National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Definitions of Family Resources

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Suggested Citation:"Definitions of Family Resources." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 36

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INTRODUCTION AND OVERVIEW 36 (Mack and Lansley, 1985). The resulting deprivation index was used directly as a measure of poverty: those experiencing "enforced lack" due to budget constraints of 3 or more of the 22 items in their list were deemed poor.10 A conceptual underpinning for a deprivation index approach has been proposed that posits a normative standard, in terms of a fixed set of needed capabilities—for example, the ability to obtain a job, literacy, good health (Sen, 1983, 1989, 1992; see also Atkinson, 1989). The standard is then made operational in a relative manner by determining items that are necessary to achieve these capabilities in a particular time and place: for example, it can be argued that one needs a telephone to be able to obtain a job in modern U.S. society. Deprivation indexes have their advantages and disadvantages. Like poverty thresholds expressed in monetary terms, they, too, involve difficult questions of choice—How many and which items to include in the list?—and inevitably embody a large element of subjectivity and relativity. Deprivation indexes appear less useful than monetary thresholds as an official measure of poverty for such purposes as determining eligibility for government assistance, but they can broaden understanding of what it means to have less resources than the official thresholds. Definitions of Family Resources Given a set of poverty thresholds, one must then define the resources that are to be counted to determine if each family and individual is above or below the appropriate threshold. Common resource definitions pertain to family income, which is the definition used in the United States and Canada, or to family expenditures (or consumption), which is the definition often used in Europe. Conceptually, an income definition is more appropriate to the view that what matters is a family's ability to attain a living standard above the poverty level by means of its own resources. Thus, an income definition will not count as poor anyone who had an income above the threshold for the period of measurement, even if he or she consumed less than the poverty level, for whatever reason—pure choice or perhaps because of anticipating a drop in future income. Conversely, an income definition will count as poor anyone who had inadequate income, even if he or she was able to maintain consumption above the poverty level by such actions as borrowing, carrying a credit card balance, or depleting savings. In contrast to an income definition, an expenditure (or consumption) definition is more appropriate to the view that what matters is someone's actual standard of living, regardless of how it is 10 In the United States, Mayer and Jencks (1993) have looked at items of ownership and types of consumption as indicators of material more than social deprivation, analyzing the proportion of low-income people who do not own a home or a car, who do not have air conditioning, etc.

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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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