Measuring Poverty: A New Approach (1995)

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THE POVERTY MEASURE AND AFDC 376 income in the AFDC program. Also, in-kind benefits are not counted as income (see further discussion below). Overall, however, the income definition in concept (if not necessarily in the specific details, such as the amount allowed for child care or work expenses) is quite consistent with the budget concept that underlies the proposed poverty thresholds and definition of family resources. Problematic Aspects of the Proposed Poverty Measure Program Interactions One issue that arises with the use of the proposed threshold concept (or the current concept, for that matter) is that AFDC is not the only program of basic consumption support for low-income families. Specifically, such programs as food stamps, school meals, public housing, and home energy assistance provide important components of consumption for many AFDC families—kinds of consumption that are included in the need concepts that underlie both the current poverty measure and the proposed alternative. Currently, a few of the states that tie their need standard to the HHS poverty guidelines attempt to take account of interaction effects with other assistance programs by subtracting food or food and medical care costs from the guidelines in order to form their AFDC need standard. However, such adjustments are not necessarily appropriate, even when the need standard would otherwise equal the poverty thresholds.23 With regard to medical care, the official poverty thresholds arguably do not include medical expenses that would be covered by Medicaid or other health insurance; the proposed thresholds do not include such expenses either (see Chapter 4). Hence, to subtract Medicaid from the poverty guidelines—or from thresholds developed under the proposed measure—is to assume that such benefits are fungible and can be used for other needed goods, when this is not generally the case. There is a clearer case for subtracting food stamps from the poverty thresholds to form AFDC need standards, particularly since food stamps are not counted as income for computing AFDC benefits. However, as we noted earlier, the way in which food stamp benefits are computed—specifically, the assumption that 30 percent of countable income (including AFDC benefits) will be available for food consumption—means that it is not straightforward to determine an appropriate adjustment. To subtract the entire value of the Thrifty Food Plan from the poverty thresholds would likely result in too great 23 Logically, such adjustments should not even be considered when the need standard is set at a fraction of the poverty thresholds, as is the case in a number of states. See Larin and Porter (1992) for a discussion of the problems in adjusting the current poverty guidelines to try to account for program interactions.