National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Discussion

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Suggested Citation:"Discussion." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Suggested Citation:"Discussion." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Suggested Citation:"Discussion." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 304
Suggested Citation:"Discussion." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 305
Suggested Citation:"Discussion." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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OTHER ISSUES IN MEASURING POVERTY 302 individuals (whether living alone or with others), who are defined as single- person families for this purpose.9 Recommendations There are reasons to consider other units of analysis, such as the individual or the household (see discussion below), but we find no compelling evidence at this time to move away from the family concept. Hence, we recommend continuing that practice with one important modification: families should be defined to include cohabiting couples.10 Such couples typically pool resources, and many of them exhibit considerable stability, so that it seems to make sense to treat them like married-couple families for purposes of poverty measurement. The topic of resource sharing (or lack of sharing) among family and household members is one that merits further study. We support research on how resources are allocated among the adults and children in a family. We also support research on the extent to which unrelated roommates in a household share resources. The results of such research may suggest a further modification to the unit of analysis for poverty measurement at a future date. RECOMMENDATION 6.2. The official measure of poverty should continue to use families and unrelated individuals as the units of analysis for which thresholds are defined and resources aggregated. The definition of "family" should be broadened for purposes of poverty measurement to include cohabiting couples. RECOMMENDATION 6.3. Appropriate agencies should conduct research on the extent of resource sharing among roommates and other household and family members to determine if the definition of the unit of analysis for the poverty measure should be modified in the future. Discussion The family is but one of three possible units of analysis that might serve as the basic unit in measuring poverty in the nation. The other two are the household and the individual. We consider important distinctions among these 9 No determination of poverty status is made, however, for unrelated people who are under age 15 because no information on their income is available. 10 In the CPS, cohabiting couples are defined as two unmarried people of the opposite sex living in the same household who are listed as roommates/unmarried partners. Their households may contain children under age 15 but not other adults. The decennial census question on household relationship separates the response categories of "housemate or roommate" and "unmarried partner." The latter category is taken to represent cohabiting couples.

OTHER ISSUES IN MEASURING POVERTY 303 three and the advantages and disadvantages of each for purposes of measuring poverty.11 The Census Bureau defines families and households as follows (Rawlings, 1993:B-2): • family: a group of two persons or more related by birth, marriage, or adoption and residing together; all such persons (including related subfamily members) are considered as members of one family. • household: all the persons who occupy a housing unit …. A household includes the related family members and all the unrelated persons, if any, such as lodgers, foster children, wards or employees who share the housing unit. A person living alone in a housing unit, or a group of unrelated persons sharing a housing unit as partners, is also counted as a household. For purposes of poverty measurement, as noted earlier, the definition of "family" includes every unrelated person, whether living alone, with roommates or partners, or with but not related to a family. Hence, the use of a household definition would result in a smaller number of larger units: for example, two or more roommates living together would be counted as one household rather than as two or more single-person families. In contrast, the use of an individual or person definition would result in a number of single-person units equal to the total population of the United States living in households (including both family members and unrelated people).12 To measure poverty, one establishes a threshold level of income for a unit and then compares the actual income level to that threshold, so logically this could be done for the family, the household, or the individual. The question is which unit, in principle, should be used as the basis for the measurement? The answer is not self-evident, because the three units differ in the extent to which the members jointly pool their income or share their consumption. If all the members of a family or of a household necessarily experienced the same level of income and monetary well-being, then that would be the unit of analysis one should use in measuring poverty. If there were such a unit and if the poverty threshold were set correctly for that unit and the unit's income level was estimated correctly, then the members of that unit would either all be in poverty or all be out of poverty. But that condition is surely not met for every family or for every household. 11 There are also variations in the definitions of family and household, which we do not explore. For example, the United Kingdom in the early 1980s switched the unit of analysis for low-income statistics from the family to the household; however, its definition of "family" was the nuclear family, consisting solely of the parent(s) and children under age 18. In contrast, the Census Bureau's definition of family includes all related persons in a household, regardless of age or specific relationship. 12 There are, of course, other persons in the nation who do not live in households, residing instead in such institutions as jails, hospitals, and group homes or living as homeless persons.

OTHER ISSUES IN MEASURING POVERTY 304 Some family members may be deprived of a full share of the family's income, and others may consume far more than the average. Similarly, household members may be in quite different economic circumstances even though they share the same living quarters and jointly use a bundle of consumer durables. So neither of these units is the perfect solution for measuring poverty. Using the individual person as the unit of analysis has considerable appeal, at least analytically. But what of a dependent family member who has no independent income and is supported by the income provided by another family member? It is not evident how to estimate that dependent person's income level, which makes it difficult to use the individual as the basis of measurement of poverty. And what of the expenditure on jointly consumed items such as the location of the house in a safe neighborhood or the heat and light in the house? It is also not easily determined how to allocate those expenditures among the individuals who share in their consumption. These jointly consumed items represent a component of the consumption bundle in which the several family or household members do in fact have a common level of resources, if not a common level of utility or satisfaction from them. So even if there were very complete information available about the income received by each person in every household or every family, because of the joint use or consumption of many items, it would not be a simple or straightforward task to determine who received benefit from that income and therefore who was and who was not "in poverty." Since the joint consumption of many durables and some services contributes to the economies of scale that promote living together in one household and sharing income, there is a sound rationale for using the larger multiperson unit, the family or household, instead of the individual, as the basic unit for defining poverty. But not all the expenditures in a family or household unit are shared equally among its members. Thus a measurement that assumes that all members of the unit are either in poverty or out of poverty cannot be correct in every instance. We know of no perfect solution to this dilemma. In reality, there is some, but incomplete, pooling of household or family income and joint consumption, and so a choice must be made in the unit of analysis for measuring poverty. That choice has long been noted and is often discussed in reports and essays on the definition of poverty. The extensive and thoughtful review conducted by the 1976 Poverty Studies Task Force, for example, discussed this issue (U.S. Department of Health, Education and Welfare, 1976: Vol.1:34,100). Ruggles (1990:121-124) stressed that the choice should depend on "what one believes about how income is shared among family and household members." In a more analytic discussion, Atkinson (1989:17-24) noted the "fragmentary statistics to bear out the anecdotal evidence that there

