National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Summary

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Suggested Citation:"Summary." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 349

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THE POVERTY MEASURE AND AFDC 349 number of foreign immigrants into the United States may be affected differently by this issue than are native-born U.S. residents. Summary Overall, it is clear that cash and near-cash assistance programs have negative effects on such behaviors as work effort, although the effects may often be small. These incentive effects can cause a disjuncture between measured need and the amount of assistance program dollars required to alleviate that need. That is, if people who are provided benefits that are intended to move them out of poverty respond in such ways as working less, the net effect will be to leave them in poverty and to require even more funds to move them out of poverty. Because of such behavioral effects, it is misleading to describe the aggregate "poverty gap" (i.e., the difference between the poverty line and a family's resources, aggregated over all families) as the dollar amount that the government would have to spend to eliminate poverty. Because of behavioral responses, an expenditure that should decrease the poverty gap to zero will almost surely fall short. Moreover, the incentive problem is even broader in that program benefits (whether from public assistance programs or social insurance programs, such as unemployment compensation) may lead to reduced work by beneficiaries, even though the poverty gap or other poverty statistic is not affected. Yet a decision not to provide any type of assistance because there may be some undesired behavioral responses on the part of some program participants is extreme. Such programs as AFDC have their success stories as well as their problems, and, as noted above, behavioral effects, when present, are often small. More fundamentally, there are groups in need—such as children—who are not responsible for their situations but who will suffer if benefits are curtailed. A program designer, then, faces the very difficult task of specifying benefit levels and other program provisions so as to assist needy people but in a manner that does not encourage behaviors that increase program costs or may otherwise be viewed as dysfunctional and, if possible, that encourages functional behaviors. The task is made more difficult by the fact that research findings on incentive effects are often incomplete or inconclusive.9 There is also the problem that other aspects of the environment may undercut efforts to provide incentives for increased self-support: for example, there may not be jobs available in the private sector for welfare recipients. Issues of program incentives have been at the center of policy debate for AFDC, which is directed to families whom the public would like to see increasingly responsible for their own support. Consequently, there has been considerable experimentation with changes in benefit levels and formulas for 9 Indeed, as Citro and Hanushek (1991) note, a major weakness of models that policy analysts use to estimate the likely effects of changes in benefit levels and others features of program design is that the models are not able to properly account for behavioral responses.

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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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