National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Full Determination of Disposable Income

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Suggested Citation:"Full Determination of Disposable Income." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 332

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USE OF THE POVERTY MEASURE IN GOVERNMENT ASSISTANCE PROGRAMS 332 two children that pays for child care and has health insurance could be based on the threshold that results from the panel's concept plus average amounts for such families for income and payroll taxes, child care expenses, and out-of- pocket medical care expenses. We do not recommend this approach for the statistical measure of poverty for a number of reasons. It would require the development of a large number of thresholds that, even so, would not likely provide an accurate measure of poverty status for the many families that are not "average." However, we believe the use of this approach has merit to determine eligibility for assistance programs in which the goal is a reasonable estimate that minimizes burden on applicants and program staff. To use Head Start as an example, families not on AFDC might be asked, as now, for gross money income and documentation of earnings. They might also be asked, on a simple yes-no basis, whether they pay child care or child support, whether they have health insurance, and whether they receive food stamps or live in public housing. Using this information, the Head Start agency could compare the family's gross money income to the appropriate threshold for that family's circumstances by consulting a menu of thresholds. The process would be similar to that performed now, except that the menu would contain thresholds that vary by factors (e.g, work status, presence of health insurance coverage, etc.) in addition to family type and geographic area. The Census Bureau could assist program agencies by developing the menu. In sum, we believe that there are reasonable strategies for program agencies that want to use the proposed poverty measure but, at the same time, retain a relatively simple application process. Whatever the strategy adopted to implement the proposed measure (e.g., a "cookbook" or "menu" approach or some other strategy), its use should improve the targeting of services to needy people compared to the current measure. Full Determination of Disposable Income A number of assistance programs already obtain a great deal of information about applicants' resources in order to calculate gross and net income. The definition of net family income that is used in many of these programs is similar in broad outline, if not in specific details, to the proposed definition of family resources for the poverty measure. Hence, such programs as food stamps or AFDC would not find it difficult to use the proposed disposable income definition, although they should still consider the particulars of the definition and their appropriateness for program use. As we have stressed previously, it is important that the concept underlying the eligibility cutoff for a program be consistent with the family resource definitions. For example, if a program's need standard makes no allowance for expenses required to earn income (e.g., taxes, child care, commuting costs),

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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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