OTHER ISSUES IN MEASURING POVERTY 305 is significant inequality" among family members and reviewed underlying assumptions that can justify one or another unit as the basis for the unit of analysis in the definition of poverty. Lazear and Michael (1988) provide an extensive literature review of this issue and offer extensive empirical evidence of differences in the expenditures on behalf of adults and children in U.S. households based on data from the Consumer Expenditure Survey (CEX). These efforts and those in the United Kingdom by Young years ago (1952), by Pahl more recently (1989), an essay by Jenkins (1991), and calculations by Townsend (1979) that illustrate poverty rates among men and women based on their individual incomes, all emphasize the need for further research on intrafamily resource allocation. Although there has been progress in this area in the past decade or two, there is neither sufficient clarity nor consensus to provide a strategy for cracking apart the family unit to measure individual levels of poverty at this time. We believe that further work on this issue could provide the capacity to do so in the future. Faced with the choice among three possibilities as the appropriate unit of analysis—the family, the household, or the individual—we recommend that the family continue to be used, with one important modification (see below). We have noted the difficulties of using the individual as the unit of analysis. In deciding between the family and the household, our choice is based partly on the precedent that the family has served as the unit of analysis for the measurement of poverty for many years. It is also based partly on our decision to propose an income-based definition of resources instead of an expenditure- based definition, as the pooling of income is, we believe, greater within a family unit than it is among the roommates and various subunits that constitute many households.13 Another reason for this choice is the stability of the unit. Although the composition of both households and families frequently changes, since we have used a time frame of one year for the measurement of poverty, the stability of the family unit is probably greater than the stability of multiperson household units over a 12-month period. There has developed in the past two decades a form of living arrangement that lies analytically somewhere between a family and a household and is now common enough to require a judgement as to how to treat it. It is cohabitation, a form of living together in a marriage-like relationship with an expectation of some longevity but not recorded by a marriage license. By the definitions of the Census Bureau, couples living in cohabitational units are 13 Whichever definition is used for poverty measurement—family or household—poverty statistics would also include unrelated individuals living alone in their own households. The difference is that, with a family definition, unrelated individuals living together in a household are also treated as one-person "families" rather than as a multiperson household.

OTHER ISSUES IN MEASURING POVERTY 306 households but not families. The Census Bureau reports that by 1992 there were 3.3 million "unmarried-couple households," most of whom are cohabiting couples; two-thirds do not include any children under age 15 while one-third do include children. The number of these unmarried-couple households rose from 523,000 in 1970 (estimated by the Census Bureau), a sixfold increase, and the Bureau reports that the ratio of these couples per 100 married couples rose from 1 per 100 in 1970 to 6 per 100 in 1992 (Saluter, 1992:xv and Table K). We recommend that these couples be treated as families, not as separate one-person units, in the measurement of poverty. The rationale for this extension is that, on average, these cohabitational units last at least 1 year in duration and many, if not a majority, end in a formal marriage, so that the pooling of income and the sharing of expenditures extend well beyond 1 year on average.14 We also support research on resource sharing among other kinds of household members, such as roommates, who may pool income for such items as food and housing. In general, we urge continued research on the complex issues of the apportioning of resources among family members within a family and on the nature and extent of resource sharing within family and household units. For accurate measurement of poverty, more research is needed on the extent of unequal allocations within consumer units and the amounts of cross- unit transfers. Also needed are empirical research-based suggestions of algorithms for calculating individual-level consumption. Research on resource sharing (whether intrafamiliar or among unrelated individuals in households) should include an assessment of the likely magnitude of the effects on poverty rates of changing the unit of analysis (e.g., defining roommates as well as cohabiting couples as "families" or completely replacing the family definition with a household definition). In general, moving from a smaller to larger unit of analysis will probably reduce the poverty rate, for two reasons. First, the larger the unit, the lower its poverty threshold relative to its size, thus requiring less income per person for the larger unit to be below the poverty line. (The exception is for measures in which the equivalence scale has a scale economy factor of 1.0, assuming no scale economies with increasing unit size.) Second, the larger the unit of analysis, the more opportunity for "excess" income of one or more family or household members to offset lower income of other members. These effects were illustrated dramatically when the United Kingdom shifted from the nuclear family to the household as the unit of analysis for its poverty measure: the poverty rate for the total population dropped by 25 14 For analyses of cohabitation in the past decade, see Bumpass and Sweet (1989); Laumann et al. (1994:Ch. 13); Thornton (1988); and Willis and Michael (1994); for the United Kingdom, see Kiernan and Estaugh (1993).

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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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