National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Budget Constraints

« Previous: Issues in Program Benefit Design
Suggested Citation:"Budget Constraints." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 342

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THE POVERTY MEASURE AND AFDC 342 We considered the issue of a national minimum benefit standard in somewhat broader terms, asking the question of how or if the proposed poverty measure could or should be linked with benefit levels for a program such as AFDC or a combination of AFDC and other cash and near-cash assistance programs. We first broached this issue in Chapter 7 , in which we discussed the possible use of the proposed poverty measure for programs that already relate eligibility to the current measure. We pointed out some of the reasons that program agencies might want to make the link less direct, for example, by setting eligibility cutoffs at a fraction of the poverty thresholds. Here we explore more fully the reasons that a program benefit standard could differ from a poverty standard and, more generally, why the design of an assistance program could deviate from the goal of helping everyone who is classified as poor. A note on terminology: When we speak of a "benefit standard" in the context of AFDC, we mean what is referred to in that program as the "maximum benefit" in contrast to either the ''need standard" or the "payment standard." A family must have gross income below 185 percent of the need standard to be eligible for AFDC; it must also have net or countable income below 100 percent of the payment standard. A number of states have a payment standard below their need standard, and some states cap the maximum benefit at a lower level than the payment standard (see below). The measurement of poverty or need does not necessarily imply anything about the extent to which need can or should be alleviated through government assistance programs. There are five key issues that separate measurement of need and alleviation of need: budget constraints, both overall and from competing demands on funding resources; strategies and preferences for targeting program benefits; interactions among programs; behavioral responses to program incentives; and, finally, cost-sharing provisions for federal-state programs. Budget Constraints Scarce budget resources may well limit the extent to which benefit standards can approach the poverty threshold, particularly in entitlement programs, such as AFDC, that must provide benefits to all eligible applicants. Both globally and in the United States, the areas with the greatest poverty are typically the areas that can least afford high benefits. For example, in some African countries, such a high proportion of the population is poor (by any standard) that very few resources are available internally to alleviate poverty. For AFDC, the states with low-benefit standards tend to be the states with higher poverty rates and with lower per capita incomes and, hence, with less ability to provide assistance to their needy families. Thus, maximum benefits in January 1990 were negatively correlated with the 1989 state poverty rate

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Measuring Poverty: A New Approach Get This Book
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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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