National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Geographic Differences in Prices

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Suggested Citation:"Geographic Differences in Prices." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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INTRODUCTION AND OVERVIEW 28 resources with which to support their own households. One study of men aged 18-54 estimated that about 16 percent were noncustodial parents, of whom 44 percent paid child support. On average, these payments accounted for 9 percent of their family income (Sorenson, 1993). Again, the current poverty measure does not distinguish between families with and without these expenses, so that it does not accurately reflect the relative economic status of the two groups. Among all households, a striking change has been the growth in nonfamily households, which increased from 15 to 30 percent from 1960 to 1992 (Bureau of the Census, 1993d: Table 65). Most nonfamily households consist of persons living alone (84% in 1992). One of the concerns that has been raised about the current poverty measure is the nature of the adjustment to the thresholds for single persons relative to families—an application of what is termed the "equivalence scale." A change in the scale value for persons living alone would likely affect the total poverty rate as well as the rate for that group, given the large and growing proportion that single adults represent of all households. Multiperson nonfamily households (including cohabitors and roommates), although smaller in numbers, exhibited even higher growth rates over the 1960-1992 period, increasing from 2 to 5 percent of all households (Bureau of the Census, 1993d: Table 65). The current poverty measure treats each member of such a household as a separate economic unit, but to the extent that cohabitors and roommates share resources and hence benefit from economies of scale, the current measure likely overstates the poverty rate for such people. Finally, households headed by someone aged 65 or over increased from 18 to 22 percent of all households between 1960 and 1992 (Bureau of the Census, 1967: Table 18; 1993d: Table 67). Most such households are comprised of a single person or a married couple. One of the most widely criticized aspects of the official measure is that the thresholds for one- and two-person units headed by someone aged 65 or over are lower than the thresholds for other such units. This difference resulted from the USDA diets, which assumed lower caloric requirements for older people. A change in the threshold values for older household heads relative to younger heads might affect both the total poverty rate and the distribution of poverty across groups. Geographic Differences in Prices Measuring differences in consumer prices across geographic areas of the country is a difficult task, yet there is evidence suggesting that such differences exist to a significant extent. In 1981, the last year for which BLS published family budgets for various locales, the relative cost of the lower level budget was higher in metropolitan areas than in nonmetropolitan areas and in the West and (to a lesser extent) the Northeast than in the South (Bureau of Labor

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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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