National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Periodic Reviews

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Suggested Citation:"Periodic Reviews." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 42
Suggested Citation:"Periodic Reviews." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
×
Page 43

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INTRODUCTION AND OVERVIEW 42 TABLE 1-2 Policy and Other Changes Affecting Poverty Statistics Reflected in Type of Change Current Measure Proposed Measure Increase/decrease in federal or state income No Yes taxes Increase/decrease in Social Security payroll No Yes taxes Increase/decrease in Social Security benefits Yes Yes Increase/decrease in receipt or benefits under Yes Yes Aid to Families with Dependent Children Program Increase/decrease in food stamp receipt or No Yes benefits Increase/decrease in public or private health No Yes insurance coverage Increase/decrease in child care or commuting No Yes subsidies Increase/decrease in child support awards and Partlya Yes enforcement Economic recession/recovery Yes Yes a Gross money income includes child support received by families, but does not deduct child support paid by families to other households. current measure, the proposed measure will capture more fully the effects of government policy initiatives, as well as social and economic changes, on the disposable money and near-money income that different types of families have available to meet their basic needs; see Table 1-2. We believe that the proposed poverty measure represents a marked improvement over the current measure, particularly for comparing the extent of poverty across population groups and geographic areas and across time. Periodic Reviews The procedure we propose for updating the poverty thresholds should link them more closely to societal norms about the appropriate level for a poverty line. Our proposal is to update the thresholds for real changes in the consumption of food, clothing, and shelter (see below). In contrast, the current measure simply updates the thresholds for price changes. The proposed measure, thus, is a type of relative measure, but it is not the same as a fully relative measure, such as one-half median income or expenditures, that would update

INTRODUCTION AND OVERVIEW 43 the thresholds for changes in total consumption, including luxuries as well as basic goods and services. However, adopting the proposed updating procedure does not obviate the need for periodic reviews of the poverty measure to determine whether, conceptually, it remains useful and appropriate and to identify and effect improvements on the basis of new data collection or research knowledge. No measure is without flaws, and a continuing process of review and improvement is needed. Thus, we also recommend periodic reassessments of all aspects of the poverty measure to determine what further improvements could be made. Indeed, it is dismaying that such a process has not been followed for the current poverty measure. Although we do not fully understand the reasons, it seems that the ''official" standing of the U.S. measure and the fact that it is used to determine eligibility for a number of government assistance programs have made it almost impervious to change. Other statistical measures with equally great political and budgetary consequences, such as the CPI, are regularly reviewed and revised, but even obvious changes—such as defining income in after-tax terms once the Census Bureau had developed reasonably good procedures for estimating income and payroll taxes—have not been made to the poverty measure. Although maintaining a concept over time is desirable to facilitate analysis of trends, it is dangerous to let a key social indicator become so frozen in place that, when societal conditions change, it can no longer adequately reflect what it was designed to measure. We believe it makes sense to conduct a comprehensive review of the poverty measure on a 10-year cycle, as is done with other important statistical indicators, such as the CPI. The review should address all aspects of the poverty measure, including the concepts underlying the thresholds and the family resource definition, the performance of the updating procedure, and whether better data are available with which to derive the thresholds and estimate resources. Should changes to the measure result from one of these periodic reviews, it will be important for policy makers, researchers, and other users to understand the implications for the time series of poverty statistics. To facilitate the transition for users, two poverty rate series should be produced for a period of several years—the official series that is based on the new measure and a second series that is based on the old measure. There is a question of who should implement the proposed revised poverty measure and carry out the 10-year reviews. The poverty measure, unlike the CPI or unemployment rate, does not have a clear "home" within the federal government. The Census Bureau publishes the official poverty statistics, but it has never been empowered to change the measure. The U.S. Office of Management and Budget (OMB) issued directives implementing the minor changes to the thresholds that were adopted in 1969 and 1981, but it

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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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