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THE POVERTY MEASURE AND AFDC 375 purposes. Finally, it is important to keep in mind the need for consistency between the thresholds and the resource definition in whatever measure a state uses. Comparative Advantage of the Proposed Poverty Measure The use of the proposed threshold concept to set state need standards of AFDC would represent an improvement over the current measure in several respects. One improvement relates to the equivalence scale by which the reference family poverty threshold is adjusted to take account of different needs for different types of families: the proposed scale is more reasonable than that embedded in the official thresholds. Another improvement is that the proposed threshold concept incorporates geographic variation in housing costs. For the statistical measure of poverty, we recommended that the thresholds vary by nine regions and several categories of size of metropolitan area within region (see Chapter 3). States may want to use thresholds that are specific to their state as a whole, and it is certainly feasible to develop such thresholds from decennial census data (see Table 8-4). Alternatively, states may want to have thresholds that vary by size of metropolitan area (or other geographic unit) within the state, and it is also feasible to develop such thresholds from census data. We caution against making further distinctions, particularly for small metropolitan or other areas, as the sample sizes underlying the estimates can become uncomfortably small. Thus, for many metropolitan areas under about 125,000 population, there are only 200-300 cases of housing units in the 1990 decennial census data with the specified characteristics that are used to estimate geographic differences in housing costs. The Census Bureau and Bureau of Labor Statistics could assist the states by constructing thresholds by state and by substate area and by providing estimates of the sampling error underlying the geographic indexes. The states could then determine whether there is enough intrastate variation and whether the estimates of that variation are sufficiently reliable to warrant using several different thresholds. Finally, an important improvement is that we propose a consistent budget concept and definition of family resources. Moreover, the proposed resource definition is more congruent with the income definition in the AFDC program than is the current gross money income definition, so it would be more consistent to use the proposed threshold concept in place of the current concept. For example, the AFDC definition of countable income deducts child care and other work expenses. It does not deduct out-of-pocket medical care expenditures, but AFDC recipients are automatically eligible for Medicaid, which limits their out-of-pocket expenditures (although the generosity of the program varies among states). There are also some inconsistencies. For example, the EITC and a few other sources of income may not be counted as