, although other readily available measures might serve the purpose just as well (e.g., monthly unemployment rates or counts of program participants, both of which are available on a timely basis). To determine how closely short-term poverty rates track the business cycle, it could be useful to develop 4-month (or even monthly) measures from SIPP for 1984-1994. One could then determine the correlations with economic trends and also how closely the rates track other indicators, such as monthly unemployment rates. If the correlations with other indicators are high, then there would be less need to publish short-term poverty rates on a frequent basis. An alternative to publication every 4 months (or every month in the case of a monthly measure) would be, each year, to publish 4-month rates, averaged over the three such periods in the year (again with a likely lag, as in the March CPS, of 5-6 months). Such an approach would smooth any seasonal variation in the estimates. In addition to average 4-month rates, an option would be to report the proportion of people each year who had at least one 4-month period of poverty (i.e., to report an ever-poor rate). Long-Term Measures Duncan (1992) and Duncan, Smeeding, and Rodgers (1992) argue strongly for the calculation of a long-term measure of poverty in addition to short-term and annual poverty measures. The characteristics of people who are chronically or persistently poor differ from those who are temporarily poor. Programs that are designed to tackle root causes of poverty and to invest in human capital and economic potential over the long-term need to be evaluated by these longer term measures of poverty. Indeed, there is some preliminary evidence, according to Duncan (1992), that the duration of economic deprivation is an important predictor of such developmental outcome variables as completion of high school or teenage pregnancy.5 However, there are many 5 Duncan (1992) notes that few developmental studies have been done that use an adequate measure of family income; however, the existing studies find that economic resources affect outcomes independent of other measures of socioeconomic status (e.g., occupation or education of parents) and that longer periods of deprivation have greater adverse effects.

OTHER ISSUES IN MEASURING POVERTY 299 conceptual, methodological, and data-related difficulties in constructing useful and feasible long-term poverty measures. Based largely on analysis of the PSID, researchers have built up a picture of persistent versus temporary poverty. Lillard and Willis (1978:1004), for example, reported that the probability of a man in poverty in 1967 being in poverty again the following year, on the basis of his earnings, was 34 percent for whites and 61 percent for blacks. Rodgers and Rodgers (1993) review the subsequent literature. They focus on what they call chronic poverty, in which, in either recurrent spells or long continuous spells, "income is less than needs during a long and continuous period of time" (Rodgers and Rodgers, 1993:29). They develop the notion of chronic poverty on the basis of a measure of permanent income compared with permanent needs. Using the PSID data for the period since the late 1970s, they conclude that about one-third of measured poverty in the United States as of 1987 can be regarded as chronic, and that over the period they studied, "poverty not only increased, it became more chronic and less transitory in nature" (Rodgers and Rodgers, 1993:51). They also conclude that "the poorest group identified consists of people living in families headed by African-American females without high-school diplomas, for whom chronic poverty is about twelve times as intense as in the entire population'' (Rodgers and Rodgers, 1993:52). Ruggles (1990) also reviews a large number of studies of longer term poverty and reports that estimates of the persistently poor vary from 6 to 80 percent of estimates of the single-year poor. The differences are due to differences in the population studied, the definition of poverty used, and the number of years in which one must be poor in order to be classified as persistently poor. Ruggles concludes that a best-guess estimate is that 40-50 percent of those poor in a single year will remain poor for some years to come. As another example of this literature, Adams and Duncan (1988), in a study of urban poverty, estimated that 13.4 percent of urban people were poor in 1979, 34.6 percent were poor in at least 1 year between 1974 and 1983, and 5.2 percent were "persistently poor"—defined as poor in 8 of 10 years or 80 percent of the years covered.6 Hence, the persistently poor were about 40 percent of the single-year poor (consistent with Ruggles's estimate) and 15 percent of the ever poor. The single-year poor were more likely than nonpoor people to be black, poorly educated, and living in female single-parent families; the persistently poor were even more likely to have these characteristics.7 6 To permit comparison of PSID data with the decennial census, Adams and Duncan (1988) defined "urban" areas to be central counties of metropolitan areas that contained a population of one million or more people. There were 56 such counties (of 3,137 U.S. counties) in 1980. 7 For another example of long-term poverty analysis and a comparison between metropolitan and nonmetropolitan residents, see Hoppe (1988).

OTHER ISSUES IN MEASURING POVERTY 300 In a paper prepared for the panel, Duncan (1992) notes that there is no agreement in the literature on the optimal form of a measure of long-term poverty. He and Rodgers and Rodgers (1993) distinguish several measures. One measure considers the length or duration of spells of poverty. There are technical issues involved in adjusting for spells that are still in progress at the time of the survey (the censoring problem). Spell analysis is also sensitive to the treatment of missing data. In general, these spell-based measures do not address the phenomenon of multiple spells and hence, as Ashworth, Hill, and Walker (1992) note, are not able to address distributional questions because the unit of analysis is the spell rather than the person or family unit.8 A second measure considers the proportion of workers or families whose incomes fall below the poverty threshold in x out of y time periods. These measures are easy to implement but attach no extra weight to consecutive periods of deprivation. A related measure takes the sum of the income over an extended period and compares it to the sum of income needs over that same period, thus focusing on the average of income compared with need. This type of measure puts weight on the extent or intensity of any income inadequacy instead of simply treating poverty as an in-or-out dichotomy in which having a few dollars above poverty in one period may be offset by having many dollars below poverty in another period. However, it also implicitly assumes that a family unit can shift income around as needed within the whole time interval selected. A third measure considers an income-generating model with an error- component structure. Such a model allows the estimation of the pattern of income over some period of time, based on a multivariate model that controls for observed characteristics that systematically affect income and that characterizes the autoregressive and random components of the error term in that statistical model. These modeling efforts are most useful in studies of the composition of poverty and in policy discussions of the effects of one or another intervention that might affect the unit's characteristics or the effect of those characteristics on the generation of income. To obtain any type of long-term measure of poverty requires using a data source other than the March CPS. Under the planned redesign of SIPP, it will be possible to obtain measures with a maximum accounting period of 4 years. (The 1993 SIPP panel will also be extended for a total of 10 years, with annual interviews after the first 3 years of 4-month interviews.) The PSID makes it possible to develop measures for accounting periods of virtually any length; 8 In the first 16 months of the 1984 SIPP panel, Ruggles (1988b) found that 32 percent of all people experiencing at least one spell of poverty experienced multiple spells. Ashworth, Hill, and Walker (1992), with data from the PSID, look at poverty over the entire span of childhood, distinguishing such patterns as poor every year, poor only 1 year, poor occasionally, or having recurrent spells of poverty.

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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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